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The stock market bent yesterday in the wake of the Moody's downgrade of the U.S. credit rating, but it did not break. The same went for the Treasury market, which was instrumental in why the stock market didn't break.
The 10-yr note yield climbed as high as 4.56%, and the 30-yr bond yield jumped to 5.04%, yet both found support and quickly retraced most of those steps. The 10-yr note yield settled the session at 4.47%, while the 30-yr bond yield settled at 4.94%.
The support that came in above 4.50% and 5.00% helped fuel another round of buy-the-dip interest in the stock market. The S&P 500, down as much as 1.1% shortly after yesterday's open, finished with a 0.1% gain and its sixth consecutive winning session.
It is too close to call now if there will be a seventh consecutive winning session. Currently, the S&P 500 futures are down 16 points and are trading 0.3% below fair value, the Nasdaq 100 futures are down 94 points and are trading 0.4% below fair value, and the Dow Jones Industrial Average futures are down 22 points and are trading fractionally below fair value.
There isn't a lot of conviction this morning, partly because there has been a ton of buying conviction since April 7, leading many to think a consolidation period is in order. At the same time, there hasn't been a lot of selling conviction because market participants are cognizant that there has been a ton of buy-the-dip conviction over the same period.
So, the market approaches today's session with a patient mindset of waiting to see what the price action will dictate.
It does so with the recognition that Dow component Home Depot (HD) reported mixed Q1 results that included weaker-than-expected EPS and stronger-than-expected revenues. The home improvement retailer reaffirmed its FY26 outlook, which doesn't call for much growth on either front, and said it doesn't plan to raise prices because of the tariffs. Shares of HD are up 2.0%.
There is also an appreciation for waiting to see if the Treasury market can keep its cool as the House debates a large reconciliation bill that, in its current form, is expected to add trillions to the budget deficit. The 2-yr note yield is unchanged at 3.98%, while the 10-yr note yield is up two basis points to 4.49%.
President Trump will visit Capitol Hill today to meet with House GOP members to lobby their support for passing the reconciliation bill, which reportedly faces some interference over Medicaid proposals and SALT deduction demands. Speaker Johnson is aiming to get a full House vote on the bill (and passage of the bill) before the weekend.
In other developments, the People's Bank of China lowered its 1-yr loan prime rate and 5-yr loan prime rate by 10 basis points each to 3.00% and 3.50%, respectively, and the Reserve Bank of Australia cut its cash rate target by 25 basis points to 3.85%. These central bank actions were expected.
There is no U.S. economic data of note today, but there is a full lineup of Fed speakers throughout the day. The main message out of Fed officials thus far is that they are opting to be patient with the next policy move, waiting to see what the hard data show in coming months. We don't expect that message to change in today's speeches.
