Moody's downgrade, US dollar, bitcoin: Market Takeaways

Well, Wall Street shakes off a Moody's downgrade, the S&P 500 notching a six-day win streak here, and here with the trading day takeaways, Yahoo Finance's Jared Blikre, Jared.

What a turnaround, but, uh, I have to invoke the spirit of Kenny Loggins once again because we have hit the danger zone. Uh, that downgrade sparked an increase, a surge in the in the 30 year above 5%. This is a year-to-date chart and I'll put some lines on it in a second, but I want to show you this in candlesticks because the open was about 5.04%. We sunk in the day to 4.94% and that is four basis points higher than the close from the day before. But nevertheless, we are venturing into this territory and I've, uh, been kind of harping on this recently because when the 30 year breaches 5%, that has all kinds of implications for other risk markets and let me just put that line on, those lines on. I'll show you a three-year chart. We've been here before, so you can see, uh, way back in late 2023, we did breach 5% and we went a little bit higher than we did today, came back down so it wasn't a big issue. But why does this matter? It all gets back to, uh, the bond market and this is something that Trump is more focused on than equities this time around and I prepare, I showed this Friday. I've been showing this, uh, all week long last week and above 5%, if you get that, uh, because of an inflation pop, guess what? Then you tend to get commodities leading and then stocks just chop around. If it's because real rates are rising, and this is all just some kind of bonky, uh, wonky bond market decomposition here, but when that happens, then you get PEs, those multiples compress and tech lags. What was happening this morning? We saw XLK, that is the tech sector, was the worst performing on the open. So, uh, I saw both of these in play. I, I mean, we're going to take a look at gold in a second here. Uh, gold was up so maybe commodities are leading, leading, but the bottom line is 5% is clearly a big, uh, big deal for investors and we want to see that below. So we ended the day in positive territory, uh, for the five-year or for the 30-year below that 5% mark, but we're really close and we could easily breach it again. We have some big auctions on deck next week and then in a couple weeks.

I feel like you have thoughts about the dollar as well.

Oh, do I ever? Um, because the dollar and the yields, their correlation had returned. They were dancing and now they've stopped dancing once again. So let me show you the price action in in the dollar today versus what was happening in yields. So this is still the 30 year. We'll just use this as an example. I'll show the intra intraday this starts at 8:20 a.m. That's when the bond market opens. You can see steady slope down there. Here's the US dollar index and this starts at an earlier time, but basically from 6:00 a.m. forward, it was going in the opposite direction, although it did decline later in the day. Why does this matter, uh, these little squiggly lines on this intraday chart? Because when all the tariff stuff happened, when we had that tariff tantrum earlier in the year, and, uh, all investors were concerned about the magnitude, it was a kind of sell everything in the US moment. We saw the US dollar decline when we saw, uh, the bid for bonds evaporate, and we saw yields shoot up. So when the dollar goes down, as it did today, and yields up, that's a pretty negative thing, so we do not want to see that continue. Um, I did mention gold before, just want to show you that gold just had its best day in about two weeks or so, that was up 1.5%, kind of supporting the claim that maybe commodities are going to benefit from some of this. And then I also wanted to show you the VIX because the VIX perked up a little bit today. It started the day just under 20 and you can see, um, it declined below here, but if I show you a year-to-date chart, it's just slowly ratcheting higher. Every time it comes down here, it's at a new, uh, higher low, so that's something to monitor as well, just seems uncertainty is still in the air.

If I was to ask you, what is the biggest bullish signal on your radar right now, you would say what?

It would be a breakout in Bitcoin. However, it was thwarted today. Let me get back to the charts and I'll show you exactly what I mean. And I'll go to our crypto heat map for this one. And I'll pull up the Bitcoin intraday price action. There it is up 1.22%. Um, let's do the year to date and you can see we came right up to these levels that we're at at the all-time highs in January and, uh, we weren't able to breach it here. We kind of came in there and I'll show you the candlestick here. We hit this, uh, 107,000 level, dropped all the way down to 102,000, it's a $5,000, uh, change in Bitcoin to the downside, that's pretty big and then jump right back up to 105,000. So when Bitcoin finally breaks to new highs, that's going to take make me a little bit bullish on other risk assets as well.

All right, thank you buddy. Thank you, Jared.

You bet.