Dow Jones: Bond Surge Hits US Stocks Today, Market Forecast Turns Cautious

Dow Futures Slide as Treasury Yields Press Higher on Budget Uncertainty

Stock futures fell sharply Wednesday morning, with Dow futures down 389 points as traders reacted to a renewed surge in bond yields. The S&P 500 and Nasdaq-100 each shed 0.7%, putting pressure on a recovery rally that had lifted major indexes over recent weeks. Sentiment soured on renewed deficit concerns tied to Washington’s stalled tax bill and lingering effects from Moody’s credit downgrade of U.S. sovereign debt.

U.S. Bonds: Why Treasury Yields Are Testing Trader Patience

The 30-year Treasury yield climbed above 5.02%, while the 10-year yield rose past 4.53%. Both rates advanced by over 5 basis points on the session, extending this week’s bond sell-off triggered by Moody’s downgrade late Friday. Traders are now focused on the fate of President Trump’s tax bill, which faces internal GOP resistance over deductions for state and local taxes. Analysts warn the proposed legislation could significantly expand the federal deficit.

Bridgewater’s Ray Dalio warned investors not to underestimate the inflationary risks of debt monetization. “Credit ratings understate the real risk,” he said, arguing the government could erode bond value through currency devaluation rather than outright default.

UnitedHealth (UNH) and Target (TGT) Weigh on Premarket Sentiment

UnitedHealth shares dropped more than 6% in early trade after HSBC downgraded the stock and a Guardian report accused the insurer of paying nursing homes to limit hospital transfers. The company defended its practices, stating the DOJ had closed its investigation. Nevertheless, the stock continued to slide, last down 3% to $311.59, after a week marked by CEO turnover and regulatory scrutiny.

Target shares fell 3.5% premarket after missing Q1 revenue forecasts and slashing its full-year sales outlook. Management cited weak discretionary demand, tariff uncertainties, and backlash from the company’s reduction of DEI initiatives as key factors behind the decline.

Toll Brothers (TOL), Lowe’s (LOW) Lead Premarket Gainers

Toll Brothers surged over 4% following a fiscal Q2 beat, posting EPS of $3.50 versus the $2.83 consensus and revenue that topped estimates by over $250 million. Lowe’s rose 2% after reaffirming its full-year forecast and delivering a slight earnings beat. These gains helped push the iShares U.S. Home Construction ETF (ITB) up 1.2% for May, pacing for its first positive month in four.

Market Outlook: Traders Eye Bond Yields, Federal Reserve Commentary

The current pullback underscores investor sensitivity to long-term interest rates and government spending. Traders should monitor updates from Capitol Hill on the tax bill’s path and any signals from the Federal Reserve that could recalibrate rate expectations. Until clarity emerges on fiscal and monetary fronts, volatility is likely to remain elevated, especially in rate-sensitive sectors.

More Information in our Economic Calendar.