U.S. Bond Yields Jump Spurred on by Fitch Downgrade

Good morning. U.S. stock index futures fell this morning as a jump in U.S. bonds yields, spurred partly by Fitch’s downgrade of U.S. long-term credit rating, pressured rate-sensitive stocks and set Wall Street up for another round of selloffs.

The U.S. Treasury announced Wednesday an increase in the size of its quarterly sales of longer-term debt for the first time in more than two and a half years. Also, the Treasury plans to continue gradually raising auction sizes to align with the government’s borrowing requirements. The move underscored the US’s reliance on higher debt and concerns of incoming fiscal deterioration, contributing to Fitch’s decision to downgrade the country’s sovereign credit rating from AAA to AA+.

Warren Buffett said he is not worried about the recent U.S. downgrade by Fitch, but noted the concerns are valid. Berkshire bought $10 billion in U.S. Treasuries on Monday. “The only question for next Monday is whether we will buy $10 billion in 3-month or 6-month,” Buffett said.

Second-quarter earnings season continues, and investors await new reports from big-name companies, including Apple, Amazon, ConocoPhillips, Amgen, Booking, Gilead, and Airbnb. Apple is expected to report the largest third-quarter drop in revenues since 2016 as sales of iPhones slow.

Markets will closely monitor initial jobless claims for the week ended July 29, due at 8:30 a.m. ET, to assess the strength of the labor market after a private payrolls report on Wednesday showed continued labor market resilience.

WTI crude futures steadied below $80 per barrel. Gold held below $1,940 an ounce while the yield on the 10-year US Treasury note rose above 4.11%.

When swing trading in a down trending market, it can take longer to make profits. As such, it is important to be patient and wait for the right opportunities. Utilize stop-losses to protect your profits. This will help you to limit your losses if the trade goes against you.

Have a great day.

-Mark