On Thursday, under the influence of multiple rumors about whether Biden would withdraw from the election almost every once in a while, both the US stock and bond markets experienced selling pressure. Among them, the Dow Jones Industrial Average fell more than 500 points, ending its six consecutive trading days of gains. In the bond market, the "Trump deal" also overwhelmed the "interest rate cut deal" overnight, helping to push US bond yields back higher.
According to an adviser to US President Biden on Thursday, Biden is in good condition after he tested positive for COVID-19 the previous day. Currently, Biden does not have a fever and his vital signs remain normal. He will continue to work.
However, even so, Biden's campaign path is still shrouded in clouds. Before Trump's speech on Thursday evening accepting the Republican presidential nomination, the overnight political discussions in the market were mainly focused on whether Biden would withdraw from the election and when and how he would withdraw.
Local media reported on Thursday morning that senior Democrats believe pressure from party members and close friends may persuade Biden to withdraw from the race as early as this weekend. Senate Majority Leader Schumer has previously told Biden that ending the race would be more advantageous for the Democratic Party. House Minority Leader Jeffrey also told Biden that he has dragged down the Democratic Party's congressional campaign.
The heaviest blow so far came from Obama. According to The Washington Post, the former US president told his allies that Biden's path to victory has greatly narrowed, and he believes that Biden needs to seriously consider the feasibility of continuing his candidacy.
According to informed sources, Biden is still planning his scheduled campaign trip next week. But the president is now more willing to listen to calls for withdrawal and has requested a poll on Vice President Harris' chances of winning against Trump.
The gambling market is clearly more convinced than ever that Biden will not be able to become the Democrat who ultimately faces former President Trump in the November election - as of Thursday afternoon local time, the main prediction platform Polymarket predicts a 14% chance of Biden becoming the official Democratic nominee, while PredictIt puts the probability at 23%. This is the lowest probability that Biden has been nominated since these two platforms began allowing betting on the US election.
Meanwhile, Vice President Harris is most likely to become the official nominee of the Democratic Party on both political betting platforms, with probabilities of 62% and 64%, respectively.
Tim Williams, the public relations director of another gambling platform BetUS, also said, "Our odds correctly predicted Vance's selection as Trump's running mate, and I believe our odds will also correctly predict this Democratic presidential candidate - be prepared to see Harris become the Democratic nominee
Affected by various rumors surrounding Biden's withdrawal from the election, the US financial market remained volatile overnight, with panic selling spreading to almost all assets. In the end, both the Nasdaq and S&P fell more than 1%, the Dow Jones Industrial Average fell more than 530 points, and small cap stocks also fell nearly 2%. The CBOE Market Volatility Index (VIX), commonly known as the "Panic Index," has reached its highest level since early May.
Ingalls& Tim Ghriskey, Senior Portfolio Strategist at Snyder, said that unlike yesterday, you did see funds entering other sectors before, but today is a fairly widespread sell-off.
Ghriskey added that in the past two weeks, we have seen funds rotate to other sectors, including mid cap and small cap stocks, whose performance had been very lagging before, but today the situation has reversed - funds are wandering around, trying to find direction. Investors began to withdraw and said, 'We need to cash out now, this is already a good market trend.'. They are uncertain about what will happen politically next.
In terms of the US bond market, although data on Thursday showed that the number of initial jobless claims in the US rose again last week, it has made people increasingly believe that the Federal Reserve may start cutting interest rates in September. However, the "Trump deal" still overwhelmed the "interest rate cut deal" overnight, causing selling pressure in the bond market and pushing US bond yields generally higher.
As of the end of the New York session, US Treasury yields collectively rose, with 2-year yields up 3.4 basis points to 4.48%, 3-year yields up 3.9 basis points to 4.248%, 5-year yields up 4.1 basis points to 4.124%, 10-year yields up 4.3 basis points to 4.205%, and 30-year yields up 4.5 basis points to 4.422%.
Of course, the only constant is the steepening of the yield curve. The yield spread of 2-year/10-year US Treasury bonds was reported as negative by 27 basis points overnight, and the degree of curve inversion was further reduced by 1 basis point. Betting on a steeper yield curve has been a popular trade recently, with expectations that as the Federal Reserve approaches a rate cut, the decline in short-term bond yields will be faster than that of long-term bond yields.
The logic behind the 'Trump deal' is that if Trump's victory leads to rising inflation and worsening fiscal deficits, it will also put greater selling pressure on long-term bonds.