The Dividend Cafe - Wednesday - May 21, 2025

Episode Date: May 21, 2025

Market Decline and Bond Yield Surge Analysis - May 21st In this episode of Dividend Cafe, Brian Szytel discusses the significant market drop on May 21st, highlighting the Dow's 816-point decline and the movements in S&P and Nasdaq. He explains the rise in bond yields, specifically in 10-year and 30-year notes, and the impact of a lackluster 20-year bond auction following a credit downgrade. Additionally, he covers the unusual drop in the dollar amidst rising interest rates, the influence of downbeat retailer earnings, and geopolitical tensions between Israel and Iran. The episode wraps up with a preview of upcoming economic data releases including jobless claims, PMI numbers, and home sales. 00:00 Introduction and Market Overview 00:27 Bond Yields and Auctions 01:53 Year-to-Date Market Performance 02:11 Global Market Reactions 02:50 Geopolitical and Economic Factors 03:25 Conclusion and Upcoming Data Links mentioned in this episode: DividendCafe.com TheBahnsenGroup.com

Welcome to the Dividend Cafe, weekly market commentary focused on dividends in your portfolio and dividends in your understanding of economic life. Welcome to Dividend Cafe. This is Wednesday, May the 21st. Brian Seitel with you here on a second down day in markets. We had more of a move today. The Dow was actually down 816 points. So big move lower. That's about 1.9%.

S&P was down about 1.6%. NASDAQ was down a little less on some positive AI headlines and things was still down 1.4%. So across the board, some red ink in the equity market. The part of the reason of that is that yields on fixed income on bonds all moved higher today, both in 10s and in 30s there was a yield flattener, meaning short-term rates moved up a little bit more than long-term rates did. But 10-year was up 11 basis points, closed at 460.

So 30-year yields today were up about 8 basis points, closed at 5.08. So let me bring it back here real quick. A 10 basis point or 11 basis point move up in tens is a meaningful amount in a day. We had a 20 year bond auction today in the US go off, I guess worse than expected. It was a 5.047 yield, which was walking 1.2 basis points higher than what they thought it was going to be. So that was on $16 billion worth of notes. But since it was the first long-term auction after the credit downgrade over the weekend, I think markets paid a little bit more attention to it.

All that said, let's look at where 10 year yields are today. We're at 459, 460 today. We started the year at 458. So look, I know if you put your hand over part of a chart and you just focus on one short term sector, a section of it, things can look dramatic. Oh my gosh, yields have gone up so much and the dollar's gone down so much. But if you zoom out over any period of time, one year, four years, five years, you start to understand where things are trading, both in currencies and in interest rates.

Yes, they've gone a little higher, but it's not outside the range of norm here. So just keep that in perspective. The other thing I would say is on the year, the S&P is down a whole 0.63%. Dow is down about 1.6% largely because of one healthcare stock. NASDAQ is down about 2.2%. So we're in the red, but 1 to 2%. Not anything crazy here. Japan also had an auction in fixed income that went worse than

expected as well. So that's what you're seeing reverberate around the world, which is a little higher rates as things get digested. The one thing I did think was a little strange. You had the dollar down slightly 0.6%. Even though interest rates were higher, those two things are usually the opposite of higher rates, usually equals a higher currency. Today you got the opposite of that. There was another day of zero economic data, by the way. So we didn't get anything in the economic side, but there was a host of different retailer earnings that were downbeat. And I think that moved markets a little bit. And then that was juxtaposed with some positive technology headlines and AI. You also had a geopolitical comment over the night with Israel and Iran, Israel saying

that they could attack an Iran nuclear facility. Not positive if they would pronounce something like that or not, but who am I to say. But in any case, that has reverberated around the globe a little bit too. So there's your Around the Horn on the day. It actually was a fairly quiet day from an actual news standpoint or data standpoint. There wasn't a lot of it, but nonetheless, here's our sell off. After six positive days in a row, we've gotten two days that are down. And again, I've given you all the headlines around the reasons as to why. That's what I have for you today. I'm going

to keep it simple. There's going to be more data out as we get into the latter part of the week. We'll have initial jobless claims. We'll have a PMI number both on services and manufacturing. We'll have an existing homes number out tomorrow. And then Friday we'll have a couple of little things, some Fed talk and some new home sales, and I'll be back with you going over it. So with that, I will let you go for this evening. I wish you a lovely one and reach out with your questions as always. Thank you again.

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