U.S. markets try to recover as Treasury action eases yield pressure

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US markets recover on Treasury action

Highlights

Treasury Department plans to double liquidity support operations and repurchase older notes, easing pressure and pushing the 30-year yield down to 5.205%.
Moderna surges over 120% and Merck rises 9.5% after strong phase three melanoma trial results, boosting healthcare sector performance.
WTI crude prices climb into the low-$85 per barrel range amid ongoing U.S.-Iran tensions and persistent supply concerns at the Strait of Hormuz.

Treasury move and Fed minutes in focus

As reported by Cboe Global Markets, investors are reassessing risk after the Treasury Department says it will double some liquidity support operations, a step that helps calm bond markets after a recent surge in yields.

The 30-year Treasury yield is pulling back to 5.205% after reaching an intraday high of 5.31%, a level not seen since 2007. The 10-year yield stands at 4.645% after touching 4.747% on Tuesday, its highest level since January of last year. Because yields move opposite to prices, the Treasury's plan to repurchase older outstanding notes before maturity is giving markets some relief.

Investors are also waiting for minutes from the Federal Open Market Committee later in the day for clues on how broadly policymakers support a hawkish stance. Chair Kevin Warsh has maintained that the Fed will keep fighting inflation to meet its 2% target, even as reports last week suggest price pressures may be cooling.

Technology, retail and energy shape trading

Technology shares are recovering moderately after Tuesday's selloff, with SanDisk, Micron, Western Digital and Seagate moving higher. Even so, the Nasdaq Composite remains near flat in early trading after falling 1.3% the previous session, while the PHLX Semiconductor Index dropped 5% on Tuesday.

The S&P 500 Index is up 0.41%, partly recovering from its 0.69% decline a day earlier, and the Dow Jones Industrial Average is higher by 0.26%, fully reversing Tuesday's 0.22% loss. In healthcare, Merck and Moderna are rising after positive phase three results for a melanoma treatment combining Moderna's mRNA shot with Merck's Keytruda after surgery. Moderna jumps more than 120%, while Merck gains 9.5%.

Among retailers, Target is higher after earnings and revenue beat Wall Street expectations, signaling progress in its turnaround. Lowe's initially comes under pressure after missing expectations and cutting its outlook to the low end of prior guidance, citing weaker discretionary do-it-yourself spending, though the shares turn about 1% higher after the open.

Elsewhere, Reddit slips 0.75% after losing 3.8% in its first session on the S&P 500 Index, and Klarna falls another 3.3% after a 23% drop the previous day despite strong second-quarter results, as guidance misses expectations. Oil prices are also moving higher, with WTI crude trading in the low-$85 per barrel range as stalled U.S.-Iran talks keep supply concerns centered on the Strait of Hormuz.

In our earlier report on the U.S. Treasury’s decision to double the size of certain long-dated debt buyback operations, we explained that the department aimed to improve liquidity in the 10- to 20-year and 20- to 30-year segments by raising purchases to at least $4 billion per operation. We also noted that the announcement helped ease pressure on the long end of the curve, with the 30-year yield pulling back from its multi-year highs after a sharp bond selloff.

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