US Treasury’s Spike While Stock Break South in Tuesdays Trading Day

Good morning.

Market futures are flat this morning this morning as Treasury yields found firmer footing, with investors’ focus now shifting to the ADP National Employment numbers due later in the day.

U.S. stocks closed sharply on Tuesday as Treasury yields rose to their highest levels since 2007. With Tuesday’s losses, the 30-stock Dow Jones index turned lower for 2023, down by around 0.4%. However, the S&P 500 index is still higher by around 10% for the year. See yesterday’s heat map. At a current reading of 17.1, the index moved to the “Extreme Fear” zone on Tuesday, compared to a previous reading of 19.8.

The eye-watering surge in long-term U.S. government borrowing costs continues to pummel world markets everywhere as investors fear 30-year yields above 5% are bound to sow financial distress somewhere in the system. And the Fed shows no sign of concern about the disturbance yet – repeating to fade its mantra on higher-for-longer interest rates and even the chance of one more hike.

Renewed concerns about a government shutdown next month now follow the removal of speaker Kevin McCarthy late on Tuesday – an unprecedented ejection of a speaker by his own party.

Overseas, the dollar remains king despite suspicions of BOJ intervention at 150 yen in Tuesday’s session. Japanese officials continue to equivocal about the chances of yen buying.

Today, all eyes are focused on U.S. ADP Nonfarm Employment Change data. Economists, on average, forecast that September ADP Nonfarm Employment Change will stand at 153K, compared to the previous value of 177K. U.S. Factory Orders data will also be in focus today. Economists foresee this figure to stand at +0.2% m/m in August, compared to the previous value of -2.1% m/m.

WTI crude futures steadied below $88 per barrel. Gold held below $1,830 an ounce while the yield on the US 10-year Treasury note rose above 4.86%.

Have a great day!