Stocks Slide Again As Treasury Yields Push Higher

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The S&P 500 down a quarter of a percent. The Dow up one quarter of a percent. The NASDAQ down one half percent, as is the rest of 2000 VIX not showing any volatility, so anything dramatic that happens could introduce volatility of the market. Dramatic being the headline sometimes, like what's going on in Iran or Ukraine. Gold's moving up, it's having a big move. Up another one percent to 47.26. Many believe that gold will take out its highs for the year, as the United States seems to be paying attention to the 40 trillion dollars of debt that we have. And gold is responding with that, as is Bitcoin. Bitcoin took its sweet little time to do it, but it's doing it now. Up three percent today. It's had an amazing four day run on the markets, sitting at 80,000, no, 80,079,500.

The gross US national debt at the end of 2024, which was basically the Biden administration, right, was about thirty five point two trillion dollars reported by the Independent Congressional Budget Office. Today, it's over forty trillion dollars. It's risen five trillion dollars in a year and a half. In January of 2025, when Trump took office for the second time, the CBO projected the national debt would be about thirty nine point two trillion by the end of 2026 So we've already passed that.

Our government is awful at projections and projecting their own debt is a problem. Yet we both know neither parties can do anything about it. They're just going to try to grow our way out of it. The best hope that Wall Street has right now is productivity from AI. Steve Leesman reported this morning that the Treasury Department could tap its massive general account to help fund its bond buying plans. Uncle Sam may be reaching into the couch cushions except for the couch cushions contain a trillion dollars.

Longer term treasury yields are lower today, which is good news for bonds and potentially stocks. The bigger question, is this a real change in the bond market or is it just a temporary sugar high?

James Carville once said, as the bond market, you can intimidate everybody, but the bond market is doing plenty of intimidation right now. Despite Treasury Secretary Besant's best efforts to push yields, lower bond yields actually rose 1% to seven basis points last week, while stocks took it on the chin. S&P 500 fell about 1.4%. The NASDAQ dropped 2.1%.

The semiconductor ETF, which is an AI proxy, got hammered 5.4%.

Today we have Iran sanctions being announced. NVIDIA earnings on Wednesday. The Fed Chairman, Kevin Warsh, speaking at Jackson Hole on Friday. Everything is perfectly calm, is it not? Furthermore, what are we taking a look at? The US is expected to impose financial sanctions on Iran and countries supporting it rather than immediately escalating military action. Public support for the war remains very weak in China. The biggest buyer of Iranian oil will likely be exempt from sanctions. So no one really expects the sanctions themselves to be the biggest market issue. But what Iran does in response is the wild card. Iran has every incentive to keep the Strait of Hormuz situation hanging over the market, potentially right through the midterms. Iran did this political espionage or work, if you will, back in 1980 when the American hostages in Iran were held for 444 days, despite financial sanctions, they were released just hours after Ronald Reagan was inaugurated in 1981, trying to embarrass President Carter. Reagan then crushed Carter in the election, winning 489 electoral votes to 49, with inflation, interest rates, gas prices, and the Iran hostage crisis all weighing heavily on Carter. You could probably say inflation, interest rates, gas prices in Iran all are weighing on Trump. NVIDIA has got a big day on Wednesday. Then comes the big event after the market closes, where we're going to start doing the valuation game. And how strong is the AI trade? NVIDIA can deliver a great quarter, and investors still seem to find a reason to sell it. But last week NVIDIA fell about 4% where the market, well, in the last couple of weeks, NVIDIA is underperforming the market, is what I'm trying to say. So trading at roughly 17 times estimated earnings compared with 19 times the SP500. Expectations come down a bit. Fundamentals are still ridiculous. The AI spending numbers remain enormous. Hyper-scaler spending up 92% year over year and 29% quarter over quarter.

That's the fastest growth since Chad's GBT launched in late 2022 Even better, revenue growth at the three biggest cloud providers accelerated to a record 43% year over year and 15% quarter over quarter.