Bond yields are spiking, and that’s kneecapping US stocks. The dollar is dropping, too, while gold and silver prices are climbing along with crude oil.
On Capitol Hill, Republicans are trying to overcome objections from within the party to pass a large tax-and-spending bill advocated by President Trump. Some lawmakers want more generous “SALT” deductions, while others want more-aggressive Medicaid spending cuts. But global bond investors are concerned that whatever compromise bill gets hammered out won’t rein in US budget deficits and debt growth.
Moody’s just stripped the US of its last “AAA” credit rating, and outside experts say the bill as discussed could boost deficits by almost $3 trillion in the next decade. In part because of that, the yield on the 30-year Treasury Bond breached 5% again overnight. It hasn’t closed there since October 2023…and before that, August 2007. The 10-year Treasury Note yield topped 4.54%.
Redfin Home Price Index (YOY % Change)
One consequence of the move: The average 30-year fixed mortgage rate just climbed to a three-month high of 6.92%, according to the Mortgage Bankers Association. That pushed an index that tracks home purchase and refinance loan applications down 5% in the most recent week. A Redfin gauge of home prices slipped 0.1% in April, the first monthly drop since September 2022. Annual price appreciation slowed to the lowest since July 2023.
Finally, we got mixed news out of the retail sector today. General merchandise retailer Target Corp. (TGT) whiffed on Q1 earnings, reported a drop of almost 4% in same-store sales, and cut full-year guidance. Its shares fell further this morning after dropping 27% year-to-date.
On the flip side, home improvement retailer Lowe’s Cos. (LOW) slightly topped profit targets amid a smaller-than-expected slide in sales. The firm reiterated full-year guidance, helping buoy LOW shares. They’re still down about 6% YTD.
