US Stock Market: Dow Jones, Nasdaq, S&P 500 Surged After Treasury Yield Falls From 19-Yrs High; What To Expect After Fed Minutes On Aug-20?

The US stock market recovered from its 3-day losing streak and closed higher overnight as Treasury yields pulled back from their 19-year high. The Dow Jones outperformed the Nasdaq and S&P 500 indexes. However, the upside was restrained due to hawkish remarks in the US Federal Reserve’s minutes of the July meeting. Going ahead on August 20th, Wall Street will witness stock-specific actions with major retailers like Alibaba and Walmart scheduled to declare their quarterly results.

US Stock Market

The Dow Jones Industrial Average, or DJIA closed at 53,463.05, up by 119.65 points or 0.22%. However, Dow Jones pulled back from its intraday high of 53,710.06 on August 19th.

Furthermore, tech stocks traded volatilely, and that kept Nasdaq Composite cautiously in green. The index closed at 26,331.09, up by 41.38 points or 0.16%.

Meanwhile, the S&P 500 index surged by 16.22 points or 0.21% end at 7,707.98.

Broadly, all three indices have snapped their three consecutive sessions of sell-offs. From August 14th to August 18th, the Dow Jones dropped by 496.59 points, and the S&P 500 is down by 107.23 points. However, Nasdaq crashed by 513.32 points.

The consumer discretionary, materials and consumer staples sectors outperformed the broader market, while industrial, technology and financial stocks lagged. Yields on longer-dated US Treasurys pulled back from multi-year highs after the government announced plans to more than double repurchases of 10-, 20- and 30-year debt over the coming months. The move came after the 30-year Treasury yield surged to its highest level since 2007 earlier this week. Investors now turn their attention to retail giant Walmart’s earnings later in the global day, along with the latest weekly jobless claims data, as per Trading Economics.

Among top gainers, Samsung shares jumped 10.10%, Apple and Amazon gained by 2.2% and 2.5% respectively. Also, Tesla zoomed by 4.23%, Eli Lilly climbed 4.5%, Merck skyrocketed by 13%, Tencent soared 2.4% and Netflix shares advanced 3.2%.

However, among top losers were chipmakers and AI-related tech stocks such as Broadcom, which was down 4.6%, SpaceX that plunged by 2.6%, AMD and Intel stocks also declined by 3.7% and 4% respectively. Nvidia also slipped 1%.

US Stocks Vs Treasury Yields Negative Co-Relation

Yesterday, the 10-year US treasury yield dropped sharply to 4.64% after hitting a 20-month high of 4.75%. This performance came after US Treasury Department announced to double the size of buybacks for long-dated securities. Furthermore, the 30-year treasury yield plunged below 5.2%, pulling away from their 19-year high of 5.34%.

Trading Economics data highlighted that the government said it would at least double the size of liquidity-support buyback operations covering securities with maturities ranging from 10 to 30 years. Scott Bessent previously described the buyback program as an important tool for addressing market dislocations and improving liquidity. Treasury bonds came under heavy pressure in August as surging AI-related debt issuance, rising deficit spending and concerns over persistent inflation pushed up estimates for term premia.

However, analysts pointed out that the bond yields and stocks have their most negative co-relation in nearly four decades.

Bond yields and stocks now have the most negative correlation since 1997, meaning when one goes up the other goes down. This implies that the bond market is keying more off inflation data than growth data, giving inflation the upper hand when it comes to equities, said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research (SCFR).

Fed Minutes Turn Hawkish

As per Think Ing note, the minutes to the July Federal Reserve FOMC policy meeting lean a touch hawkishly, but that was to be expected given three officials had dissented. Beth Hammack, Lorie Logan and Neel Kashkari had all voted for an immediate 25bp interest rate increase, while nine other committee members voted to hold the fed funds range at 3.5-3.75%.

Analysts at ING said, “The minutes showed “several participants” favoured a rate hike and “many” assessed that rate hikes would likely be needed if inflation didn’t decline. In the end though “most” supported holding rates steady.”

What To Expect On Wall Street On August 20?

Firstly, economic data such as Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Leading Economic Index, and Philadelphia Fed Index are scheduled to release on Thursday.

Among corporate earnings, companies like Advance Auto Parts Inc. (AAP), Alibaba Group Holding Ltd. (BABA), Alour Lifestyle Holdings Ltd. (ATAT), Autohome Inc. (ATHM), Deere & Co. (DE), Futu Holdings Ltd. (FUTU), NetEase Inc. (NTES), OSI systems Inc. (OSIS), Ross Stores Inc. (ROST), and Walmart Inc. (WMT) are set to be in focus.

Geopolitical developments, however, remain a key focus for investors. Ponmudi R, CEO of Enrich Money, said, U.S. President Donald Trump has announced the launch of an “economic warfare” campaign against Iran, keeping tensions elevated and leaving the outlook for the Strait of Hormuz uncertain. WTI crude oil continues to trade in the $84-85 per barrel range, ensuring that energy prices and their implications for inflation and global risk sentiment remain firmly in focus.