It's been said that bond traders are ten times smarter than their stock hustling counterparts.
Whether or not there's any truth to the statement is hardly relevant. Let's just say bond traders are more diligent and discriminating than their counterparts dealing in equities. Be that as it may, something worth noticing has been unfurling in the flagging treasury market. Amid a stock market mini-meltdown, there's not been a rush to fixed income; the cagy old pros have been selling long-dated maturities, not buying, as would normally be the case in a "flight to quality."
Yield on the 10-year note hit 4.60% on Monday. The 30-year bond was throwing off an eye-catching 5.18%. Those are numbers beyond the psychological levels that have been repeatedly warned and worried over, 4.50% and 5.00%, and, if the smartest guys on Wall Street are selling already, what happens when stocks get really hot and bothered? More than likely, they'll be buying, at yields higher than current levels.
That may happen sooner, but probably later. There will be a run to the safety of finxed income and away from risky stocks, but it may prove to be short-lived. The scale of buying is likely to be at a measured pace. Bonds are much less volatile than stocks, and the managers tasked with trading debt instruments aren't about to go all in at 4.75% on the 10s or 5.25% on 30s. A nibble here, a nibble there. Before you now it, the 10-year, once considered dangerous at 4.50%, will look heavenly at 4.85% and the 30-year at 5.65%, both generous returns - much better than the average dividend yield on most stocks - with what will be perceived as minimal risk.
Rising bond yields are what naturally happens when money is too loose for too long. The American debt machine has rung up nearly $40 trillion in government debt, just at the federal level. States and municipalities, counties, and villages have dug their own debt graves and will continue digging. Individual and corporate debt are at extremes, with credit card debt at an all-time high (at an average of nearly 22%), mortgage failures and foreclosures rising rapidly and more than 40% of recent new car loans underwater, the debt binge is close to reaching its stupefying, cataclysmic climax. Nobody can just keep borrowing and borrowing more to pay off the interest - which is what the government has been doing for 40+ years - indefinitely. Eventually, the numbers just become too grotesque, too large to hide, and too onerous to handle.
U.S. government debt recently passed $39.5 trillion, just a hop, skip, and jump away from the $40 trillion mark. While there's nothing inherently magical about $40 trillion, or even $50 or $60 trillion, large, round numbers do give people reason to pause. The government will spend over $1.1 trillion in interest payments alone this fiscal year and that number is not expected to decline at all for the foreseeable future. At some point - and that point has already been reached by central banks of other major economies - there's reason to doubt the invincibility of the U.S. dollar as the world's reserve currency. It's OK, if you like paying interest on debt incurred years or decades ago for your entire life, but it's not a plan anybody with a free conscious and open mind would choose to pursue. At this juncture, however, there's no plans to make any changes. The government will issue debt, the Fed will cover it, the purchasing power of the backing currency will decline. It's just straight up math, though it does play out rather slowly, as in decades and across generations.
Since the 1970s, the United States has managed to destroy its creditor nation position to become the world's largest debtor. The wealth of the U.S. is all created by debt, and, so far, it's working, though living standards overall have been in decline since the early 2000s and are, in many parts of the country that aren't discussed at fancy parties, getting even worse. Inner cities have become homeless tent centers. Appalachia, always an area of severe poverty, has been completely devastated by a lack of new jobs, drug addiction, and the ultimate ravages of long-term underemployment.
Most people won't look over there and see the depression and hopelessness that prevails, but they are looking at their grocery bills, mortgage or rent payments, insurance and health costs eating away at their weekly or bi-weekly paychecks, and it's not just a little scary, it's very scary. People in their 30s and 40s trying to raise families are scraping by on two salaries. A generation or two ago, they'd have been prosperous and happy. Today's working couples are concerned and cornered by debt and inflation. As soon as they manage to make some headway in their income/expense ratio, gas prices, or food prices, or school fees or property taxes take another bite.
Of course, none of this is of any concern to the stock pushers on Wall Street or the slippery fish floating around congress. They aren't in that "class" of people, after all, and they look out for themselves pretty well, which is one of the reasons why they always appear to be in control, touting the latest discoveries or advancements and pretending that the whole U.S. economy is just fine and dandy, thank you.
