US stocks rose modestly on Wednesday, with the S&P 500 climbing 0.2% and the Nasdaq composite ticking 0.2% higher, marking the S&P 500's first gain in four days after reaching an all-time high last week. The Dow Jones Industrial Average added 119 points, or 0.2%. This uptick followed an announcement from the US Treasury Department to at least double its planned purchases of longer-term Treasurys from September 9 through November 4. Strong profit reports from companies like Estee Lauder and Target also contributed to the market's support.
Financial markets have been under increasing strain as Treasury yields surged throughout the summer, driven by concerns over inflation, substantial government debts, and other factors. Higher yields make borrowing more expensive, which in turn slows the economy and negatively impacts stock and other investment prices. In response to the Treasury's announcement, longer-term US Treasury yields fell, with the yield on the 30-year Treasury bond plunging from 5.26% to as low as 5.18%, and the 10-year yield dropping from 4.68% to 4.63%.
The move by Treasury Secretary Scott Bessent to increase debt repurchases is seen as an effort to curb rising rates. However, some investors and market watchers expressed skepticism about the lasting impact of this measure. Jim Bullard, former president of the Federal Reserve Bank of St. Louis, noted that while it was an "important tactical move," it doesn't alter the fundamental issues of large fiscal deficits and a Federal Reserve maintaining a neutral stance, which are the primary drivers of higher longer-term yields. Economist Mohamed El-Erian also suggested that while the announcement might temporarily lower mortgage rates, it "risks collateral damage and unintended consequences" without fundamental policy adjustments. The average 30-year fixed mortgage rate on Wednesday was 6.72%, a slight decrease from 6.75% the previous day.
