[New York Stock Market] Treasury Announces Major Buyback Expansion... All Indices Close Modestly Higher

Treasury to Double Long-Term Bond Buyback Program
30-Year Yield Plunges, Easing Rate Pressure
Fed Minutes Reveal Widespread Support for Additional Hikes
Upside Capped by Weakness in AI-Related Stocks

With the U.S. Treasury announcing that it would at least double the size of its long-term Treasury bond buybacks, long-term Treasury yields fell sharply. Amid this, on August 19 (local time), the three major U.S. stock indexes in the New York Stock Exchange closed with modest gains. However, the upside was limited as the Federal Reserve's July Federal Open Market Committee (FOMC) minutes raised the possibility of additional interest rate hikes, and some artificial intelligence (AI) related stocks weakened.

At the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 53,463.05, up 119.65 points (0.22%) from the previous session. The large-cap S&P 500 Index rose 16.22 points (0.21%) to 7,707.98, while the tech-heavy Nasdaq Index climbed 41.37 points (0.16%) to 26,331.09.

New York Stock Exchange. New York, USA – Special Correspondent Yoonju Hwang

The market on this day focused on the U.S. Treasury's announcement regarding its expanded buyback program for long-term Treasuries. The U.S. Treasury announced that it would at least double the buyback size for 10- to 30-year Treasury bonds. The 20-year note was also included in the targets for buybacks.

Following the Treasury's announcement, long-term Treasury yields dropped sharply. The yield on the 30-year Treasury, which had surpassed 5.33% the previous day to hit a 19-year high, fell by about 9 basis points (1bp = 0.01%) to 5.195%. The 10-year Treasury yield also declined by more than 5 basis points, dropping to 4.653%.

Among housing-related stocks, Home Depot rose 2.02%. Lowe's, a home improvement retailer, showed strength during the session but later gave up its gains to end down 1.12%.

Massimo Santikia, Head of U.S. Equities at Procion, commented, "Value stocks performed very well today, which shows that the economic and corporate earnings cycles remain very strong."

However, he pointed out that there is ongoing market tension between solid corporate fundamentals and rising capital costs due to high Treasury yields. Nevertheless, considering prospects for corporate earnings, he assessed that the overall environment remains favorable for equities.

Among individual stocks, Moderna soared by 176.97%, boosted by the news that an experimental skin cancer vaccine jointly developed by Moderna and Merck produced positive results in late-stage clinical trials. Merck also climbed 12.61%, contributing to the advance in the Dow.

Semiconductor company Marvell Technology jumped 9.85% on the news that it had signed a contract with Google relating to Tensor Processing Units (TPUs). Marvell also issued warrants to Alphabet that could allow the company to purchase up to USD 12.2 billion worth of Marvell common stock.

On the other hand, some AI-related stocks weakened. The Wall Street Journal (WSJ) reported that OpenAI's second-quarter results disclosed to investors fell short of expectations. While OpenAI's revenues rose 18% from the first to the second quarter, net losses reportedly widened as well.

In response, Broadcom and AMD fell 4.61% and 3.71%, respectively, while the iShares AI Innovation and Tech Active ETF declined by about 2.08%.

The Federal Reserve's hawkish stance also capped gains in the stock market. According to the July FOMC minutes released on this day, some members of the Fed indicated that further interest rate hikes could be necessary if inflation does not sufficiently cool.

At the July meeting, three members voted against holding rates steady, calling for a 25-basis-point increase. Notably, the minutes revealed that the inclination toward rate hikes was broader within the Fed than was apparent from the actual vote.

This content was produced with the assistance of AI translation services.