S&P 500 and Nasdaq-100: Treasury Buyback Fails as Yields Return

One Day Was All Treasury Could Buy

The bond market gave Wednesday’s buyback announcement back on Thursday. The Dow fell 602 points. The S&P 500 lost 0.7%. The Nasdaq dropped 1.1%. Treasury yields climbed back above the levels that were causing damage before the announcement, and Walmart’s worst session since May 2022 took the consumer trade down with it.

WTI crude pushed above $86 and Brent moved above $93 after Washington announced plans for the toughest sanctions in history against Iran. The stock market is dealing with higher yields, elevated crude and a consumer name that just told Wall Street the guidance is not what it expected. The Nasdaq-100 futures broke below the 50-day moving average late in the session.

Daily September E-mini S&P 500 Index Futures Technical Analysis

September E-mini S&P 500 Index futures are trading sharply lower late in the session on Thursday. The index is now trading on the weak side of the former contract high at 7693.75. You can look at this two ways. First, it could mean that the old adage of old tops becoming new bottoms did not work this time. Second, traders found the market to be overvalued above the old top and are now looking for value.

The main trend is up, but the minor trend is down. This means momentum is now trending lower. Recovering Wednesday’s high at 7764.75 will shift momentum to the upside. In the meantime, however, the price action suggests that traders are eyeing the price cluster formed by the short-term 50% level at 7581.25 and the 50-day moving average at 7576.68. This potential support cluster could prove to be attractive for buyers or it could be the trigger point for an acceleration to the downside.

Daily September E-mini Nasdaq-100 Index Futures Technical Analysis

September E-mini Nasdaq-100 Index futures are plunging late Thursday after crossing to the bearish side of the 50-day moving average at 29505.22. The downside momentum created by the move has put the index in a position to challenge the intermediate 50% level at 29150.75.

A technical bounce is possible on the first test of 29150.75. If it fails to materialize, the selling is likely to extend into the short-term retracement zone at 28772.25 to 28401.50.

Yields Recovered and the Buyback Lost Its Hold on the Market

The 10-year Treasury yield rose more than 5 basis points Thursday to 4.706%. The 30-year added more than 5 basis points to 5.251%. Earlier this week the 30-year reached its highest level in nearly 20 years. Wednesday’s buyback announcement pushed yields lower for one session. Thursday erased the move.

Treasury Secretary Scott Bessent said the buyback operations could exceed the announced $4 billion size. That may support liquidity at the long end. It does not remove the deficit, future borrowing needs or the pipeline of new debt coming into the market. The bond market is telling traders that a larger buyback program is not enough by itself. Treasury can step in and buy older bonds. New debt still has to be sold to fund the government.

Stocks ran near record highs into a week where the 30-year yield hit levels not seen since 2007. The buyback gave them one session of relief. The bond market took it back Thursday and the selling in the Dow accelerated into the close.

Walmart Missed Where It Mattered and the Dow Paid for It

Walmart dropped about 9% Thursday and is heading for its worst session since May 2022. U.S. comparable sales missed expectations. The adjusted earnings outlook for the third quarter and full year came in below what Wall Street had been pricing. The stock pulled the Dow lower by itself.

The report was not a collapse in consumer spending. Walmart is still growing. Online sales, advertising and membership revenue were solid. The company received tariff refunds it plans to use to lower prices. The problem was the gap between what the street expected and what the company delivered on the numbers that drive the valuation.

Walmart lowering prices tells investors the consumer is feeling the pressure from fuel and food costs. Home Depot beat earlier in the week. Lowe’s missed. Walmart landed somewhere in between, but the stock reaction said the market is not giving consumer names the benefit of the doubt when guidance falls short.

Walmart is sharply lower after gapping below its last swing bottom at $106.79 and 50% of its April 2025 to May 2026 trading range at $107.49. The next big test is the Fibonacci level at $100.95. That pairs with the psychological $100 level. In my opinion, a move under $100 could be damaging and lead to a further decline.

Trading on the bearish side of both the 50-day moving average at $113.92 and the 200-day moving average at $118.51 is another sign of weakness. Combined with a move under $100, it would bring the April 7, 2025 main bottom at $79.81 into the picture.

Washington Escalated the Iran Pressure and Crude Responded

Trump said Wednesday that the United States would begin a major economic operation against Iran. Bessent followed Thursday saying Washington plans to impose the toughest sanctions in history against Tehran. WTI crude for October delivery traded above $86. Brent moved above $93.

Higher crude keeps the inflation debate alive at the worst time for stocks. The FOMC minutes already showed officials are still prepared to raise rates. Fuel costs feeding into the next round of price data give the committee another reason to stay hawkish. The stock market rallied when July inflation reports came in soft. Crude staying above $86 WTI and $93 Brent threatens to make the August data look different.

What to Watch

The 30-year yield is still the number running this market. Wednesday showed Treasury can force yields lower for a session. Thursday showed the bond market takes it back once the initial reaction fades. The buyback program does not start until September 9. Between now and then, the market has to absorb the same supply of long-dated paper that pushed yields to 19-year highs earlier in the week.

Walmart put the consumer under pressure and crude above $86 WTI is keeping the inflation risk in front of the Fed. The S&P is trading below the former contract high. The Nasdaq-100 broke its 50-day moving average late in the session. The main trends are still up but momentum has shifted to the downside across all three indexes. The support cluster near the S&P’s 50-day moving average is where the market finds out whether this is a repricing or the start of something larger.

More Information in our Economic Calendar.