The 10-year hits 5.1%. Russell goes first
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The 10-year is at 5.1%. Energy is the only green
Wednesday hit the rate-sensitive side first. SPX closed 7706, down 0.75%. The Nasdaq Composite closed 26936, down 1.1%. The Dow closed 51512, down 0.7%. The Russell 2000 closed 2839, down 1.8%. IWM closed 282. It tagged 288 yesterday and dumped back through it today. QQQ closed 741, down 0.8%. VIX closed 15.18, up almost 7%.
The 10-year yield tagged 5.13% and closed 5.11%, fourteen basis points above Tuesday's 4.97%. The 5-year closed 5.00%, back on the round number. The 30-year closed 5.40%. TLT closed 80.46, down 1.6%. Thirty-year mortgage rates are still above 7%. Some daily prints pushed toward 7.2% after the yield spike.
Only energy finished green among the S&P sectors. XLE closed 62.37, up about 1%. WTI's daily bar is still below Tuesday's 94.59. Crude bounced from about 89 toward 92 in the session. Energy stocks followed that bounce. That is not a trend reversal. Tech, discretionary, and utilities all fell. SOXX closed 566, down 1.2%. XLF closed 54.54, down 0.5%. It did not repeat Tuesday's near-2% smash.
Index down, yields up, energy alone in the green. That tape is clean. The discount rate moved first. Growth and rate-sensitive small caps stepped aside. NVDA closed 226, down 1.5%. AMD closed 615, down 1.5%. AMZN closed 249, down 2.2%. AAPL closed 337, down 0.8%. It was not a uniform dump. META closed 744, up 1%, after a 764 high. That is not today's main line. Rates are. The next few sessions have to digest two things that pull in opposite directions: hotter growth that can lift earnings estimates, and higher yields that compress multiples.
PMI exploded. October hike odds went to 70%
The S&P Global September flash woke the rates market up. Manufacturing PMI printed 57.0 versus 53.6 expected and 53.9 prior. Services printed 58.7 versus 56.0 expected and 56.5 prior. The composite rose from 56.0 to 58.4, a five-year high. Services output had its steepest rise in five years. Employment growth was the strongest in more than four years. The nasty print was costs. Average input prices across goods and services hit the highest since October 2022. Fuel and transport are the main excuse.
Voting Governor Barr made the policy read explicit. Last week's hike was a recalibration of the front end. Growth is strong. The labor market is solid. Inflation is not heading to 2% in a timely way. His base case is that further policy adjustments are still needed to get inflation back to target on time. Money markets lifted the odds of another 25 basis points in October from about 50% yesterday to about 70%.
Hot data and a hawkish voter on the same day is why the 10-year jumped fourteen basis points in one session. The 5-year auction was also weak, with a fat tail, so the front end got more expensive. The equity implication is direct. Rate-sensitive Russell going first is not a surprise. IWM lost 288 yesterday and closed 282 today. Treat that as a rates hit. Do not treat it as small caps suddenly breaking on their own. To change the call, the 10-year has to stop around 5.1%, and IWM has to treat 282 as the shock low rather than another step down.
Microsoft is discounting for share. 514 is not done
MSFT opened 501, high 509, low 496, closed 501, up 0.5%. The tape fell. Microsoft did not go with it. The Information reports that enterprise customers who commit to large Copilot seat counts, and pay extra on usage for some features, will be authorized for 30% to 50% subscription discounts, as soon as October, alongside a rebuilt super-app. Roughly 30% above 1,000 seats. Up to 50% above 10,000. That is not a list-price cut for everyone. It is a large-commitment plus usage-fee package. That is a share grab. It sits on the same road as the model vendors cutting token prices this week. Sell-side coverage is still skewed to buy. The stock ticked up. The tape did not hear the discount as a profit collapse. It is waiting to see whether cheaper seats actually spread.
Two technical holes remain. 514 is the last strong resistance. 600 is a conversation after that clears. Volume has not expanded. The bid is not strong enough to punch through. On the weekly, the week of August 24 made a price high without an RSI high. That bearish divergence is still unrepaired. There are only two repair paths: break first and repair in overbought, or repair lower first and then break. Cash is at 501, close to 514, and not far from 487 if the tape turns. Until 514 goes on volume, treat it as a coil, not a breakout.
