Michael M. Santiago/Getty Images News
Wall Street slipped on Wednesday, as equities came under pressure amid a bond sell-off that extended from the previous session. Losses in airline stocks and managed care players also weighed on markets.
The blue-chip Dow (DJI) shed the most among the three major averages, falling 0.98% to 38,471.27 points in midday trade. The benchmark S&P 500 (SP500) retreated 0.63% to 5,272.41 points, while the tech-heavy Nasdaq Composite (COMP:IND) was lower by 0.39% to 16,952.99 points.
All 11 S&P sectors were in the red.
U.S. stocks had ended mixed in the previous session, as comments from Minneapolis Federal Reserve President Neel Kashkari – who is known as one of the more hawkish policymakers – along with the bond sell-off hit sentiment. The latter had been ignited by two weak Treasury note auctions.
“Markets struggled to gain much traction yesterday, with sovereign bonds selling off globally thanks to several hawkish headlines and weak demand at a Treasury auction,” Deutsche Bank’s Jim Reid said.
Yields were higher again on Wednesday, with traders closely eyeing an upcoming $44B 7-year note auction. The longer-end 30-year yield (US30Y) was up 7 basis points to 4.74%, while the 10-year yield (US10Y) was up 8 basis points 4.62%. The shorter-end more rate-sensitive 2-year yield (US2Y) gained slightly to 4.99%.
“Seven-year Treasury yields have fallen 16bp since the April auction and are trading near the middle of the range they’ve held over the last month. The 7-year sector has outperformed along the curve over the month and now appears rich to the wings after controlling for the level of yields and shape of the curve,” JPMorgan’s Jay Barry and Jason Hunter said.
“With yields near the middle of recent ranges and the sector appearing somewhat rich along the curve, we think (Wednesday’s) auction should require some further concession in order to be digested smoothly,” Barry and Hunter added.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
The energy sector grabbed a chunk of the spotlight on Wednesday, after U.S. oil and gas producer ConocoPhillips (COP) agreed to buy rival Marathon Oil (MRO) in an all-stock transaction with an enterprise value of $22.5B. Marathon Oil (MRO) stock jumped 8% and was the top percentage gainer on the S&P 500 (SP500), while shares of ConocoPhillips (COP) fell 4%.
Conversely, American Airlines (AAL) slumped ~13% and was the top S&P percentage loser, after the carrier cut its current quarter adjusted profit guidance to well below expectations. Other airline stocks took a hit as well.
Dow 30 component UnitedHealth (UNH) was also a top S&P percentage loser, after top boss Andrew Witty at a conference reportedly said it could be a “multi-quarter cycle” before U.S. states begin paying premium rates that adequately cover Medicaid patient costs.
Turning to Wednesday’s economic calendar, MBA mortgage applications fell in the past week as interest rates rose. Meanwhile, data from the Richmond Fed showed Fifth District manufacturing activity improved but remained sluggish in May.
The Fed’s Beige Book report on regional activity will arrive in the afternoon.
