Dow Hits Record as Yen Slumps on Massive Intervention

The Dow notched a record-high close on Monday, thanks to solid manufacturing data and optimism around earnings and U.S.-Iran peace hopes. The yen slumped to a three-month low after a historic bout of coordinated U.S.-Japanese intervention.

Japan spent almost $100 billion over a 48-hour period last week in FX intervention to support the yen, with $36.6 billion on Friday and $59 billion on Thursday. This follows similar large-scale interventions in April-May this year, July 2024, April-May 2024, and October 2022.

The U.S. Treasury's activity in the FX market buying Japanese yen has been unconventional, but its goals may be conventional. The timing of these actions speaks to deeper concerns about the U.S. bond market. Investors are putting recent chip routs aside and focusing on earnings, with a Q2 annual consensus U.S. earnings growth forecast running at 47.7%, virtually double what it was only a month ago.

Global factory activity has been less volatile than financial markets, with the latest purchasing managers index data showing U.S. factory activity expanded in July at its fastest pace in over four years, euro zone output at its highest in four and a half years, and Japan's manufacturing PMI leaping to a 12-year high.