Late last week, U.S. Treasury bond yields started to pull back. The reversal pattern is a welcome development for frothy stock markets. Lower yields decrease the cost of borrowing and increase the attractiveness of stocks. It would help the indexes like the Dow Jones (DJI), Russell 2000 (IWM), and S&P 500 (IVV) (SPY).
The bad news is that the U.S. 10-year Treasury bond yield started to inch higher. That hurt the 7-10 Year (IEF) and 20+ Year bond (TLT) ETFs. Continue to watch out for yields topping 5.2% and 5.5%.
Bears made a decisive bet against stock markets last Friday. The S&P 500 recorded its biggest one-day put options trading volume by dollar notional value that day. It increased by 330% compared to the 2024 average. Traders snapped up between 4.1 million and 4.98 million SP500 put contracts.
Goldman Sachs said that the volumes indicated a meaningful shift in market sentiment.
Investors might have bought put options to hedge their portfolio against the downside. In the last week, it only took worries on CoreWeave’s (CRWV) debt level to send AI suppliers lower. Nebius (NBIS), Oracle (ORCL), and Broadcom (AVGO) shares declined.
Sentiment is so negative that strong quarterly results from Taiwan Semiconductor (TSM) did not lift its share price.
