The color red is the theme today. Although yesterday’s announcement of the Treasury Department buying back bonds lowered yields and boosted returns, the effect has so far been short-lived, as what market participants now call the “Bessent Put” is expected to fail, considering that the size of the operation is nowhere near large enough to influence the market on a sustained basis. Furthermore, by shortening the duration of Treasury debt now and in the near future, the Treasury risks potentially spending more money on interest payments in the future because the federal budget is still in deficit, a fact that could cause long-term bondholders to feel uneasy.
Yields rebounded across the curve. The U.S. 5-year Treasury yield climbed by 3 basis points to 4.39%, while the 10-year and 30-year yields rose by 5 basis points to 4.7% and 5.25%, respectively. Gold held steady even with higher rates as the dollar’s credibility eroded.
Stocks fell broadly as bonds retreated and oil prices rose further. The Dow lost 704 points to 52,759. The NASDAQ declined 1% to 26,067. The S&P 500 posted a loss of 0.87% to 7,641. Energy and real estate were the only sectors to post gains today, albeit minimally.
All economic indicators were solid today, with the Philadelphia Fed Business Outlook Survey coming in significantly better than expected. While on the surface this contradicted the retail sales numbers from last week, it is notable that many of the businesses surveyed are vital parts of the AI supply chain, signaling the weight of AI in our current economy.
As we approach the end of the week, Adams Wealth Advisors will watch for new market drivers and summarize this week’s market action for you.