Market Takes Pessimistic Turn

To be sure, cautious comments and disappointing guidance from Toll Brothers (TOL Quote) and J.C. Penney (JCP Quote) were discernible negatives, as was Iran's missing a deadline to halt uranium enrichment. But the point is that the market chose to accentuate the negatives on this day, which may simply be a function of a market that is technically extended and famously hasn't experienced as much as a 2% correction since June.

Some media reports attributed stocks' malaise to rising commodity prices. But gold finished down $1, and crude rose less than it did on Wednesday.

On the other hand, Treasury prices did fall further Thursday than the prior day, and rising yields could explain the stock market's stumble. The 10-year note fell 11/32, and its yield rose to 4.74%.

The Treasury selloff came in the wake of a 5-year note auction, the results of which were "not nearly as stellar as the strong results of Wednesday's two-year note auction, which suggests that the enthusiasm for bidding Treasury yields lower is not nearly as great as some might have previously thought," writes Tony Crescenzi, chief bond market strategist at Miller Tabak and RealMoney.com contributor.

Additionally, perhaps investors came to grips with the credibility issue facing the Federal Reserve in the wake of Wednesday's stronger-than-expected CPI report, as my colleague Liz Rappaport described. For the moment at least, the CPI report belied the Fed's recent message that inflationary pressures are abating, making the likelihood of a near-term rate cut less likely.