Market Wrap for Wednesday, June 12: Stock and Bond Markets Fall Mid-Week; Liquidity Concerns Remain a Focus

The U.S. stock market fell on Wednesday for the third straight session as investors continued to mull the timeline for the Federal Reserve to ratchet down its stimulus programs. The multi-year rally in risk assets has been driven in large part by huge liquidity injections from the Fed and other central banks, and investors worry about economic growth in the absence of these programs.

Given the run-up in the major averages in 2013, the markets are also vulnerable to profit taking bouts in the absence of good news. Sentiment has been turning bearish in recent days, and a triple digit decline on Wednesday saw the Dow close below 15,000.

Major Averages

The Dow Jones Industrial Average fell 127 points, or 0.84 percent, to 14,995.

The S&P 500 lost almost 14 points, or 0.84 percent, to just below 1,613.

The Nasdaq fell nearly 37 points, or 1.06 percent, to close at 3,400.

Treasury Budget

For the month of May, the Treasury Budget showed a deficit of $138.7 billion. This compared to a deficit of $124.6 billion in May 2012. The bottom line figure was slightly below expectations calling for a deficit of $139.0 billion last month.

Commodities

Despite a weak stock market, energy prices rose on Wednesday. Near the close of equities, NYMEX crude futures were up around 0.50 percent to $95.85. Brent contracts were last higher by 0.53 percent to $103.51. Natural gas futures rose around 1.30 percent on the session to $3.77.

Precious metals also got a slight boost on the day. At last check, COMEX gold futures had risen 0.72 percent to $1,386.90 while silver was up 0.23 percent to $21.70. Copper futures added 0.80 percent on Wednesday to $3.2205.

In the grains complex, both corn and wheat lost ground. Heading into the closing bell, corn futures were down 2.41 percent while wheat had lost roughly 2 percent. Movers in soft commodities included coffee and cotton. Coffee futures lost nearly 4 percent on the session while cotton was last up 3.39 percent.

Bonds

In an unusual twist, bonds recorded steep losses along with stocks on Wednesday. At last check, the iShares Barclays 20+ Year Treasury Bond ETF (NYSE:TLT) was down 1.40 percent to $112.36. Yields surged as bond prices tumbled.

At last check, the yield on the 2-Year Note was 0.32 percent and the 5-Year Note was yielding 1.14 percent. Yields on the 10-Year Note and 30-Year Bond were 2.23 percent and 3.37 percent, respectively.

Currencies

The U.S. Dollar was slightly lower on the session. Nearing the close of equities, the PowerShares DB US Dollar Index Bullish ETF (NYSE:UUP), which tracks the performance of the greenback versus a basket of foreign currencies, was down 0.09 percent to $21.96.

The closely watched EUR/USD pair was last trading up 0.17 percent to $1.3329. Overall, volatility was limited in currency markets, but other movers included the USD/JPY, which lost 0.26 percent, and the AUD/USD, which rose 0.48 percent.

Volatility and Volume

A third straight day of declines for the major averages triggered a jump in the CBOE Volatility Index on Wednesday. In late afternoon trade the VIX was up almost 9 percent to 18.59 and is now sitting at the high-end of its recent range.

As nervousness become more palatable on Wall Street, trading volumes have been rising in recent weeks. On Wednesday, around 165 million SPDR S&P 500 ETF (NYSE:SPY) shares traded hands compared to a 3-month daily average of 132 million.

Stock Movers

Cooper Tire & Rubber Company (NYSE:CTB) surged almost 41 percent after the company agreed to be acquired by Apollo Tyres in an all-cash deal valued at around $2.5 billion.

Health Management Associates (NYSE:HMA) was trading up better than 11 percent on Wednesday afternoon. The move comes in the wake of a request from the company's largest shareholder, hedge fund Glenview Capital Management LLC, that it remove its poison pill provision or raise the trigger to 25 percent from 15 percent. Glenview said that it is evaluating a number of options with regard to its HMA investment and may try to change all or part of the company's board. Deustche Bank analysts said that Glenview may attempt to force a sale of the company and upgraded the stock to Buy.

Software maker Agilysys (NASDAQ:AGYS) climbed 9 percent on the session after the company reported better than expected fiscal Q4 results.

Rambus added more than 6 percent after South Korea's SH Hynix Inc. agreed to pay $240 million as part of a patent dispute dating all the way back to 2000.

Ulta Salon (NASDAQ:ULTA) soared almost 15 percent after reporting its fiscal first-quarter earnings results. Profit in the quarter was up 20 percent.

Spectra Energy (NYSE:SE) rose roughly 11 percent after announcing it will drop-down its remaining domestic transmission and storage assets to Spectra Energy Partners (NYSE:SEP) by the end of the year. In light of the news, Deutsche Bank upgraded the stock to Buy.

Boston Beer (NYSE:SAM) rose better than 5 percent after getting an upgrade from Sell to Neutral at Goldman Sachs. The firm also lifted its price target on the stock by $21 to $162.

Investor Carl Icahn's holding company Icahn Enterprises (NYSE:IEP) lost almost 10 percent on the session after pricing a depositary unit offering.

Manchester United (NYSE:MANU) lost more than 9 percent on Wednesday after reaching a deal to sign Argentinian defender Ezequiel Garay for $26.6 million.

Take-Two Interactive Software (NASDAQ:TTWO) fell almost 9 percent after the company announced a proposed share offering.

First Solar (NASDAQ:FSLR) lost almost 11 percent after disclosing that it intends to sell 8.5 million shares.

Biogen Idec (NASDAQ:BIIB) fell more than 7 percent after the stock was downgraded at Citigroup from Buy to Neutral.

Lululemon (NASDAQ:LULU) continued to plummet on Wednesday after the company announced the impending departure of CEO Christine Day on Monday after the market close.