James Brodie
Head of Learning & Development, Flux
US Equities, Japanese Yield Highs, Palantir Surge, Amazon Crosses $3T Market Cap
US stocks rally on strong data and earnings, but rising global bond yields signal higher capital costs and growing market tension.
STRONG EARNINGS, STRONG ECONOMY, STRONG U.S.
One of the best days for U.S. equities in 2026 - and the data backs up the price action.
Manufacturing is roaring back
U.S. manufacturing expanded in July at its fastest pace in more than four years. ISM Manufacturing hit 55.6, its highest since May 2022. S&P Global PMI sits at 53.9, New Orders at 56.7, Employment at 52.8. Every major component is now back in expansion territory - a broad-based industrial recovery rather than a one-off data surprise.
Earnings are confirming it
The proportion of S&P 500 companies beating Q2 estimates is at a record high. Strong data, strong beats, reinforcing each other.
But the bond market is telling a different story
Japan's 2yr and 5yr yields just hit 31-year highs - 1.579% and 2.098%, up from near zero two years ago. In the U.S., the 30yr yield is up 41bp this year, and the 30yr real yield is up 40bp. Long-term inflation expectations have moved just 1bp.
That combination matters: this isn't an inflation shock. Investors are demanding a materially higher real return to lend to the U.S. government - a structural repricing of term premium, not a growth scare.
With OIS pricing 35bp of hikes by year-end and 46bp over 12 months, the 2yr yield now sits on a key trendline. On the data alone, higher yields would be the logical next move. The uncertainty is whether the new Fed leadership allows markets to follow that path. (Chart 1: U.S. 2yr yield, Bloomberg)
Equities: breadth, not just beta
S&P closed up 1.5%, Nasdaq up 1.8% - semis, software, and hyperscalers all participating together. The S&P sits just below all-time highs. Whatever your view on valuation, breaking a prior high tends to pull in fresh buying fast, particularly passive flow into SPY. (Chart 2: S&P 500, Bloomberg)
Palantir surged over 8% on an earnings beat. Microsoft is up more than 25% in three days. And hedge funds are chasing the move: the largest weekly purchase of U.S. tech since December 2022, the 3rd-largest in at least five years - driven by fresh longs and short covering, concentrated in software, semis, and semi-equipment. Magnificent 7 names were bought for four straight days through Thursday. (Chart 3: Kobeissi Letter, Goldman Sachs)
Elsewhere
Germany's DAX hit a fresh all-time high. Amazon became only the fifth company ever to cross $3 trillion in market cap. And the Rhine has fallen to its lowest level since 1880 - a real supply-chain risk hiding beneath all the good news. It's another reminder that supply-side risks haven't disappeared, even as equity markets celebrate stronger growth.
The bottom line: the data, earnings, and price action are all pulling in the same direction - but the bond market is quietly repricing the cost of capital underneath it. That tension won't stay quiet forever.
Which breaks first - equity momentum or the bond market's patience?
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