"I am the house now," U.S. Treasury Secretary Scott Bessent said on Tuesday. "And you can bet against me if you want." Bessent's eye-opening remarks were in reference to his knowledge of, and influence over, the Japanese yen. Remember, the U.S. jointly intervened with Japan to support the yen a few weeks ago. Bessent's swagger here appears to be well-founded — for now at least — with the yen rallying strongly across the board. Of course, time will tell.
But it's a different story in the U.S. bond market, where Bessent is even more active, trying to get longer-end yields down. Treasury on Wednesday said it will buy back up to $6 billion of long-dated bonds on Thursday, three times its last buyback. But yields leaped to new, historic highs on the announcement. The U.S. bond market is big, there are big bets being made. Again, time will tell. But the house may not always win here.
Brent crude oil is back above $100/bbl, WTI isn't far behind and is at a 3-month high. Oil is now up 50% on the same period a year ago. Meanwhile, U.S. gasoline prices are comfortably above $4/gallon, and diesel is at a record $5.94/gallon. War in the Middle East is spreading, and there's little to suggest peace, resolution or ceasefire are anywhere close on the horizon.
Puzzling questions from all this are: why isn't the economy rolling over, and will it ever? Of course, the economy is much less energy-intensive now than it was in years gone by, and as we are seeing elsewhere, many traditional macro models, rules of thumb, and correlations have broken down since the COVID-19 pandemic. High energy costs are one of the factors lifting bond yields, and stocks may now be feeling the heat. Are the scales beginning to tip?
Apple shares have performed reasonably well this year, outperforming all of its "Magnificent 7" peers except Nvidia. Investors have cheered Apple's conservative approach to borrowing — it has eschewed the debt issuance binge many of its peers have undertaken to fund the AI buildout. Apple's market cap briefly topped $5 trillion in July, becoming only the second company to achieve that milestone after Nvidia.
But doubts persist around new products and pricing. If the initial share price move on Wednesday following the launch of the company's foldable phone called "Duo" is any indication, these doubts aren't lifting any time soon. The cheapest Duo will be $1,999, and that's not cheap. Shares initially fell more than 2% on the unveiling, but recouped most of these losses to end down only 0.3%. That still lagged other Mag 7 and Big Tech stocks, however.
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