Wall Street Rebounds as Tech Rallies and Yields Rise

Wall Street benchmarks rose on Wednesday, after a stronger-than-expected private payrolls report pointed to a robust labour market and as technology stocks rebounded from Tuesday’s selloff. Bonds came under pressure after the ADP employment report showed US private payrolls lifted sharply in October, which might see the Fed hold rates over at next month’s FOMC. The Trump administration faced tough questions from the Supreme Court over the legality of the wide-ranging tariffs, which, if blocked, could see inflation fall sharply. The dollar and gold were steady while oil fell.

The S&P 500 gained +0.37% to 6,796 and retreated from intraday highs, the Dow Jones added +0.48% and the Nasdaq Composite added +0.65%. The Russell 2000 rebounded +1.54%. Wednesday had all the hallmarks of retail investors buying the dip; however, selling emerged once again later in the session. Correction risks remain prominent with the SPX priced at 23.3X forward earnings, which is well above the 20-year average of 16. Volatility subsided with the VIX lower by 8.3% to 17.4.

News flow will slow soon as the reporting season winds down, and with the next catalyst around the Fed decision not due until December 10th. Nvidia, the most valuable company in the world, will also report earnings on November 19th. Meanwhile, the Government shutdown continues on official economic statistics, with markets having to rely on private data.

Bonds came under more pressure with yields rising across the curve. The US 2-year Treasury yield rose 5.5bps to 3.63% while the 10-year Treasury yield and 30-year Treasury yield added 7 bps to 4.16% and 4.74%. The bond market is coming under pressure and notably at the long end of the curve. It is hard to see how longer dated mortgage rates in the US will come down, which might see the government intervening and “bending the curve” in the mortgage-backed securities market. The US30yr is not yet flashing a red light – but if the yield were to rise towards 5%, alarm bells would start ringing in the markets.

While the US 30-year Treasury yield has retreated from multidecade highs, the technical setup on the charts has far from confirmed a “bullish pattern”, and in fact, risks still look very much skewed to the topside. The US 30yr (and the 10s) bear monitoring closely.

At yesterday’s FPC AGM, I outlined our view on the bond market for 2026 and the risk that longer-dated yields rise next year. At a wedding last weekend, I had a long chat with the CEO of one of Australia’s major regional banks. His view was that the US10yr yield is headed towards 8% over the coming years. This view might well be correct, and I maintain a long-held high conviction view that US and international government bonds are now in a well-defined secular bear market – and expect yields to rise sharply over the medium to longer term.

The US dollar held steady, with the DXY trading at 100.2. Commodities were mixed. Oil prices fell with WTI and Brent falling 1.5% to $59.61 and $63.53, which has positive implications for inflation. Gold prices rose 1% to $4,000/oz, as silver and platinum added 2.2% and 1.5% to $48.20 and $1,562. The PGMs continue to consolidate within a correction and work off overbought conditions. Copper rose 1% to $4.99. The soft ag complex lifted. Iron ore was steady at $103.55. Bitcoin rebounded 3.5% to $104k, and the Bcom index was steady at 107.5.

Australian shares slipped on Wednesday as investors rotated into defensive positions, dumping technology stocks and selling resources plays and REITs. Some gains from banks and insurers capped the downside for the index. The ASX 200 fell -0.13%, or 11.70 points, to close at 8,802. The index tumbled as much as 80 pts to six-week lows before a late afternoon recovery pared the decline on the benchmark.   

Sectors were about evenly split, but a feature again on Wednesday was weak breadth at the individual stock level, with roughly 2 decliners for each advancer. It has been that way for about a week, highlighting investor jitters. The Australian dollar weakened slightly to US64.9 cents.

The rotation on Wednesday unfolded after a wobble for growth stocks on the Nasdaq overnight, sagging commodity prices and as Bitcoin technically entered a bear market. Local investors continued to digest RBA Governor Michele Bullock’s warning from Tuesday that inflationary pressures may be more persistent than previously expected, prompting money markets to scale back bets on further interest rate cuts this cycle. A$ spot gold prices rose 1% to $6,125oz. SPI futures are pointing to a 0.76% gain on the open.

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