Markets bounce back after yesterday's rout

Dow rebounded 416, advancers over decliners 4-1 & NAZ rallied 215.  The MLP index jumped 6+ to the 279s & the REIT index went up 6+ to 406.  Junk bond funds were in demand along with stocks & Treasuries had heavy selling which raised yields (more below).  Oil was even at 73 following recent selling (more below) & gold dropped 19 to 2424.

Dow Jones Industrials 

Treasury yields bounced back as investors closely monitored a reversal of the previous day's global market sell-off.  The yield on the benchmark 10-year Treasury note traded more than 5 basis points higher at 3.836% after the yield on the 10-year Treasury note yesterday fell to its lowest level since Jun 2023.  The yield on the 2-year Treasury note advanced nearly 7 basis points at 3.948%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  The Commerce Dept reported that the US trade deficit fell less than expected in Jun.  The goods & services shortfall fell to a seasonally adjusted $73.1B, down $1.9B from May but above the estimate for $72.5B.  Exports rose $3.9B, while imports, which subtract from GDP, were up $2B.  Meanwhile, global markets appeared on track to shake off yesterday's dramatic downturn.  US stocks kicked off the month sharply lower, as fresh data prompted fears of a worsening economic outlook.  The weaker-than-expected data led investors to worry that the Federal Reserve may be behind the curve in cutting interest rates to fend off a recession.  However, all 3 major averages partially rebounded & rose around 1% & more today.  Traders are now pricing in a 73.5% chance of the central bank cutting rates by 50 basis points at its next meeting in Sep, according to CME Group's FedWatch tool.

10-year Treasury yield rebounds after hitting its lowest level in more than a year

Crude oil futures fell for the 4rth session in a row, as recession fears continue to overshadow the risk of a major escalation in the Middle East.  US crude oil closed at a 6-month low yesterday, after equity markets sold off on fears that the US economy might tip into a recession.  The S&P 500 & Dow booked their worst day in nearly 2 years.  The fear of a US recession has hit oil markets as traders were already worried already about lackluster demand in China, the world's 2nd-largest economy.  West Texas Intermediate Sep contract was $72.45 per barrel, down 49¢ (0.7%) & YTD US crude oil has gained 1%.  Brent Oct contract was $75.96 per barrel, down 34¢ (0.5%) & YTD the global benchmark has declined 1.4%.  Oil markets have sold off despite the growing risk of major escalation in the Middle East. Israel is preparing for an attack by Iran after Hamas leader Ismail Haniyeh was assassinated in Tehran last week.  The oil market has largely looked past geopolitical tensions in the Middle East as crude supplies have not faced any major disruption.  Analysts have warned for months that a direct conflict between Israel & OPEC member Iran could lead to a disruption of oil flows.  A rocket attack on a US base in Iraq is believed to have injured several American personnel.

Crude oil futures fall for fourth day as recession fears outweigh rising Middle East tensions

Yum Brands (YUM) reported a mixed qtr as both Pizza Hut & KFC reported declining same-store sales.  “The impacts from the Middle East conflict, in addition to a more cost-conscious consumer, have presented headwinds to same-store sales,” Yum CEO David Gibbs said.  He added that sales trends have improved in the US compared with the prior qtr, thanks to value meals such as Pizza Hut's $7 Deal Lovers.  Pizza Hut's US same-store sales decreased 1%, while its intl same-store sales declined 4%.  Taco Bell, the crown jewel of Yum's portfolio, saw its same-store sales increase 5% in the qtr.  The chain's footprint is largely concentrated in the US, where its reputation for value has helped it weather the pullback in consumer spending.  Taco Bell's same-store sales grew across all income cohorts.  On Wed, Yum announced plans to expand its rollout of artificial intelligence across Taco Bell drive-thru lanes to hundreds of its US restaurants by the end of the year.  The stock went up 4.86.

Yum Brands reports mixed results as Pizza Hut and KFC same-store sales fallestes in the coming days. 

Bargain hunters are buying stocks which were heavily oversold short term.  The strength of this rally will be tested in the coming days.  In the meantime interest rates continue at very high levels while economic data is unimpressive.