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(Today's Smart Brevity count: 1,196 words, < 5 minutes.)
Illustration: Lazaro Gamio/Axios
Stocks took a nosedive for the second consecutive day on Wednesday and the Dow and S&P fell for the fourth time in 5 sessions. But the U.S. Treasury market experienced a far smaller move, as it has been factoring in manufacturing weakness and slowing job growth for months.
What's happening: Bearish investors appear to have seized control of stock markets and are now pricing in the impacts of the already-in-recession manufacturing sector. While the Dow fell by nearly 500 points on Wednesday, the benchmark U.S. 10-year Treasury note yield dipped just 5 basis points.
Reality check: Jobs, consumer spending and the all-important services sector, which represents around 70% of the U.S. economy, have largely held strong.
Between the lines: Treasury yields have been incrementally moving lower throughout the year as traders have poured into bonds, correctly betting that U.S. economic data would continue to weaken and the Fed would cut overnight interest rates and ease policy.
The bottom line: With more important data releases to come this week, the stock market may continue to be volatile. But the Treasury market has proven a better representative of the real economy this year and may have found a floor.
Historically, as U.S. stock prices rise, Treasury yields increase as investors sell bonds to buy equities. But that has not been the case over the past year.
The U.S. stock market may be running low on liquidity, experts say, and that could very well weigh down prices and lead to further selling.
Why it matters: The dysfunction over the past few weeks in the repo market, which is where large financial institutions sell assets like Treasuries when they need quick cash, may have been the first signal of a wide-ranging liquidity shortage.
What they're saying: "Over the past year we have seen liquidity risks bubbling up," Bank of America Merrill Lynch equity and quant strategist Savita Subramanian said in a note to clients.
The nagging issues in the repo market are "just a symptom of a larger macro problem," Yves Lamoureux, president of macroeconomic research firm Lamoureux & Co., told Axios.
Watch this space: The rapidly rising popularity of passive investing, converging stock ownership, and increasing fund flows from pension funds and large money managers into private equity is drying out typical sources of liquidity to the stock market and could mean major outflows in the face of bad news, Subramanian adds.
Axios managing editor Jennifer Kingson writes: It now costs an average of $4.72 to take money out of an ATM that isn't owned by your bank — the highest amount since Bankrate.com started tracking the data in 1998 (when it was $1.97).
Why it matters: ATM fees disproportionately fall on low-income people in neighborhoods that banks tend to avoid. At the same time, saving money in the bank is harder than before, as banks lower the interest rates they pay to depositors.
By the numbers: There are 2 parts to what customers pay to use an out-of-network ATM...
By the city: Of the 25 metro areas included in the study, Houston has the highest average ATM fee ($5.58), while Los Angeles has the lowest ($4.15).
Meanwhile, the average yield on a checking account is only .06% — down from 1.35% in 1998 (though the lowest figure was .04% in 2014, per Bankrate).
Tuesday's dramatic slide in U.S. manufacturing to the weakest level in 10 years generated jarring headlines and spooked the market, but there are signs the sector is improving on a global level.
Between the lines: A survey of global manufacturing data from IHS Markit Tuesday showed that though the sector remains in contraction, the index rose for the second straight month.
The last word: "The data provides no room for complacency, but is not quite as bleak as the ISM data suggests," Alan Ruskin, chief international strategist at Deutsche Bank, said in a note to clients.
The U.S. opened another phase in what's beginning to look like a global trade war, announcing it will impose tariffs on $7.5 billion in aircraft, agricultural products and other goods from the European Union.
Details: The World Trade Organization authorized the tariffs as a result of a U.S. complaint over EU subsidies to Airbus.
Why it matters: With little traction on a trade deal with China, and Europe's deteriorating economic stability, this action by the U.S. will likely further sour the mood of global equity markets and threatens to further weaken the global economy.
“I’m tempted to say it will poison the well on other U.S.-EU trade issues, but the well is pretty poisoned anyways."— William Reinsch, senior adviser, Center for Strategic and International Studies, said of the new tariffs to WSJ
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