Author: Trend Research
The three major U.S. stock indices ended their three-day losing streak, but this rebound was not smooth.
After the U.S. Treasury Department raised the long-term bond buyback limit, the 30-year Treasury yield once plummeted by 10 basis points, providing support for stocks, bonds, gold, and crypto assets simultaneously. The minutes from the Federal Reserve's July meeting were hawkish, showing a broader consensus for interest rate hikes than the voting results suggested, with several officials still concerned about inflation. In market performance, the breakthrough in mRNA cancer vaccines ignited the healthcare sector, with Moderna surging nearly 180% and Merck & Co. gaining nearly 13%, leading the Dow. However, the Philadelphia Semiconductor Index (SOX) fell over 2% against the trend, with Broadcom down 4.6%. Nvidia was one of the few losers among the "Magnificent Seven." While long-term interest rate risks were temporarily suppressed, pressure on the AI hardware chain has not been fully alleviated. Moving forward, long-term bonds are the master switch, and the SOX is the thermometer for tech recovery.
U.S. Treasury Raises Long-Term Bond Buyback Limit, 30-Year Treasury Yield Plummets
The most critical variable on Wednesday came from the U.S. Treasury Department. The Treasury announced it would at least double the long-term bond buyback limit, raising the single-operation cap to $4 billion. Following the news, the 30-year Treasury yield once plunged by about 10 basis points, significantly easing pressure on long-term interest rates.
By the close of the bond market, the 10-year Treasury yield was around 4.64%, up about 6 basis points on the day; the 2-year Treasury yield was around 4.16%, largely unchanged; and the 30-year Treasury yield was around 5.19%, down about 9 basis points on the day. The policy signal truly suppressed the long end, while the short end and 10-year yield did not fall sharply in sync.
Wall Street interpreted this move as another realization of the "Trump put," with the Treasury intervening as long-term bond yields surged to dangerous levels. The U.S. federal government debt officially surpassed $40 trillion on Wednesday, more than doubling in a decade. The risk of a "debt death spiral" is shifting from theoretical discussion to a real constraint.
The U.S. dollar index weakened alongside the decline in long-term bond yields, falling to its lowest level since late May. The yen rebounded nearly 1% intraday, while offshore Chinese yuan rose above 6.73 for the first time in over three years.
Fed Meeting Minutes Lean Hawkish, Rate Hike Consensus Broader Than Voting Results
The minutes from the Federal Reserve's July meeting, released on the same day, conveyed a hawkish tone. They revealed that more than the three dissenting members at the July meeting supported a rate hike, with several believing action would be needed if inflation did not decline. Some officials suggested AI could push inflation higher, and staff viewed inflation expectations with an upside bias. Waller also proposed reducing the number of FOMC meetings from eight to six per year.
The interpretation by the "new Fed whisperer" was more direct: rate hikes received "broader support." This means uncertainty around the September meeting is greater than previously anticipated by the market. Even with July's CPI and PPI cooling, concerns about inflation within the Fed have not subsided.
The hawkish tone of the minutes created a policy counterbalance to the Treasury's "market rescue" operation. One department is suppressing long-term rates, while another is hinting at possible further rate hikes. The market initially traded on the Treasury's short-term positive, but the shadow of the hawkish minutes has not dissipated.
Healthcare Takes the Lead as mRNA Cancer Vaccine Breakthrough Ignites Sector
Moderna was the standout stock on Wednesday. The company, jointly with Merck, announced success in a Phase III trial of its personalized mRNA cancer vaccine for melanoma. Moderna closed up nearly 180%, while Merck gained nearly 13%, leading the Dow.
The S&P 500 Healthcare sector rose 3.2%, marking its biggest single-day gain since April 2025. Following valuation declines and policy debates post-COVID vaccines, the Phase III success in cancer treatment is prompting a reassessment of the commercial potential of the mRNA technology platform. Biotech, pharmaceutical, and healthcare ETFs collectively strengthened.
Retail earnings also provided market support. Target reported better-than-expected results and raised its full-year outlook, while Estée Lauder surged on strong revenue from China. The consumer sector did not signal a broad recession, which is another reason the indices did not continue to decline.
Semiconductors Remain the Weak Link, Philadelphia Semiconductor Index Falls Over 2% Against Trend
Against the backdrop of the broader market rebound, the Philadelphia Semiconductor Index (SOX) fell over 2%. Broadcom led the decline, down 4.6%, while Marvell Technology closed up nearly 10%, buoyed by news of its custom chip collaboration with Google. Among the "Magnificent Seven," only Nvidia closed down about 1%, while Tesla rebounded over 4%.
The weakness in the chip sector has two contexts: First, the Fed minutes mentioned some officials believe AI could fuel inflation. If AI investment itself becomes a driver of inflation, the interest rate narrative for AI would be discounted. Second, concerns about AI financing persist. OpenAI's Q2 revenue growth slowed, and operating losses widened, leading the market to question whether application-level cash flow can support higher capital expenditures.
This indicates the market is differentiating between two types of tech assets. One is the giants and software assets supported by declining rates; the other is the hardware chain with high prior gains, crowded positioning, and strong ties to AI capital expenditures. A decline in long-term bond yields can ease valuation pressure but does not automatically resolve positioning and expectation issues within semiconductors.
The SOX is more telling than the Nasdaq. The Nasdaq can be supported by the Magnificent Seven and software, while the SOX better reflects market confidence in the AI hardware cycle. As long as the SOX continues to underperform the broader market, a tech recovery can hardly be considered complete.
Commodities and Crypto Rebound in Sync; Geopolitical Premiums Persist
Commodities continue to reflect geopolitical premiums. WTI crude futures rose 1.05% to $85.83 per barrel, and Brent crude futures gained 0.66% to $91.62 per barrel. U.S.-Iran negotiations remain deadlocked; Trump backtracked a day later, saying maybe negotiations would resume "at some point." Iran-related risks continue to support oil prices.
Gold rebounded sharply, with COMEX gold futures up 2.83% to $4,489.40 per ounce, briefly surpassing $4,500 intraday. A weaker dollar and falling long-term yields jointly boosted precious metals, with silver up 2.8%.
Cryptocurrencies also strengthened. Bitcoin rose above $69,000 intraday, up over 8% from the daily low; Ethereum surged 10% at one point. The collective reaction of these assets is clear: as long as long-term bond yields are no longer out of control, the market will immediately return to buying high-beta assets.
Today's Focus
Thursday's market focus lies in three directions.
First, whether long-term Treasury yields can stabilize. Whether the Treasury's buybacks can continue to suppress the 30-year yield will determine if the U.S. stock recovery can shift from a technical rebound to more stable capital inflows.
Second, U.S. initial jobless claims and the Philadelphia Fed Manufacturing Index. Following the hawkish Fed minutes, the market will interpret every growth and employment data point more sensitively. If data continues to show strength, rate pressures may return to the market; if data weakens, tech stock recovery will still depend on whether the SOX can halt its decline.
Third, the follow-up reaction to SK Hynix's buyback plan. SK Hynix announced plans to repurchase and cancel 40 trillion won worth of shares and pledged to return at least 50% of cash flow to shareholders. After SanDisk's 35% gain last week, memory stock valuations are already high. The mood-boosting effect of this news on the memory sector warrants attention.
