Bond Slide Drags Down Stocks Amid Weak Treasury Auctions and Fed Rate Signals

The recent weak sale of Treasuries has sparked concerns about swelling supply and rising yields, leading to a slide in bonds that dragged down stocks. The US sold $44 billion of seven-year notes at a higher rate than expected, following tepid demand in two other recent auctions totaling $139 billion.

This trend is impacting various asset classes and highlighting uncertainties over Federal Reserve policy as inflation remains elevated globally. Longer maturities in the Treasury market saw losses, with 30-year yields rising to 4.75%. European bond issuance has surpassed €1 trillion, while German bond yields hit a six-month high due to accelerating inflation.

In the stock market, the S&P 500 dropped below 5,300, with American Airlines Group Inc. and UnitedHealth Group Inc. facing challenges. However, Marathon Oil Corp. surged as ConocoPhillips announced a $17 billion acquisition deal.

As the Fed prepares to release the Beige Book survey and monitor inflation, economists are expecting a balanced tone that may influence future rate decisions. Fed Chair Jerome Powell has emphasized the need for sustained evidence of inflation reaching the 2% target before considering rate cuts.

Looking ahead, the options market predicts muted swings in the S&P 500 following bond auctions and inflation data, with traders focusing on upcoming consumer price readings and the Fed’s decisions. Bank of America Corp. clients have been net sellers of US equities, with hedge funds increasing exposure to technology giants like Nvidia Corp.

Corporate highlights include Exxon Mobil Corp.’s annual meeting, Abercrombie & Fitch Co.’s strong sales, and Dick’s Sporting Goods Inc.’s positive outlook. Robinhood Markets Inc. announced a share repurchase plan, while Lenovo Group Ltd. plans to sell convertible bonds to Saudi Arabia’s sovereign wealth fund.

Key events this week include economic data releases from Eurozone, US, Japan, and China, as well as speeches from Fed officials. Overall, market movements have been mixed, with stocks and currencies experiencing declines while bond yields and commodity prices fluctuate.