Doom: It’s the mood of the nation. The mix of frustration and anxiety has morphed into palpable fear on display in yet another ugly session that was worse than declines in major indices would suggest.

Red Across the Screen

There wasn't anywhere to hide yesterday, and the only green on the screen was a spike in the “fear index” (VIX).

I will note, however, that major index declines were relatively tame, but internals were much more bearish.

Market Breadth

• Decliners tripled advancers
• New lows swamped new highs
• Down volume doubled up volume

Bond Market Takes Down “the House”

Treasury Secretary Scott Bessent is never short on confidence, and his presence has been hugely positive for the market, starting with the media’s effort to turn the tariff fight into a political event.

But calling himself the “house” and daring bond traders to go against him was probably unnecessary hubris.  I get that smack-talk is part of the plan to help his schemes succeed – it works for professional pugilists, so it stands to reason a verbal pugilist would try it as well.

But this fight has embedded rules that are hard to ignore.

In fact, Scott Bessent may have to go back to the drawing board as his $6 billion buyback fell flat.  Speculation suggested the buyback would be higher, so $6 billion may have been underwhelming. Still, it’s a gimmick, to be sure, as only the Fed can pull off what Bessent is trying to do because the Fed has the printing press.  

The 10-year bond yield surged.

Strong Auction

The ten-year bond auction was super strong.

• $39.0 billion
• 4.834% at the highest yield
• 2.7 bid-to-cover
• 4.3% primary dealers (second lowest on record)

What a day for the bond market to show that there are buyers out there.

Today, I’m watching small-caps closely. They've had a strong 2026, but are looking vulnerable.

Shorts on the Prowl

The shorts have begun loading up, especially in the iShares Russell 2000 ETF (IWM), just as the index slipped below its 50-day moving average.

Busy Morning

Lots to digest this morning.

Today’s Session

The market was under pressure all morning into the Producer Price Index print, which mostly came in line with expectations, although “core” (less food and energy) came in at 0.2% against a consensus of 0.3%.

The overall 0.4% month-to-month increase was the highest since May, which climbed 0.5%, adding fuel to the notion that inflation is on the rise. 

Odds of a rate hike spiked this morning.  Higher bond yields compete with stocks in general, but the names powering the AI trade have earnings yields that should translate into substantially higher share prices. Hold on.

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