US stocks end session lower after Treasury auction unsettles market

• 20-year Treasury auction sees weak demand.
• US bonds and equities sell off in unison on Wednesday.
• Observers cite market’s distrust of continued heavy US deficits.
• BofA says last week saw end of historic retail equity-buying spree.

The US stock market pulled back on Wednesday after a 20-year Treasury auction failed to go off as planned. The $16 billion auction was met in the early afternoon with weak demand from proposed buyers with the 20-year bonds purchased for yields above 5%. Bloomberg said it was the highest yield for 20-year Treasuries since 2020.

Yields on 5-year, 10-year and 30-year US Treasuries rose more than 2% on Wednesday.

Higher Treasury yields often draw interest away from equities, and all three major US equity indices fell more than 1.4%. The NASDAQ was near that level of decline, while the S&P 500 sank 1.6%, and the Dow Jones Industrial Average (DJIA) shed 1.9%.

But once again as happened during April’s tariff-induced sell-off, bond prices fell in tandem with equities. Some capital undoubtedly flowed into Bitcoin (BTC) as the leading crypto reached an all-time high above $109,796, but many market observers believe the outflow from US equities and Treasuries is a worrisome sign.

Liz Ann Sonders, Charles Schwab chief investment strategist, told CNBC moderators that Treasury yields were rising due to market despondency over Congress’ new budget bill. The bill touted by US President Donald Trump makes permanent his tax cuts from 2017, as well as creating new tax exemptions that taken together are projected to balloon the deficit by $4 trillion over a decade.

Moody’s cut the US government’s debt rating late last week, owing to similar concerns. Moody’s cited “the increase over more than a decade in government debt” as one of its chief concerns.

UnitedHealth Group (UNH) stock traded 5.8% lower on Wednesday due to reporting about alleged kickbacks to nursing homes. Target (TGT) earnings showcased collapsing comparable sales dropping 3.8%, and the stock price gave up 5.2% in the session. Blackstone (BX) stock moved lower for its seventh straight session. Coca-Cola (KO) was the lone constituent in the Dow Jones index to advance on Wednesday. Nvidia (NVDA) closed down more than 1.9% after trading more than 2% higher in the morning session.

Bank of America said that while hedge funds saw heavy inflows into equities, retail buying ended its 23-week equity-buying streak and became net sellers.

YTD performance chart of the Dow Jones, NASDAQ Composite and S&P 500