Treasury funding and long-term yields
A CNBC report said Treasury Secretary Bessent could tap the general account (TGA) to fund the buyback of long-term Treasuries. The market had been asking where the money would come from - short-end issuance, more debt, or another source. This does not change the story. Bessent has every right to pull these levers; managing the country's finances is his job. But the core problem is the economic fundamentals: a large fiscal deficit that he cannot fix right now. These are short-term fixes that may keep long-term yields from rising much further.
The TGA gives them a lot of firepower. The plan to buy long-term Treasuries would likely be funded with T-bill issuance, and drawing down the TGA adds to that firepower. The catch: the TGA needs to be refilled later. This same pattern has played out around past debt ceiling debates - they draw it down, then issue more debt to refill it. So it is a short-term band-aid.
The economy is resilient and growing. Fiscal concerns are not going away, and inflation is still here. There is not much that can pull yields much lower.
SPX levels and market breadth
Key resistance sits around 7,600 on the S&P 500. Shares slid a bit last week, found that zone, and are now pausing there - pointing to some consolidation and repair under the surface at these levels.
Breadth weakened slightly under the surface this past week. The New York Stock Exchange new-lows list is a strong gauge of corrective periods. The last time it peaked to this level was the larger correction back in March. Peaks in the new-lows list often mark the end of a correction.
A close above Thursday's candle, around 7,700, would confirm a support bounce. If that does not happen today and a pullback breaks 7,600, many traders would look for another 1% to 1.5% pullback down to the 50-day moving average just below.
Overall conditions stay bullish. There is no rotation into the dollar as a safe haven - the dollar saw a big breakdown last week. Credit spreads are tightening. Both support a risk-embracing environment.
Jackson Hole and Fed reaction function
Powell will likely keep markets guessing, as he has for a few months, and stick to his script with no forward guidance. Worth hoping for is a nugget about his reaction function - how he views the current stance of monetary policy. He may focus more on the task forces, communications, and a possible mention of the balance sheet, rather than saying whether policy is accommodative or restrictive or what would change that view. He still has more data prints to review before the September meeting.
What makes a central banker credible is not being hawkish or dovish; it is the reaction function. The useful message is telling the market what he is thinking rather than what he will do, so traders can judge incoming data and map out where the economy and monetary policy may go over the next few months.
Russell 1000 growth vs value and rotation
The chart to watch is Russell 1000 growth versus Russell 1000 value, using the relative strength line. Over the past week, sectors like energy and materials put in reversal formations against the S&P 500 (SPX), signaling possible rotation into those areas. A weaker dollar, higher rates, and a mix of geopolitical factors have supported precious metals and the broader commodities complex, giving life to those sectors. That backs the rotation into value, helped by continued strength in healthcare and financials.
The growth-versus-value ratio has pulled back to prior cycle highs - a major polarity zone and a critical support level, the point where value led in the last cycle. A breakdown in that ratio could mark a change of character in the market, shifting toward a stock pickers' market. In that case expect more choppiness at the index level rather than a market driven by high beta and momentum. This is a level to watch in the value space.
Financials outperformed on the day, up 1.5% across the sectors.
