Market Wrap US-Europe 20 August: Dow Sheds 700 Points as Treasury Buyback Relief Fades
Wall Street gave back Wednesday’s bounce on Thursday as Treasury yields rebounded and the relief from the Treasury’s buyback expansion faded, with CNBC’s close report describing the plan to subdue yields as having failed its first market test. The Dow Jones Industrial Average tumbled 703.84 points, or 1.32 percent, to 52,759.21, with Walmart sinking 9.15 percent for its worst day since May 2022 after its guidance disappointed, per CNBC. The official 30 year Treasury yield rose 4 basis points to 5.23 percent, giving back nearly half of Wednesday’s 9 basis point buyback-driven drop, per the US Treasury’s daily curve, while London’s FTSE 100 was the only gainer among the four European benchmarks tracked here for a third straight session, our count from our published closes, and Bitcoin traded at its highest since the start of June, per CNBC.
Across the US board, the selling was broad but heaviest in the cyclicals. The S&P 500 fell 0.87 percent to 7,641.16, the Nasdaq Composite 1.00 percent to 26,067.17 and the Russell 2000 1.34 percent to 2,992.44, per CNBC. Walmart closed at 103.84 dollars after its second quarter US comparable sales grew 2.6 percent against the 3.5 percent analysts expected and its third quarter earnings guidance of 62 to 64 cents a share came in below the consensus of 68 cents, per CNBC, even as the company raised its full year outlook. Walmart’s own release said comparable sales were steady with prior periods setting aside a negative 125 basis point impact from Maximum Fair Pricing legislation in pharmacy, per the company. Deere jumped 6.94 percent after reporting a 1.38 billion dollar quarterly profit on revenue of 12.6 billion dollars and raising the low end of its full year forecast, per CNBC. The day’s data leaned strong: the Philadelphia Federal Reserve’s manufacturing index jumped to 47.4 in August, its highest since April 2021 and well above the 25 consensus, with its employment gauge at the highest since April 2022, per CNBC, and the Treasury Department reported that total US government debt has topped 40 trillion dollars, at 40.05 trillion as of Tuesday, per CNBC.
The rates story drove the tape. Treasury yields rebounded through the session, reversing in intraday trading the decline that had followed Wednesday’s buyback announcement, per CNBC, with the 30 year at 5.25 percent late in the day, up more than 5 basis points, and the 10 year at 4.70 percent, per CNBC. On the official close of day curve the move was smaller: the 30 year rose 4 basis points to 5.23 percent and the 10 year 4 basis points to 4.69 percent, with the 2 year unchanged at 4.19 percent, per the US Treasury. The Treasury itself describes the programme as liquidity support for the long end rather than a yield target, per its announcement. Treasury Secretary Scott Bessent said the accelerated buyback could be higher than the announced 4 billion dollars per operation and that his department would make a market in the longer dated securities where yields have been rising, per CNBC.
Europe closed lower with one exception. The FTSE 100 edged up 0.04 percent to 10,748.16, its third straight session as the only gainer among the four benchmarks tracked here, our count from our published closes, while the Euro STOXX 50 fell 0.35 percent to 6,422.06, Germany’s DAX 0.42 percent to 25,983.04 and France’s CAC 40 0.57 percent to 8,453.09, per CNBC. Denmark’s Novonesis jumped 8 percent in early trading after raising its full year guidance and announcing a 1 billion euro share buyback, per CNBC.
In currencies and the wider market, the dollar index was little changed at 98.887, per CNBC. The euro was flat at 1.1676 and sterling up 0.18 percent at 1.3627, with the yen weaker at 159.10 per dollar and the Kuwaiti dinar at 0.3067 to the dollar, per CNBC. The Central Bank of Egypt’s official rate for 20 August stood at 50.8140 buy and 50.9534 sell per dollar, per the central bank. Bitcoin surged 6.29 percent to 72,704.00 dollars in a live late Thursday reading, its highest since 1 June, extending a two day rally that followed the White House push for the Clarity Act cryptocurrency bill, per CNBC, and the Cboe Volatility Index jumped 7.52 percent to close at 16.01, per CNBC.
For reference, earlier Thursday Asia rebounded sharply from Wednesday’s rout, with the Kospi up 5.89 percent and Brent settling near 94 dollars on the Iran escalation, as covered in our MENA-Asia and commodities wraps.
US equities, 20 August closes, ranked by change
| Index | Close | Change |
|---|---|---|
| S&P 500 (United States) | 7,641.16 | -0.87% |
| Nasdaq Composite (United States) | 26,067.17 | -1.00% |
| Dow Jones Industrial Average (United States) | 52,759.21 | -1.32% |
| Russell 2000 (United States) | 2,992.44 | -1.34% |
Europe equities, 20 August closes, ranked by change
| Index | Close | Change |
|---|---|---|
| FTSE 100 (United Kingdom) | 10,748.16 | +0.04% |
| Euro STOXX 50 (euro area) | 6,422.06 | -0.35% |
| DAX (Germany) | 25,983.04 | -0.42% |
| CAC 40 (France) | 8,453.09 | -0.57% |
US Treasury yields, 20 August official curve, ranked by change
| Maturity | Yield | Change |
|---|---|---|
| 30-year | 5.23% | +4 basis points |
| 10-year | 4.69% | +4 basis points |
| 2-year | 4.19% | unchanged |
Currencies, 20 August
| Pair | Level | Basis |
|---|---|---|
| USD/EGP, Central Bank of Egypt | 50.8140 buy / 50.9534 sell | official rate, 20 August |
| USD/JPY | 159.10 | +0.59%, intraday |
| GBP/USD | 1.3627 | +0.18%, intraday |
| EUR/USD | 1.1676 | little changed, intraday |
| USD/KWD | 0.3067 | -0.13%, intraday |
Volatility and crypto
| Instrument | Level | Change |
|---|---|---|
| Bitcoin | $72,704.00 | +6.29%, live Thursday market |
| Cboe Volatility Index | 16.01 | +7.52%, Thursday 20 August close |
Why it matters: The session tested whether an announced buyback can hold down the long end by itself, and the market’s answer was not yet, our reading. Wednesday’s 9 basis point drop in the official 30 year yield was nearly half unwound within a day even as Bessent raised the promised operation size, which shifts the burden of proof to the actual purchases when they begin, our reading. The equity translation was differentiated: the Russell 2000’s decline fits renewed pressure from financing costs on domestically focused companies, our reading, while the Dow’s underperformance was amplified by Walmart, a consumer bellwether repriced on guidance in a market with little patience for misses. Against that, the strong Philadelphia Fed print argues against reading the session as a growth scare, and resilient activity can itself add to the pressure on long yields, our reading, while London’s quiet third day as the only gainer among the benchmarks tracked here extends a divergence worth watching.
Outlook: The next markers are whether the official long end keeps unwinding Wednesday’s drop when the curve publishes after Friday’s close, Bessent’s Monday press conference on the Iran sanctions plan, per CNBC, and the buyback operations themselves from 9 September, per the Treasury’s schedule. In equities, the test is whether the week closes with Wall Street holding above its pre-buyback levels, and whether Bitcoin’s push to its highest since June survives the first profit taking, our reading.
Sources: CNBC; the US Department of the Treasury; Walmart; Central Bank of Egypt.
