Stocks closed lower yesterday with all of the major indexes down by roughly -1.5% or more. The small-cap Russell 2000 and mid-cap S&P 400 got hit the hardest, falling by more than -2.5% each.

One could easily argue that the markets were ripe for a pullback given the historic rally we've seen since the correction lows were made back on April 7. Since then, the Dow has rallied by 14.3%; the S&P 500 by 20.9%; the Nasdaq by 27.7%; the Russell 2000 by 18.1%; and the S&P 400 by 19.0%.

And sans yesterday, the S&P alone was up in 17 out 21 trading days, while also setting a 20-year record for the longest winning streak (9 up days in a row), within that time span.

The headlines, however, also point to bond yields rising with the 10-year hitting 4.59% and the 30-year hitting 5.08%, the highest in nearly 2 years.

Additionally, with Congress in the midst of trying to pass the Administration's budget, which looks to extend the 2017 tax cuts (and more), the renewed focus on the deficit is taking center-stage. And that was only compounded by last week's credit downgrade by Moody?s.

None of this is a surprise. Moody's downgrade simply follows Fitch's downgrade from 2023, and S&P Global's downgrade from all the way back in 2011.

Additionally, Treasury yields have been steadily climbing ever since the Fed said they would take a wait and see approach to cutting interest rates due to uncertainty around tariffs.

Why did stocks 'suddenly' go down now? I point back to the top ? the market was ripe for a pullback after an amazing surge over the last 7 weeks.

Going into a 3-day holiday weekend (the markets are closed on Monday, 5/26, for Memorial Day), only added to the volatility.

In other news, MBA Mortgage Applications were down -5.1% w/w with purchases down -5.2%, and refi's lower by -5.0%.

And the Atlanta Fed Business Inflation Expectations eased to 2.5% vs. last month's 2.8% print.

Today we'll get Weekly Jobless Claims, the Chicago Fed National Activity Index, the PMI Composite report, Existing Homes Sales, and the Quarterly Services Survey.

It's been relatively quiet on the trade deal front after last week's high profile announcement of a 90-day deal with China (as they hash out details on a larger agreement), and the previous week's trade deal with the U.K.

But many other trade deals are expected to be announced in the coming weeks.

And that could very well be the catalyst for the next leg up.

In the meantime, the major indexes are currently down for the week. But there?s still 2 days left.

But it's been an amazing run so far with the Dow up 3 out of the last 6 weeks. The S&P and Nasdaq have been up in 4 of the last 6 weeks. And the small-cap Russell 2000 and mid-cap S&P 400 have been up in 6 out of the last 6 weeks.

Pretty amazing. And the week's not over yet.

See you tomorrow,