In a sharp downturn, U.S. stocks hit session lows on Tuesday as equities faced pressure from a bond sell-off triggered by two weak Treasury note auctions. After enjoying a five-week winning streak, Wall Street has recently been hesitating near record levels due to uncertainty surrounding interest rate cuts. The Memorial Day holiday weekend came to an end, bringing investors back to the market.

The benchmark S&P 500 slipped into negative territory, falling 0.38% to 5,284.72 points in afternoon trade. The blue-chip Dow experienced further losses, declining 0.85% to 38,736.19 points. The tech-heavy Nasdaq Composite, after briefly surpassing the 17,000 mark buoyed by Nvidia's strong quarterly report last week, pared its gains and was up marginally by 0.07% at 16,931.96 points.

Eight out of the 11 S&P sectors were in the red, reflecting the overall downturn in the market. The bond sell-off was a key factor in this decline, as U.S. Treasury yields surged following disappointing auctions of $69 billion in 2-year notes and $70 billion in 5-year notes. The yield on the 30-year Treasury rose by 8 basis points to 4.66%, the 10-year yield increased by the same margin to 4.55%, and the 2-year yield gained 4 basis points, reaching 4.98%.

Althea Spinozzi, Senior Fixed Income Strategist at Saxo Bank, commented that the weak auctions signal that investors believe the Federal Reserve might further address inflation concerns. Wall Street experienced mixed trading earlier in the day, with the S&P barely moving from the flat line. However, hawkish comments from Minneapolis Federal Reserve President Neel Kashkari, known as one of the more hawkish Fed policymakers, had a countering effect on the market sentiment.

Kashkari noted that interest rate increases have not been ruled out and emphasized that the discussion on potential rate hikes is still ongoing. These comments offset the positive economic data from the Conference Board, which showed a slight improvement in consumer confidence for May, ending a three-month decline. Nevertheless, the survey revealed that consumers' 12-month inflation expectations have risen.

The market's attention now shifts to Friday's release of the core personal consumption expenditures price index, which is the Fed's favored inflation gauge. Additionally, economic data on Tuesday showed the S&P Corelogic Case-Shiller Index reaching a record high in March, with all major metro markets reporting month-on-month price increases. In March, house prices also rose by 0.1% month-on-month, as reported by FHFA data.

As investors digest these developments and evaluate the future trajectory of the market and the economy, market participants will closely monitor the impact of the bond sell-off and upcoming economic indicators to inform their trading decisions.

Overall, the recent stock market decline, driven by the bond market sell-off, highlights the ongoing market uncertainties related to interest rate cuts and inflation concerns.