Stronger than expected

The deeper account

There is an old joke in markets that good news is bad news, and on Wednesday it stopped being a joke for a morning. The survey S&P Global publishes each month from purchasing managers — the people inside companies who order the materials and hire the services, and who are usually the first to know whether business is picking up — came in at 58.4, the highest since July 2021. Anything above 50 means expansion; economists had expected 55.3. For a week-old story about a Federal Reserve that has just raised interest rates for the first time since 2023, and says inflation is not coming down fast enough, that is the wrong kind of strong. A hotter economy is one the Fed may have to cool again, and by the afternoon the reported odds of a second rise in October were about seventy percent. Governor Michael Barr said further adjustments were likely to be needed.

The bond market set the price. The ten-year Treasury yield rose to its highest since 2007 — the wires put its close anywhere from 5.06 to 5.11 percent — and the thirty-year to about 5.37. Then at one o'clock the Treasury auctioned $70 billion of five-year notes, and the buyers who turned up wanted more than the market had been paying a moment earlier: the notes cleared at 5.033 percent, reported as the highest yield at the auction since 2006, with a tail of 3.1 basis points. Foreign and fund buyers took 54.3 percent of the issue where they usually take about 65; the dealers, who are obliged to bid, were left holding 15.8 percent. The S&P 500 was at 7,705.79 at 1:01. At 1:02 it fell 8.64 points in a single minute, and at 1:04 it made its low for the day, 7,694.89.

The shape of the day is simpler than any of that. The index opened at 7,761.94, just under Tuesday's close, and that first print was the highest it traded all day. From there it went down, and it never came back: every one of the session's 390 minutes closed below Tuesday's 7,764.64. On Tuesday this book recorded the index crossing its previous close twenty-five times. On Wednesday it did not cross it once. It is the eleventh session this year whose opening print was its best, and the fifth in September alone — the fourth, the eighth, the ninth, the eighteenth and now the twenty-third — which is a peculiar habit for a market to fall into: to be at its most optimistic at half past nine, and a little less so every hour after.

Almost everything fell with it. Ten of the eleven sectors went down, and the two that trade most like bonds — utilities, down 1.92 percent, and real estate, down 1.55 — did worst, because a company that pays its owners a steady dividend is worth less when a Treasury note pays five percent for nothing. Energy was the one sector up, with oil. The small-company fund fell 1.84 percent; smaller companies borrow at floating rates. Gold fell 1.80 and the bitcoin fund 1.95: the things that pay no interest at all lost ground on the day interest rose. McDonald's, whose chief executive chose the same morning to say that nobody's restaurant traffic was going to grow, fell 4.81 percent to its lowest close in nearly four years.

Technology fell a little less than the rest and not in step. The Nasdaq 100, a day after its first record since June, gave back 0.85 percent; Alphabet fell 3.80 and Micron 2.22; software, of all things, rose 1.26. Meta rose 1.02 percent on the day of its Connect conference, ahead of the evening keynote at which Mark Zuckerberg was to explain how the Muse assistant that had moved the market on Monday and Tuesday would make money. The Dow fell 352.10 points to 51,511.59, and the VIX rose from the year's lowest close, 14.21, to 15.18.

Two honest notes. The survey is S&P Global's flash estimate, the first of two readings each month, and it is revised. And the Treasury figures on this page are the wires', not the feed's: this book's market-data feed carries prices for funds that hold Treasuries but not the yields themselves, and the wires did not agree with one another about where the ten-year closed. The page prints the range and says so. The movement of the long-bond fund, −1.58 percent, is the feed's own number and needs no one's agreement.

In the photograph it is ten past seven on the same Wednesday, before any of it, and the sun has only just come up over a fast-food restaurant at the edge of a town. The camera is at the top of a light pole. Below it the drive-through lane curves around the building, wet from the night's sprinklers, and there is not one car in it; the car parks beyond are empty. In the middle of the lane, beside the order post, exactly where a driver's window would be, stands a man in a grey suit who has come on foot. His head is bowed over the paper bag in his hands, and his shadow runs a long way back up the lane behind him. For a few minutes the low sun has made everything gold — the dew, the kerbs, the wet asphalt — the way the first price of Wednesday was the best one. By half past nine it will be ordinary light. He is early, as he always is, at the one window in town that was built for somebody who drove.