Hello everyone, welcome back to the U.S. stock analysis channel, I'm lorder. Today's market — Treasury yields were having a party, too bad stocks weren't invited. The 10-year Treasury yield spiked four standard deviations in a single day, breaking through 5.1%, marking the biggest one-day jump since "Liberation Day." We just saw a three-standard-deviation surge two weeks ago, and now this again — how can the market not be rattled? All four major indices came under pressure. Today we're going to talk about a few key stocks caught in the middle of this rate storm.

Let me state my stance first: cautious, leaning defensive. Treasury yields spiked sharply, and the Russell index — the most rate-sensitive — tumbled 1.84%, with all four major indices under pressure. PMI data came in much stronger than expected, combined with hawkish comments from a Fed voter, and the market is once again facing a tug-of-war between rising rates and upward earnings revisions. On individual names: Microsoft is consolidating ahead of a breakout but has some technical blemishes; McDonald's is down sharply on an earnings warning; Broadcom faces new risk from a SASAC investigation; and Costco is not a stock to touch before earnings.

Today's S&P flash PMI surged to 57, well above the 53.6 expected and the prior reading of 53.9. Services PMI came in at 58.7, versus expectations of 56 and a prior reading of 56.5. Composite PMI rose from 56 to 58.4, hitting a five-year high. This PMI strength was driven mainly by services, with output growth at its fastest pace in five years and the employment index growing at its quickest pace in over four years.

With data this strong, inflation pressures naturally follow. The input cost component of the PMI jumped sharply to its highest level since October 2022, with fuel and transportation costs pushing inflation higher. Fed voter Barr delivered hawkish remarks, saying "further rate hikes may be necessary." The probability of an October hike has already surged from 50% to 69%.

On Treasury yields, the 10-year broke through 5.1%, the 5-year broke above 5% for the first time — the first since 2007 — the 30-year hit its highest level since 2004, and 30-year mortgage rates are above 7%. Only energy was up among the S&P's eleven sectors today; ten sectors were down. 332 stocks fell while only 170 advanced. This market — the battle between rising rates and upward earnings revisions looks like it's about to begin again.

Microsoft — consolidating, hasn't broken through 514 yet. Support at 487, resistance at 514, and above that, the upside target is 600+. Long-term bullish, but the technicals need to work themselves out. The weekly RSI bearish divergence hasn't been resolved — in the week of August 24th, the stock made a new high but RSI didn't confirm, creating a bearish divergence. The current modest pullback isn't enough to fix it. Either it breaks out first and then repairs into overbought territory, or it pulls back first to repair and then breaks out. Volume is extremely light overall, lacking the buying power needed to break through the strong resistance at 514.

Broadcom — support at 324, only two moderate resistance levels above, stop-loss at 324, step aside if it breaks. Cautiously bullish; above 324 it's a high-growth buy point, with forward valuation of 352 to 469 and a 30 to 40 times PE in a high-growth environment. But a break below would mean institutional buyers are voting with their feet, and downward EPS revisions from sellers would follow with a lag. The risk is the SASAC investigation — state-owned enterprise penetration is as high as 90%, and future upgrade cycles could see replacements. Short-term earnings impact is limited, but confidence is shaken.

McDonald's — fell to a four-year low, down 4.81% today. Q3 earnings warning, U.S. business expected to decline, growth deteriorating sharply, fundamentals in a downward spiral. Weekly charts are deeply oversold, monthly charts are approaching oversold, but the sharp bearish candles mean there's little buying support, and with fundamentals spiraling lower, oversold conditions don't constitute a reversal buy signal. In a rising inflation environment, consumer companies have limited ability to pass through price increases — avoid this one.

Costco — options are pricing in a post-earnings move of 905 ± 32 dollars, roughly ±4.5%, within a 68% probability range. Key support at 867; below 867, the downside target is under 750. Stay on the sidelines before earnings. The high valuation depends on pricing power; a break below 867 would trigger mean reversion. Based on a 37.4 times PE, the ceiling is only 838, with growth in the mid-teens. Heavy resistance is stacked above, and with limited room before earnings, this isn't a trade.

Today Treasury yields spiked 4 standard deviations in a single day, with the 10-year breaking above 5.1% for the biggest one-day gain since "Liberation Day," the 5-year breaking above 5% for the first time since 2007, the 30-year hitting its highest level since 2004, and 30-year mortgage rates above 7%. The probability of an October rate hike surged from 50% to 69%, and Fed voter Barr said "further rate hikes may be necessary." The PMI input cost component rose sharply, with fuel and transportation costs pushing inflation higher. McDonald's Q3 earnings warning reflects the limited pricing power of consumer companies in an inflationary environment. Broadcom faces a SASAC investigation, with state-owned enterprise penetration as high as 90% and potential replacement in future upgrade cycles.

Alright, that's all for today. In the middle of this rate storm, stay on the sidelines when you should, avoid what you should avoid — risk management always comes first. See you tomorrow at the same time. Take care.