They'll never tell you the truth. Those bond guys may be onto something, however.
After the usual celebratory opening spike in stocks, the major indices took a nose dive the rest of the day. The Dow was the first to capitulate, dropping into the red before 10:00 am ET. The S&P and NASDAQ were more resistant, bouncing around most of the session in positive territory before closing out with minor losses.
This is exactly the kind of market that portfolio managers don’t want to see during what should be a robust earnings season.
Domino's Pizza (DPZ) reported solid results before he open and ended the day up just more than two percent, at 328.97. Too bad it opened at 350 and got portioned out and devoured throughout the stuffed-crust session.
Irish ultra-low-cost airline carrier, Ryanair (RYAAY), reported a 34% Y/Y drop in its first-quarter profit because of higher jet fuel prices and lower fares, helping explain why investors took profits and ran, sending the stock down 5.85% on Monday.
After the close Monday, reporting were:
Zions Bancorporation (ZION) - down 5% ater reporting solid quarterly results
Crown Holdings (CCK) - beat, raised expectations, stock is flat in pre-market
Steel Dynamics (STLD) - second-quarter profit, revenue rise on improved steel pricing, shares down one percent
Tuesday, before the opening bell, these companies reported Q2 results:
Ally (ALLY) - in-line to beat on bottom line, shares flat
DR Horton (DHI) - earnings beat, but profits down 12%, shares down one percent
Charles Schwab (SCHW) - eps beat, record revenue, shares down 1-2%
General Motors (GM) - earnings beat, boosts guidance, shares down one percent
3M (MMM) - shares rally 7 % after second-quarter earnings beat and higher full-year outlook
Halliburton (HAL) - higher revenue, earnings beat, shares down 4%
Outside of 3M, a pattern, which has already emerged from last week, continues to haunt dealers with intentions for profit-making trades. Earnings reports, good, bad, or otherwise, are being used as a rationale to sell. This implies an immediacy to raising cash or to escape from positions that appear to be facing institutional liquidation. There's three months before the next report, so why not cash out now and buy back in before the next glowing quarterly report, or, move money elsewhere?
It makes plenty of sense considering the mostly outrageous price:value ratio. On that basis, General Motors, the makers of mostly sub-standard, over-priced motor vehicles, appears to be the ripest short of the bunch, sporting a PE above 30 (no, it's not a growth company) and a dividend yield of 0.95% (Yes, grandma, I can turn your $10,000 into $10,095 in a year. "You go run along and play in traffic, sonny.").
There is ample reason to believe that the stock market has already made the trun from bullish to bearish.
The NASDAQ is down 5.85% since June 2nd's all-time high (27,093.90). The S&P is down just over two percent over the same span, but it is the NASDAQ that represents the heart of trading in semis, tech, hyperscalers, Mag7, etc., and that is also the opening narrative for stocks heading into Tuesday's session: Tech rebound. With the NAZ already down nearly six percent, who exactly is buying into that particualr fable?
Institutions want out, but not before they lure retail into the trap. Any gains today will e gone tomorrow. That appears to be the current zeitgeist or corporate strategy. It's not working. People have less and less faith in institutional passive investing every day. Additionally, baby boomers are dying and passing along assets in 401k and other plans to their heirs, who are quickly liquidating them to pay themselves for years of diligent elderly care and a better life.
The longer the lies of the elites continue, the further the actuarial tables tell the real story.
Futures are putting lipstick and mascara on this pig of a market with NASDAQ futures up 400 points prior to the open. Dow futures are up 135; S&P futures are up 33. Bear in mind the NASDAQ can rise 400 or 500 points and still be down 3-4%. It’s nothing more than churning a dead cat that refuses to bounce very much.
Fewer and fewer suckers are being fooled only because there are fewer of them still breathing. There are more sellers than buyers. Recipe for a correction.
At the Close, Monday, July 20, 2026:
Dow: 51,839.26, -307.16 (-0.59%)
NASDAQ: 25,508.07, -12.17 (-0.05%)
S&P 500: 7,443.28, -14.41 (-0.19%)
NYSE Composite: 23,669.65, -147.32 (-0.62%)
Posts
No comments:
Post a Comment