It didn’t take long for yesterday’s move in yields to reverse. The Treasury Department’s announcement yesterday briefly relieved pressure on the long end of the curve, but much of that move was retraced today. Whether that reflects traders having more time to digest the intervention or was simply a reaction to higher oil today is unclear. On the equity front it was enough to take SPX below its weeks long range between 7700 and 7800.
A disappointing reaction to Walmart earnings didn’t help matters. It was a fairly low volatility day that had the SPX grinding lower, but it did close kind of ugly on the lows:
Oil: WTI Crude is now $87, its highest level since July, and up sharply from the recent lows near $74. Today’s move was mainly around threats of severe economic sanctions on Iran and another reminder that the standoff could go on for a long time.
Yields: US10YY: 4.70%, US30YY: 5.24%. The 10Y is now back near where it traded before yesterday’s Treasury announcement, while the 30Y retraced roughly half of yesterday’s decline.
Dollar, Gold & Bitcoin - The dollar’s recent decline paused today.
After falling steadily over the past week, the dollar stabilized and bounced modestly intraday. DXY is now 98.90
Gold: 4575, held onto its morning gains despite the dollar bounce.
Bitcoin: Just shy of 73k - Bitcoin’s rally continued, pushing to its highest levels since late May.
VIX 16.05: Yesterday’s VIX expiration didn’t have much immediate impact, but it did move higher today as the SPX broke below its recent range. Short duration vols ticked slightly higher but it remains really low, especially given next week’s events.
Sectorwise things were failry mixed early but almost all turned red by the end of the day aside from Energy names.
Consumer Discretionary and Staples were bothlosers of the day with Walmart weighing across most retail stocks. WMT was -9% on the day.
Healthcare gave up some of yesterday’s gains from the MRNA rally. MRNA itself was -40% with alot of yesterday’s move short squeeze induced.
ROST is higher by about +4% after its report
Liz - Today’s market action is not saying the same thing as yesterday, people are still digesting the news.
Liz - It’s now important to prove to the entire AI ecosystem that the demand is still there, and the capex should continue, that financing should continue. I don’t expect surprises to the downside, but it’s a bellwether on demand.
Articles Mentioned:
Dow falls 600 points with stock losses increasing after a Treasury plan to tamp down yields fails (CNBC)
Bessent says Treasury buyback operation could be more than $4 billion (CNBC)
Fed and Treasury appear at odds when it comes to the markets (Axios)
Walmart Shares Slump on Weakest Sales Growth in Over Six Years (WSJ)
Retail Earnings Show US Consumers Keep Spending for the Right Price (Bloomberg)
U.S. Workers Are Paying More for Healthcare, and Next Year Will Be Worse (WSJ)
Anthropic Expects to Match SpaceX’s Record IPO Size or Top It (Bloomberg)
Meta Has Quietly Become One of Microsoft’s Largest AI Customers (Bloomberg)
Tomorrow is monthly options expiration. The backdrop remains one of long gamma that has helped keep index moves contained despite a steady stream of macro and geopolitical headlines over the past week. Yesterday’s VIX expiration likely removed some volatility-related hedging effects, while tomorrow’s expiration will clear out a large amount of index call and put gamma. Keep an eye on nearby strikes for potential pinning activity into the close tomorrow.
Monday brings a bit of a reset into potential catalysts in NVDA earnings and Jackson Hole.
For tomorrow, earnings from BJ’s Wholesale before the open, and S&P Global’s manufacturing and services PMIs shortly after the open.
Friday, August 20th
BJ - BJ’s Wholesale Club - Exp. Move 8.9%, Est: $1.17
9:45 AM - S&P Global Manufacturing PMI, Exp: 53.8, Prev: 53.9
9:45 AM - S&P Global Services PMI, Exp: 54, Prev: 54.6
SPX Expected Move: 0.6%
Analysis - US10YY, TLT, WMT, TGT, NVDA, SMH, SOXX,
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