The Dow Jones ended over 250 points off the day’s high but managed a positive close. The S&P 500 snapped a three-day losing streak but ended just above the flat line, having gained as much as 0.7% earlier. The Nasdaq Composite also ended little changed but in positive territory, failing to sustain an initial 0.6% advance.
Why Did Bond Yields Fall on Wednesday?
On Wednesday, the US Treasury announced that it plans to boost the buyback of longer-dated bonds after borrowing costs had jumped to the highest level in nearly two decades.
The department said that it will “increase, by at least double,” the size of liquidity support for buyback operations for securities dated from the 10-year to the 30-year tenor. What was earlier supposed to be a $2 billion minimum buyback size operation, will now be “at least” $4 billion.
As a result of the announcement, the 30-year yield sold-off sharply, falling to levels of 5.18%, having climbed to as high as 5.33% earlier in the week. The 10-year yield also cooled off to 4.64%, having climbed to a high of 4.73% earlier.
However, economists and market experts believe that this will do nothing to bring down the overall national debt, which crossed $40 trillion for the first time on Tuesday.
How Did Other Asset Classes React To The Treasury Intervention?
While equities rose but failed to sustain the gains, and bond yields fell, the US Dollar index saw its biggest single-day drop in over three months, slipping to levels below 99.
The move also spurred Gold prices in the global markets, with spot levels crossing the mark of $4,500 an ounce on Wednesday.
What Could Have Caused Equities To Fall From The Highs On Wednesday?
A positive move after the fall in bond yields on Wall Street could have possibly been offset by some hawkish commentary in the minutes of the recently concluded Federal Reserve policy meeting, where “many” participants said that rate hikes would be necessary if inflation does not cool down.
In Federal Reserve terms, “many” is described as nearly half of the 19 officials on the board.
Why Chip Stocks Fell On Wednesday But Marvell Outperformed?
The Nasdaq 100, which comprises of mostly chip stocks, fell close to 100 points on Wednesday, underperforming most of its peers, as a Wall Street Journal report disclosed OpenAI’s second quarter results citing sources.
The report stated that OpenAI saw 18% revenue growth year-on-year during the quarter but wider losses. The report sent shares of chip stocks like Broadcom, Intel, and AMD lower by over 4% each.
However, Marvell Technology shares jumped 10% after the company announced a chip deal with Google-parent Alphabet, and as part of the deal, Alphabet could also purchase Marvell shares worth over $12 billion.
Highlight Of The Day: Moderna
Shares of Moderna nearly tripled in value in a single session, surging 177%, after a personalised vaccine developed by the company, along with Merck & Co., helped reduce the recurrence of Melanoma in a large, late-stage trial. Melanoma is one of the deadliest forms of skin cancer. Merck shares also jumped 13% on the news.
Later today, Wall Street will focus on results from the world’s largest retailer, Walmart, and commentary from its management on the road ahead. Walmart’s peer Target, reported strong results on Wednesday and also boosted its full-year net sales guidance, taking the stock higher by 4%.
