S&P500: Bessent Buyback Fails to Halt Selling as Oil Keeps Fed Risk High

Bessent’s Buyback Hit a Market That Was Already Selling

Stocks were weak Wednesday before Treasury Secretary Scott Bessent made the bond market’s problem bigger. Crude oil was already above $100. Yields were already near multi-month highs. The Dow was already down before the open. Then Bessent announced the largest Treasury buyback in recent memory and the tape drifted lower instead of stabilizing.

At 15:06 GMT, the Dow Jones Industrial Average is down 369.88 points or 0.70% at 52,416.19. The S&P 500 Index fell 0.39% to 7,643.64. The Nasdaq Composite lost 0.52% to 26,284.77.

PPI Thursday and CPI Friday are the last inflation reads before the September 15-16 Fed meeting.

Daily S&P 500 Index (SPX) Technical Analysis

The S&P 500 Index is lower as it approaches the mid-session Wednesday. The selling pressure has the benchmark testing the swing bottom at 7,611.20, with the 50-day moving average at 7,601.02 the next downside target.

A trade through 7,611.20 will reaffirm the main downtrend and put the 50-day moving average in play. If buyers fail to defend the 50-day moving average, the next target is the intermediate retracement zone at 7,565.31 to 7,505.98. Momentum is shifting to the downside.

The SPX swing chart indicates the main trend is down. The major top is 7,816.70. The lower tops at 7,771.48 and 7,756.76 indicate the downtrend is strengthening.

The retracement zone at 7,565.31 to 7,505.98 could slow the selling. However, taking out the 61.8% level at 7,505.98 could trigger an acceleration to the downside, with no major support until the July 29 main bottom at 7,313.92.

Treasury Is Buying Back $6 Billion of Long Debt

The Treasury Department said it will buy back $6 billion of already-issued longer-term government debt. That is triple the normal buyback size. It follows Bessent’s August statement that Treasury would at least double its usual purchases. The operation targets 10-year and 20-year notes. The actual purchase takes place Thursday. Wednesday’s announcement gave traders the size they had been waiting for.

The federal debt is above $40 trillion. Bessent has also been active in the currency market. Treasury bought yen to reduce the risk of Japanese holders selling U.S. debt to finance their own intervention. Japan holds about $1.1 trillion in Treasuries.

The buyback is triple the normal size and the market drifted lower after the announcement. Equities did not bounce on it. The bond market did not settle on it. That was the tell Wednesday.

Brent Crossed $100 and WTI Cleared $95

Brent crude pushed above $100 a barrel Wednesday for the first time since July. WTI traded above $95. Iranian forces struck shipping and a U.S. military base in Jordan after Washington said it had destroyed Iranian oil tankers. The 10-year Treasury yield briefly moved above 4.8% Tuesday and held near that level Wednesday. September rate-hike odds are at 60%.

RBC Sees a 5% to 10% Pullback Getting Easier

RBC Capital Markets warned that the odds of a normal 5% to 10% near-term pullback have risen. The firm cited September seasonality, the midterm election cycle, the Iran conflict and inflation concerns that have not gone away. Small-cap stocks have already lagged large caps since late June. Earnings have moved to the background with no major calendar to absorb attention.

Stocks in the News

Exxon Mobil and the Energy Select Sector SPDR Fund caught a bid as crude ran above $100 Brent. Apple remained in focus ahead of its product event where the company is expected to unveil new iPhones and possibly a foldable model.

Mission Produce advanced after fiscal third-quarter earnings and revenue beat. Signet Jewelers caught a strong bid after topping quarterly estimates and raising its full-year earnings outlook. Chime Financial moved higher on stronger-than-expected earnings and revenue guidance above the street.

Casey’s General Stores came under pressure after mixed quarterly results. Earnings and revenue beat, however, fuel sales declined year over year and prepared-food sales missed. ServiceTitan sold off after its revenue outlook missed. Braze weakened after revenue came in below expectations.

What to Watch

Bessent’s buyback operation runs Thursday morning. The bond market’s response tells you whether the $6 billion calms the long end or whether sellers take it as a reason to press harder. PPI lands the same day. CPI Friday. Crude above $100 Brent is doing the inflation work heading into both reports. The September rate-hike probability is at 60% and neither print is expected to walk it back without a clear downside surprise.

The near-term lean is bearish while the S&P 500 stays below 7,756.76. The swing bottom at 7,611.20 and the 50-day at 7,601.02 are sitting right below Wednesday’s trade. A failure of the 50-day opens the retracement zone at 7,565.31 to 7,505.98. The 61.8% level at 7,505.98 is where the selling accelerates if buyers do not show up. No major support below that until the July 29 main bottom at 7,313.92.