| Name | Daily Close | Daily Change | Daily Change (%) |
|---|---|---|---|
| Dow | 42,677.24 | -114.83 | -0.27% |
| S&P 500 | 5,940.46 | -23.14 | -0.39% |
| Nasdaq | 19,142.71 | -72.75 | -0.38% |
| VIX | 19.03 | 0.95 | 5.25% |
| Gold | 3,312.60 | 28 | 0.86% |
| Oil | 62.55 | 0.5 | 0.81% |
US MARKET
Pay attention to today’s trade, a day in which the equities market took notice of the bond market. There are troubles brewing in the long-end of the US Treasuries curve and these troubles have implications for stocks.
Stocks in the US fell sharply in the afternoon trading as rising Treasury yields and concerns over mounting US deficits weighed heavily on investor sentiment. The S&P 500 and Nasdaq lost 1.4% and 1.2%, respectively, while Dow Jones 1.8%. There was buying into the close, slightly paring the larger drops. Yields on longer-term bonds spiked after a weak $16 billion auction of 20-year Treasuries, with the 30-year yield jumping to around 5.08%, the highest since 2023 amid heightened worries that a proposed tax-and-spending bill in Washington could further inflate the federal deficit. After almost erasing losses, the S&P 500 dropped nearly 1.5%. It was a very broad-based sell-off – only 14 stocks in the S&P 500 were in the green.
The long end of the US treasuries curve has been a theme all week, starting with the Moody’s downgrade. The move in the 10-year yield (the risk-free rate and used in equities valuations) meaningfully above 4.5% is something that confirms a key change in long-term yields. These higher yields make it much tougher to justify today’s very high valuation levels. So, it’s something that will likely create some renewed headwinds for stocks. It is hard for US equities to stay resilient in this environment – it is hard to make the case that such a (negative) driver of the rising cost of capital is positive for risk assets.
Significantly, retail earnings also added pressure, with Target (-4%) slashing its outlook and warning of weaker consumer demand, while Lowe’s and TJX held their guidance steady. UnitedHealth sank 5% on reports it paid nursing homes to reduce hospital transfers. On the other hand, Alphabet rose 3.5% on new AI investments. Investors are also watching the weakening US dollar and possible implications from the ongoing G-7 summit, adding more uncertainty to the outlook.
OVERVIEW OF AUSTRALIAN MARKET
A rally in the big banks led the Australian sharemarket higher on Wednesday, with sentiment buoyed by the RBA’s rate cut on Tuesday and expectations of more policy easing to come. The S&P/ASX 200 rose 0.7%, or by 54.8 points, to 8398.1 points, less than 2% shy of its record high in February. Ten of the 11 sectors were in the green, led by utilities and bank stocks. The All Ordinaries rose 0.6%.
Banks guided the broad rally in Australian shares, with index bellwether Commonwealth Bank touching a record in early trading. The stock was up 1.5%. National Australia Bank added 2.1% and Westpac edged up 0.5% amid news it is preparing to shed more than 1500 employees.
Utilities and healthcare stocks also advanced, with Origin Energy up 1% and APA Group 1.9%. Among the healthcare names, Resmed jumped 4.6% and Fisher & Paykel 2.6%. Energy stocks tracked a bounce in Brent crude, up 1.5% to $US66.37 a barrel, following a report Israel is preparing for a strike on Iranian nuclear facilities. Woodside and Santos advanced more than 1%.
Going the other way and significantly so, Mayne Pharma crashed 30.6% after US pharmaceutical giant Cosette warned there had been a material adverse change in the company’s trading conditions, putting its $672 million takeover bid for the drug company in doubt. Nufarm plunged 29.6% after the global farm chemical supplier downgraded its earnings guidance. Nufarm reported lower first-half profit, driven by weakness in fish oil pricing and higher costs
