Dow Drops Over 600 Points as Bond Yields Reverse and Walmart Posts Worst Day in Years

The relief lasted about 24 hours.

On Wednesday, August 19, the Treasury Department announced it would at least double its buyback of long-dated government bonds, from $2 billion to a minimum of $4 billion, starting September 9 and running through November 4, according to a Treasury press release cited by Kiplinger. Stocks rallied. The 10-year yield fell 6.7 basis points to 4.639%. The 30-year yield, which had hit its highest level in roughly two decades earlier in the week, dropped 10 basis points to 5.185%.

That relief evaporated Thursday, August 20. The 10-year yield climbed back above 4.70%, according to CNBC, erasing Wednesday's entire move. The 30-year yield added more than 5 basis points to 5.251%. Treasury Secretary Scott Bessent told CNBC the buyback operation could end up larger than announced, and yields on the 30-year and 10-year briefly pared gains after his comments before resuming their climb, according to the New York Post.

Stocks sold off hard. The Dow Jones Industrial Average fell as much as 637 points intraday, a 1.2% drop, according to CNBC, before settling down roughly 567 to 605 points depending on the exact time of measurement across outlets, landing in the 52,857 to 52,896 range. The S&P 500 lost 0.7%, and the Nasdaq Composite dropped more than 1%, per multiple sources including the Associated Press as carried by WDRB.

Walmart's miss did real damage

Walmart shares fell 9%, its worst single-day drop in more than four years, after the retail giant missed Wall Street's expectations for quarterly comparable sales and issued a weaker-than-expected earnings forecast for both the third quarter and the full year, according to CNBC. The Associated Press noted Walmart actually beat estimates on overall profit and revenue for the quarter, but investors focused on the disappointing sales comps and guidance instead.

Mona Mahajan, head of investment strategy at Edward Jones, told the New York Post there's "some question about how resilient the consumer can be with ongoing elevated gas prices and inflationary pressures." The Walmart report dragged the S&P 500 consumer staples index down 1.5% and consumer discretionary down 1.9%. Albertsons fell 1.5% and Costco dropped 2.3% in sympathy.

Bond skeptics were right

Adam Phillips, managing director of investments at EP Wealth Advisors, told CNBC he was skeptical the buyback program would provide lasting relief. "This is not the cure to what ails the bond market. There are structural forces here at play that are really beyond the Treasury and the administration's control," he said, adding that the boost from past interventions "has generally been short-lived."

The numbers support the skepticism. The Associated Press, via WDRB, reported the U.S. national debt topped $40 trillion on Wednesday, just months after crossing $39 trillion in April. A one-time buyback announcement worth a few billion dollars a month doesn't move the needle against that kind of debt load. Tony Miano, global investment strategy analyst at Wells Fargo, told Kiplinger the "key drivers behind rising yields... remain in place" and that "risks to long-term Treasury yields remain skewed to the upside."

Bessent's team can point to Wednesday's brief rally as proof the intervention worked, at least for a day. Critics can point to Thursday's reversal as proof it accomplished nothing structural. Both are true. The buyback bought one green trading session. It didn't buy a fix for a government spending far more than it takes in.

Oil and Iran added fuel

West