The US Treasury Department is reacting to rising bond yields with countermeasures - with success: Treasury yields are falling and investors are giving up their reluctance to buy stocks. Moderna papers are going through the roof after reports of progress in cancer therapy.
The US stock markets closed a little firmer on Wednesday. Falling yields on government bonds boosted investors' willingness to take risks. A price jump of almost 180 percent in the shares of the vaccine manufacturer Moderna also boosted many other stocks from the healthcare sector. All three indices closed 0.2 percent higher. The US standard value index Dow Jones stood at 53,463 points, the technology-heavy Nasdaq at 26,331 points and the broad S&P 500 at 7,708 points.
Investors hardly reacted to the minutes of the July meeting of the US Federal Reserve. It highlighted increasing concerns about inflation and several policymakers expressed willingness to raise interest rates. Many said a rate hike would be necessary if inflation did not return to the Federal Reserve's 2 percent target.
But there was some relief on bonds: one day after the yield on the 30-year US government bond reached its highest level since 2007, it fell on Wednesday, as did the yield on the 10-year US government bond. The US Treasury Department had previously announced that it would double the volume of buyback measures to support liquidity for longer-term bonds. “Risk-on investors are trying to cling to the lifeline that Finance Minister Bessent has thrown,” said Carol Schleif, chief market strategist at BMO Private Wealth. She noted that riskier assets, including technology stocks, had sold off in recent days amid rising bond yields.
Concerns about exploding national debt and rising inflation pushed global bond yields to multi-year highs on Tuesday. The government support made it easier for investors, explained Schleif. Higher interest rates could potentially hurt AI trading as tech companies issue bonds and stocks and use their own cash to finance the construction of AI data centers.
As the trading day progressed, the stock indices largely gave up higher gains from early trading. Jim Baird, chief investment officer at Plante Moran Financial Advisors, explained this with profit-taking after the initial rally. Ultimately, the longer-term problem of higher interest rates is not off the table.
Moderna rose sharply after the company announced that its personalized mRNA cancer therapy developed with Merck reduced the risk of melanoma recurrence and spread in an advanced-stage study. Merck shares also jumped and were the biggest gainer in the blue-chip Dow index. Moderna's price rally boosted other companies in the healthcare sector such as Novavax and Biontech.
Losses in semiconductor values
S&P 500 information technology stocks fell during the trading day, with chip stocks leading losses. However, Marvell Technologies gained after the company said it would help develop Google's highly sought-after custom chips and gave the search giant the right to take a stake worth potentially $12.2 billion.
Shares of Target rose after the retailer raised its annual sales forecast. Retailer Lowe's rose despite lowering its sales growth forecast. Estée Lauder soared after the cosmetics maker forecast full-year profit that beat Wall Street estimates.
The price of oil continued to rise, Brent now costs $91.40. The background is the unclear developments in the Middle East. US President Donald Trump said there were no talks with Iran and stressed that the Strait of Hormuz was open. Iran said the strait remained closed to shipping.
