Market Pulse with Dan Sheehan

Good Morning Investors,

Markets took a breather Tuesday after a strong run. The S&P 500 slipped 0.4%, the Dow dipped 0.3%, and the Nasdaq was flat—hardly a rout, but enough to hint that some consolidation might be ahead. This follows six straight days of gains that had left major indices hovering near highs, and as I’ve said before, a retest of key technical levels—like the 200-day moving average—wouldn’t be unhealthy. Some short-term tension is returning, particularly in bonds and trade policy. I’ve flagged both as likely catalysts for a short-term pullback, and they’re now back in focus. Wednesday’s market action showed just how quickly sentiment can shift when yields start to bite.

Before the Bell

Futures were mostly flat early Thursday, with the S&P 500 unchanged, the Dow down 0.2%, and the Nasdaq modestly higher by 0.1%. The 10-year Treasury yield nudged above 4.61% while the 30-year moved past 5.13%, continuing a week-long surge driven by deficit concerns. Oil fell over 1% after reports of a possible OPEC+ supply boost, while gold paused after its recent rally. European stocks declined on weak PMI data, and Japan’s Nikkei closed at a two-week low.

Bond Market Watch

The bond market made its presence known Wednesday. A lackluster 20-year Treasury auction revealed how skittish investors have become about US debt. Just $16 billion in bonds were offered—but weak demand forced yields above 5%, producing the widest auction "tail" since December. The 20-year yield surged to 5.125%, and the 30-year hit 5.093%, with the 10-year rising to 4.61%.

This spike is no longer about inflation. It’s about supply, demand, and deficits. I’ve warned in recent editions that a poorly received bond sale could catalyze a broader equity pullback—and that’s exactly what played out. The Trump tax bill, with its $4 trillion price tag, has added fuel to concerns over fiscal trajectory. If long-end yields stay elevated—or push higher—risk assets could see more pain. This was the correction I had expected.

As I noted yesterday, rising yields are now the main market driver, with term premiums surging due to fiscal concerns. The Trump tax bill, advancing through Congress, has only added to deficit anxieties. If the 10-year yield breaks above 4.6%, which it nearly did Wednesday, more equity weakness could follow. This was the pullback I flagged earlier in the week—and while painful, it remains orderly so far. The fact that a relatively obscure bond auction triggered such a sharp move only reinforces the sensitivity of this market to the debt and deficit narrative—something I’ve been highlighting consistently.

Trade Tensions Rekindle

The US-China tariff truce is beginning to show cracks. The latest flashpoint is AI chip policy: the US Commerce Department has issued warnings about Huawei chip use, prompting legal threats from China’s Ministry of Commerce. Nvidia’s CEO Jensen Huang called US chip export controls a “failure,” noting they’ve cost his firm billions while accelerating China's domestic AI chip progress. I said earlier this month that trade policy remains the most fragile macro pillar—Wednesday's news reinforces that.

Markets have yet to fully price in the risk that negotiations break down again. As trade moves from headline optimism back into legal retaliation and tech restrictions, the short-term path could get bumpier.

Bitcoin at New Highs

Bitcoin surged above $111,000 early Thursday, notching a new all-time high and further validating what we’ve been saying for months: crypto is back, and institutional support is growing. The rally reflects more than just risk sentiment. Regulatory clarity, ETF tailwinds, and a weakening dollar have all played their part. I first outlined a $150,000 target for Bitcoin back in early Q1, and while there’s still a long road to that mark, we’re clearly on the right track.

The catalyst? A perfect storm of fiscal anxiety, rising Treasury yields, and regulatory progress under the Trump administration’s pro-crypto stance. Institutional flows are accelerating, with major players like MicroStrategy and traditional asset managers continuing to build exposure. The GENIUS Act clearing a key Senate hurdle also reinforces growing stability for stablecoin infrastructure. For investors seeking an inflation hedge or a fiat alternative, Bitcoin is increasingly the choice.

This divergence—stocks retreating while Bitcoin surges—may speak to its growing role as a hedge against fiscal disarray. With the US deficit in the headlines and bond yields flashing warnings, Bitcoin’s appeal as an alternative asset is finding fresh traction. A reminder that conviction, especially in volatile assets, matters.

Analyst Recommendations

Closing Thoughts

Wednesday’s pullback was a classic reminder of how sentiment hinges on bond auctions and fiscal signals. I’ve said repeatedly that long-end yields could be the market’s biggest tell, and this week we saw it. A weak auction, rising deficits, and policy tension were enough to send equities sharply lower. The S&P fell 1.6%, the Dow dropped nearly 2%, and the Nasdaq lost 1.4%.

Still, I see this as part of a healthy consolidation. As long as yields don’t accelerate uncontrollably, a test of the 200-day moving average could solidify support. If that level holds, we could resume the uptrend and still reach all-time highs later this year. But the road will be bumpier now. Expect more volatility as the bond market reasserts its influence—and as always, don’t ignore the signals coming from crypto.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.