McDonald's at a four-year low. Do not catch it
MCD opened 250, high 250, low 234, closed 238, down 4.8%. A four-year low is the price fact. The catalyst maps to investor day. CFO Borden said U.S. sales in the current quarter are tracking slightly negative. Last quarter U.S. comps were still +0.8%, with traffic already down and check holding the line. Check is now close to losing that fight. The company also rolled out NEXT: about $8.5 billion of franchisee support through 2036, with about $5 billion by 2030, going into remodels, equipment, and training. Putting money into franchisees means growth has to come from store quality and share, not from industry traffic drifting higher on its own. The CEO framed high inflation and flat traffic as the environment, not a noise that fades in a few days.
Growth no longer matches the old multiple. The mid-to-high teens growth story has rolled to single digits on a two-year and five-year view. The weekly is deeply oversold. The monthly is close. Oversold is not a V. The Nike path — grind down, then a long sideways repair — is the better rhyme. Until the business stops falling and the stock bases for a while, cheap is cheap on the old growth rate. If the forward multiple compresses another 20% to 30%, about 15 times maps near 200. Holders wait for a clear business stabilize. Flat cash does not need to catch 238.
The restaurant bind is harder than the chart. After the pandemic, the price base was low and guests still paid. Checks are already expensive. Another round of list-price hikes breaks demand. Oil is expensive. Mortgages sit above 7%. What households cut is eating out. Revenue is not keeping up with costs. Pass-through room is narrower. That is not a one-day chart problem.
Broadcom's new risk is confidence. 324 is the line
AVGO opened 362, high 363, low 354, closed 355, down 2.6%. The Financial Times reports that SASAC has spent recent weeks surveying Broadcom switch installs in state-owned data centers. Preliminary penetration could be as high as 90%. Informal guidance may follow, telling SOE data centers to use less Broadcom. Informal guidance in Beijing often carries the weight of an order. Existing kits stay. When they wear out, the SOE refresh cycle may go domestic. That is a diverted replacement cycle, not a teardown today. ByteDance and Alibaba are not under the same SASAC constraint. The bulk of frontier training does not get cut overnight. The survey is also looking at whether bundling and bulk buys kept Huawei, H3C, and Ruijie outside the door. That is a second confidence cut. It is not an order number yet.
The 10-K is clear. Fiscal 2025 shipments to mainland China plus Hong Kong were $11.16 billion, 17% of $63.89 billion in revenue, down from 20% the year before. The company also says much of that is assembled in China for end customers elsewhere. True China end-demand is smaller than the delivery line. This is a confidence risk, not an immediate P&L rewrite. Sell-side EPS has not come down.
Use price. Under a high-growth assumption the forward band is about 352 to 469, and next year 572 to 763. 355 is already hugging this year's lower rail. 324 is whether institutions still defend. Hold above it, and a volume-up day back through the range still reads as accumulation. Lose 324, and buy-side voting with feet will show up before the sell-side cuts EPS. After September 18 witching volume, the stock has been wrestling in the box. Today's volume-down day: watch whether 324 holds. Do not hear 90% penetration as this year's earnings gone.
Costco prints tomorrow. 905 plus or minus thirty
COST closed 905, high 906, low 893. Earnings after the close Thursday. Options around 905 are pricing about a $32 move, roughly 4.5%, the one-sigma band. Down is about 870. Up is about 937. Strong supply is still overhead. The gap is tight.
The multiple has been rich for a long time. Around 37 times forward, with mid-teens growth, the upper rail only gets to about 838. If institutions do not leave, rich can stay rich. Do not lose 867. Lose it and mean reversion points toward 750. Taking a stab inside a $30 window around 905 into the print is a poor payoff. Wait for the numbers, then see whether the bid stays.
Finish the rates line first. The 10-year has to stop around 5.1%, and IWM has to stop dumping, before growth gets air. Microsoft still watches 514. Broadcom still watches 324. Let McDonald's finish its own move. Costco is the next shot, Thursday.