US equity indices closed lower yesterday. The S&P 500 fell by 0.48%, the Nasdaq 100 dropped by 0.64%, and the Dow Jones Industrial Average lost 0.77%.

Asian markets followed suit, sliding after the US sell-off as higher oil rekindled inflation fears. The MSCI Asia Pacific index fell by 0.6%, with Hong Kong and Australia among the weakest performers. Brent briefly rose to $101.94/bbl in early Asian trading before losing its gains. The 10-year Treasury yield held near a high of 4.85%.

The most telling development was the market reaction to Treasury actions. The government's plan to buy up to $6 billion of long-dated Treasuries disappointed some investors who had hoped for a larger program. Recall that in August, the Treasury doubled its operation limits from $2 billion to $4 billion, which temporarily pushed yields lower for a few days before they reverted. That initial announcement produced the strongest one-day gain in long-term bonds since February 2025. The second had little effect, and this latest move prompted outright disappointment. Skeptics who warned that technical fixes are insufficient to address fiscal imbalances have gained credibility, while the Treasury's policy toolkit appears to be shrinking with each attempt.

A striking contrast emerged from two near-back-to-back statements out of Washington. Yesterday, Treasury Secretary Scott Bessent outlined a plan for fiscal consolidation to shrink a deficit approaching $2 trillion. Today, President Donald Trump promised to pay every US adult $5,000 if Republicans retain control of both houses of Congress. With roughly 260 million adults, that pledge amounts to about $1.3 trillion, a sum comparable to much of the annual deficit Bessent says he wants to reduce.

Market odds have shifted ahead of Friday's inflation prints. Fed funds futures are pricing in roughly a 62% chance of a 25-bp hike at the September 15–16 meeting, up from about 60% on Tuesday. However, a cooler inflation reading would strengthen the case for a pause and leave the dollar vulnerable to a dovish re-rating of Fed policy. Most likely, the dollar will remain under pressure until the inflation data is released, after which moves will depend on the internal split in the report.

Technically, the S&P 500 chart shows that the immediate task for buyers today is to overcome the resistance level of 7,656 to confirm upside and open the path to 7,679. Maintaining control above 7,698 would further reinforce the bullish case. On the downside, buyers must defend 7,633. A break below that level would likely push the index back to 7,607 and open the way to 7,583.