There was a recovery on Friday from Wall Street as the bond market cooled off and US shares were lifted, even if weekly losses are still in the cards. With the Treasury yield swings moderating, risk appetite made a comeback and one could see a bid for the more growth-sensitive areas, like crypto-linked names, despite the uncertainty over rates and elsewhere.
Bond chill steadies Wall Street
One finds the most relief in a subdued Treasury market. The 10-year yield inched to 4.71% from 4.69%, having been in the 4.68-4.71% range overnight and into the early part of the session. It is a calmer affair after some sharp moves that had a way of rattling equities.
Then there is oil. The situation with Iran and when exactly tankers will be moving out of the Persian Gulf has left some unease. Brent crude was up 0.4% to $94.09 a barrel after some back and forth within a two dollar or so spread.
Rates were not as much of a factor earlier in the week once the Treasury Department came out with the unanticipated news it would be buying more of the longer-term bonds. By Friday the yields had stabilised and equities were able to regain some confidence following a difficult session.
Opening bounce contrasts with weekly slide
The Dow Jones Industrial Average was up 9.7 points to 52768.87 when the opening bell rang. The S&P 500 put in a 24.5 point gain to 7665.68 and the Nasdaq Composite advanced to 26198.835.
A little after 9:35 a.m. Eastern, the S&P 500 showed a 0.3% gain, the Dow 250 points and the Nasdaq 0.3%. Yet the market is poised to finish the week in the red; surging government bond yields and the geopolitical scene have their effect on risk appetite.
It has been the better-than-expected spring earnings from most US firms that have propelled the market to record highs in recent days. For now though, the tone is set by the contest between those profits and policy-driven yields.
Earnings outliers and sector moves
Ross Stores is one name to note, up 3.8% on a quarter where both revenue and profit beat the mark. Management pointed to stronger engagement and new business, with tariff refunds also playing a part.
Investors have been selective in what they will lead with, looking for liquidity and resilience. It is a preference for cash flow visibility in the near term, with exposure to growth only where the volatility allows.
Three things are dictating risk appetite today:
– The lull in Treasury yield swings of late
– Jitters over oil and the war in Iran
– A boost to liquidity from the Treasury’s expanded repurchases
Crypto and global read-across
Bitcoin has been a beneficiary of the Treasury’s decision to expand repurchases, climbing past $76,500 from under $63,000 a week ago. That enthusiasm carried over to equities with Robinhood Markets up 8.8% and Coinbase Global 7.8%, making them standouts in the crypto space.
The better mood is not confined to these shores. There were gains across Asia and Europe for the most part. Hong Kong’s Hang Seng was up 1.2% and South Korea’s Kospi 0.9% in what were among the stronger moves globally.
What to watch next
The question is can the yields calm down enough to counter the geopolitical risks and put a stop to the weekly slide? Losses are still in prospect but Friday’s stabilisation suggests a more even hand if rates do not budge.
For the investor, the focus is on:
– If the week does indeed close in the red
– Treasury yields holding around 4.71%
– Oil as the shipping picture in the Persian Gulf develops
The message from the market is plain after Friday’s rebound: while earnings are a help, it is the bond market’s next move that will determine the course.
