PMI Surprise Amid Bond Tension… Is the U.S. Stock Market's Rebound a Relief Rally?

On the 21st (local time), the New York stock market closed higher, partially recouping the week’s sharp losses. The S&P 500 rose 0.4% to 7,674.37, the Dow Jones Industrial Average gained 1.0% to 53,277.01, and the Nasdaq Composite increased 0.4% to 26,180.45. However, on a weekly basis the S&P 500 fell 1.4% and the Nasdaq dropped 2.1%, indicating a continued correction phase.

The top market mover was S&P Global’s August flash PMI. The US composite PMI jumped to 56.0 from 54.5 in July—its highest level in about four years and well above the 54.0 consensus—while the services PMI also reaffirmed a clear expansion trend. As expectations for stronger economic momentum grew, the perception that the corporate earnings cycle could extend further supported risk‐asset demand.

However, the bond market still reflected “tightening repricing.” In the July FOMC minutes, several Fed officials signaled that additional rate hikes would be necessary if inflation doesn’t cool. On the day, the 10-year Treasury yield climbed from 4.69% to 4.73%, and the 30-year yield remained near its highest level since 2007. Despite the Treasury’s unusual move to expand long‐term debt buybacks, accumulated fiscal deficits and persistent inflation concerns have pushed yields back up.

On the corporate front, off‐price retailer Ross Stores jumped over 4% after quarterly sales and earnings both exceeded market expectations, demonstrating the resilience of value shopping amid consumer‐slowdown worries. Conversely, disappointing results in certain industrial and consumer names, along with management‐change news, weighed on individual issues and capped the market’s upside. Meanwhile, amid expectations of Treasury buybacks and regulatory easing, Bitcoin surged from the $63,000 range to above $77,000 on a weekly basis, and crypto‐related stocks such as Robinhood and Coinbase led thematic gains with double‐digit increases.

On the global front, renewed geopolitical tensions—including the Iran conflict, concerns over navigation through the Strait of Hormuz, and the hijacking of an Iran-linked tanker off Somalia—propelled Brent crude up 0.8% to $92.67 per barrel. The rebound in energy prices, coupled with an already hawkish‐leaning Fed, fuels worries about a re‐acceleration of inflation. Gold also tested record highs again, trading above $4,690 per ounce, while gold and copper mining stocks both strengthened. Despite the short‐term rebound, investors view next week’s Jackson Hole symposium and additional inflation data as the key watershed that will determine the market’s future direction in this high‐rate, high‐volatility environment.