The higher bond yields gutted a technology rally and pushed the overall stock market lower.
The Standard & Poor's 500 Index closed down 96 points to 5,845. The Nasdaq Composite Index gave up a decent rally and fell 270 points to 18,8723. The Dow Jones Industrial Average slumped 817 points to 41,860, its biggest loss in a month.
What happened in Treasuries
The 20-year auction produced a high yield of $5.047%, up from 4.81% at a month-earlier auction. In response, the 30-year yield jumped to 5.0815% from 4.979% on Tuesday and 4.95% on Friday.
The 10-year yield hit 4.589%, up from Tuesday's 4.49% and the highest since hitting 4.61% in February.
This one is a big determinant of mortgage rates and will pressure home sales. Mortgage News Daily said it's seeing the 30-year rate just below 7.1%, the highest level since early April.
The battle is between Republicans who can't agree on spending cuts and are fearful of voter reaction if services are cut too sharply, a real possibility.
There is "a feeling of disillusionment with the fiscal outlook" as bond investors watch "Congress debate spending more money on one thing vs. spending more money on another thing," wrote Matthew Graham, who comments on bonds and the bond market for the mortgage site.
The iShares U.S. Home Construction ETF (ITB) was down nearly 3% to $90.55. The ETF's components include homebuilders and building supply companies.
Morgan Stanley is worried
Meanwhile, investment bank Morgan Stanley (MS) offered its mid-year look at interest rates and the economy.
Rates will be sticky, Chief US Economist Michael Gapen wrote in his forecast.
The effective U.S. tariff rate will remain at 13%, and he does see the Federal Reserve cutting interest rates until year.
The Standard & Poor's 500 Index, the Dow Jones industrials and the Russell 2000 index are still lower on the day.
The Nasdaq Composite and Nasdaq-100 indexes rallied in mid-morning, but the rally fell apart after the bond auction.
Only one stock in the Magficent 7 list of stocks higher on the day: Google-parent Alphabet (GOOGL) , up 2.8% to $168.56.
Tesla was off 2.7% to $332.62.
Investors liked what they heard at Alphabet's I/O developer conference. Among other things, Alphabet plans to overhaul its search engine with “AI Mode” to rival AI chatbots like ChatGPT, The Wall Street Journal noted.
Weighing on the the S&P 500 and the Dow were UnitedHealth (UNH) , Nike (NKE) and American Express (AXP) .
Ten of 11 S&P 500 sectors were lower today, with utilities suffering the biggest losses. The 30-year Treasury yield has topped 5.4%. The 10-year yield was up 4.546%.
Communications services, which includes Alphabet, was the only winning sector.
Jony Ive joins Open AI
Legendary product designer Jony Ive has agreed to sell his company to Open AI, and he has sold one of his companies to OpenAi for an estimated $6.5 billion in equity.
Ive is famed for his work in designing the iPhone and other products for Apple (AAPL) .
He left Apple in 2019 to start his own firm LoveFrom plus io, a company founded to design and build a new family of AI-powered products.
Apple was off 2.3% this afternoon to $202.09.
UnitedHealth shares slump again
UnitedHealth shares were off 5.8% to $302.98 after a Guardian report alleging the company secretly paid nursing homes in bonuses not to transfer patients to hospitals.
That helped saved the company millions. Critics say patients have suffered.
The company said the allegations are "varifiably false."
UnitedHealth shares are down 39% this year.
Updated: 10:58 a.m. EDT
Just before 11 a.m. EDT Wall Street is broadly lower. The Dow 30 are off 0.5% and the Russell 2000 is down nearly 1.2%.
Bill Ackman's Pershing Square put a big chunk into a major technology company, according to the firm's recent SEC 13-F, TheStreet's Silin Chen reports. Have a look here.
Updated: 10 a.m. ET
Stocks opened broadly lower on Wednesday, pushed lower by weak earnings from retailers Target (TGT) and TJX (TJX) and worries about rising interest rates.
The losses, if they hold, would be the second consecutive market decline.
At 10:15 a.m., the Standard & Poor's 500 Index was off 0.4% to 5,915. The Nasdaq Composite Index dropped 0.2% to 19,103, and the Dow Jones Industrial Average was off 316 points to 42,362.
Home Depot's vulnerability to rising rates
Home Depot (HD) shares were off slightly Wednesday morning after slipping on Tuesday. The declines come even as the company insisted Tuesday it would not need to raise prices because of Trump tariffs.
Home Depot doesn't source much of its inventory from China.
The reason for the share weakness, says TheStreet Pro contributor Ed Ponsi, is that Home Depot's business is more tied to the housing and home improvement markets. Higher rates hurts the company's sales.
Target shares were trading down 5.6% to $92.58 in premarket trading after the retailer reported comparable sales, those in stores open at least a year, were down 3.8% from a year ago.
Home-improvement retailer Lowe's (LOW) shares were up 2% although sales were lower than they were a year earlier.
Futures trading suggested the Standard & Poor's 500 Index was looking at a 31-point drop at the open. Trading in the Nasdaq-100 index futures were off more than 110 points. The Nasdaq-100 has a deep concentration in big technology stocks.
Futures based on the Dow Jones Industrial Average were off more than 290 points.
The major averages fell in Tuesday trading with the S&P 500 and the Nasdaq-100 down 0.4%. The Dow was off 0.3%.
Target cuts guidance
Target cut its annual earnings guidance to $8 to $10 a share. The company blamed tariff unease and consumer worries about the economy.
The company expects tariff increases to cut into fiscal-second-quarter profit and warned it might have to raise some prices to cope with higher tariff costs.
Shopper checking out purchases at Target.Image source: Universal Images Group via Getty Images
Last week, Walmart (WMT) made the same warning for goods imported from China and elsewhere. President Donald Trump criticized the company and over the weekend said Walmart should eat the tariff costs.
Just about all of Target's lines saw sales decreases, led by an 8.5% decline in home furnishings and decor and a 4.8% decline in apparel sales.
Food and beverage sales were up slightly.
Bond yields move higher
Bond yields were rising on growing concern about how a tax-cut bill being debated in Congress could add to the federal deficit.
The 30-year Treasury yield moved above 5%, its highest level this year. The 10-year yield was moving above4.5%. The 10-year yield is a key determinant of mortgage rates.
