The US Treasury's decision to expand its buyback program for longer-dated nominal securities, raising the single-operation cap to at least $4 billion, has triggered a sharp flattening of the yield curve with long-term Treasury yields moving lower. Equity futures rallied in response, with Nasdaq 100 futures gaining 0.6%, S&P 500 futures up 0.6%, and Dow futures climbing 0.6%, offering a brief respite from the recent market turbulence.
Despite the stabilization in equity futures, traders remain cautious over widening fiscal deficits, a wave of debt issuance from AI giants, and escalating Middle East tensions, suggesting the market has yet to find a genuine turning point. Spot gold extended its gains to 2.5%, trading at $4,440.25 per ounce, while spot silver advanced 2.4% to $64.83 per ounce.
In pre-market trading, memory chip stocks moved broadly higher, with SK Hynix surging approximately 6% following its announcement of a 40 trillion won share buyback and cancellation plan, alongside a commitment to return at least 50% of cash flow to shareholders. SanDisk, Western Digital, and Micron Technology each rose about 2%, while Seagate Technology gained roughly 1%. Moderna jumped over 50% in pre-market trading after the company and Merck announced their melanoma skin cancer vaccine met its goals in a large-scale trial.
Brent crude extended its winning streak to a fourth consecutive session, trading above $91.30 per barrel after accumulating a 4.5% gain over the previous three sessions. President Trump reiterated that no negotiations are currently underway between the US and Iran, leaving Middle East tensions without a clear resolution path. Kazunori Tatebe, chief strategist at Daiwa Asset Management, noted that the Middle East outlook remains uncertain, yields are holding at elevated levels, and the market is likely to remain in risk-off mode today.
Long-term Treasury yields moved lower, with the 30-year yield dropping 10 basis points to 5.19%. Japan's 20-year yield fell 6 basis points to 3.785%, while the 40-year yield declined 6 basis points to 4.145%. The dollar index slipped 0.6%, with all G10 currencies gaining against the greenback and the yen appreciating as much as 0.9% to 158.17 per dollar. Bitcoin edged down 0.4% to $64,284.84.
US stocks suffered their largest single-day decline of the month on Tuesday, with chip stocks leading the selloff and weighing on the S&P 500. Asian chip equities followed suit, but SK Hynix reversed an intraday drop of as much as 8.3% after announcing a $28.6 billion share buyback program post-market, emerging as a standout performer. European major indices snapped a five-session losing streak, signaling marginal improvement in market sentiment, while S&P 500 futures held roughly flat, reflecting investors' wait-and-see stance.
Technology stocks have long been viewed as growth assets, but with persistent inflation, hefty government spending, and a wave of debt issuance, global bond yields are hovering near multi-decade highs, reducing market tolerance for richly valued growth names. Concerns over rising borrowing costs for hyperscalers have also dampened investor sentiment. Jung In Yun, CEO of Fibonacci Asset Management Global, said the long-term AI growth narrative remains intact, but higher interest rates and geopolitical risks are making investors reluctant to pay a premium for that growth.
Bond markets strengthened as risk-off sentiment drove equity declines, triggering safe-haven buying in fixed income. According to Bloomberg strategist Mark Cranfield, Japanese government bonds, US Treasuries, and Australian bond futures all saw modest buying, reflecting the instinctive flight-to-quality response when equities tumbled sharply in Korea and Japan, amplified by overcrowded short positions in bond markets. The US 10-year yield edged down 1 basis point to 4.69%, while the 30-year yield slipped 1 basis point to 5.27%, after climbing to 5.34% the previous session, near its highest level since 2007.
Attention now turns to the Federal Reserve's latest meeting minutes for signals on policymakers' stance. Bloomberg reported that the minutes have taken on added significance since Chair Kevin Warsh reduced his communications with the public. Meanwhile, bond traders have begun hedging against the risk of the Fed pivoting to rate cuts by 2027.
Escalating geopolitical tensions have introduced new variables to the market. The UAE reported that two ballistic missiles fired by Iran landed in the sea, marking the first known attack on the Gulf state since May and signaling the continuation of a broader regional conflict. Brent crude has risen for consecutive sessions, gaining 4.5% over the past three days. Analysts suggest that the unresolved Middle East conflict, particularly the standoff over the Strait of Hormuz, is heightening the risk of energy-driven inflation shocks and could keep interest rates elevated for longer.
Gold, after experiencing its largest single-day decline in nearly a month, is hovering around $4,340 per ounce, with the precious metal's outlook clouded by both the bond selloff and the Hormuz standoff. In the currency markets, the Canadian dollar strengthened following reports that the Trump administration agreed to delay a planned 50% tariff on billions of dollars of Canadian goods by three days after high-level talks in Washington, providing a brief window for negotiations.
In credit markets, widening spreads, rising rates, and a surge in bond supply weakened the investment-grade funding environment on Tuesday, with at least seven issuers postponing their bond sale plans.