Morning Bid Americas: Risk and rates moving in tandem

Farmer Bros Co

12/09/2023 11:02

A look at the day ahead in U.S. and global markets from Mike
Dolan 
    
    Both long-term borrowing rates and riskier growth stocks of
the Big Tech universe have climbed in tandem this week, a
peculiar coincidence in price trends that typically offset each
other.
   While it's often dangerous to over-interpret a few days of
market developments, some argue investors are gradually pricing
a more durable high-pressure economy ahead - one where demand
and earnings growth stay brisk and keep credit policy and
interest rates tight over the horizon.
    Or it may just be a series of idiosyncratic news events.
    Either way, it was enough to hand Wall St stocks  .SPX 
their best day of the month on Monday just as 10-year Treasury
yields eye recent 15-year highs again above 4.3% ahead of
today's auction of new 10-year paper.
    Although both stock futures and bond yields edged back a
touch again on Tuesday ahead of the bell, the fact they are
moving in tandem ahead of a critical week for macro policy is
notable. 
    Curiously, it was the traditionally most interest-rate
sensitive sectors that led Monday's stock rally, with the
NYFANG+ index  .NYFANG  of mega cap tech and digital giants
clocking a daily gain of more than 2% for the first time in
September.
    That jump was led by Tesla's 10% surge  TSLA.O  after Morgan
Stanley upgraded its stock recommendation to "overweight" and
said its Dojo supercomputer could boost the company's market
value by nearly $600 billion.
    The renewed excitement about a quantum leap in artificial
intelligence also saw Meta Platforms  META.O  advance more than
3% after a report it was working on a more powerful AI system.
    Recovering somewhat from the China-related hit last week,
Apple  APPL.O  stock also rebounded as it prepared to launch its
latest iPhone on Tuesday and signed a new deal with chipmaker
Qualcomm  QCOM.O  for the supply of 5G modem chips at least
until 2026 - before a previous agreement ends this year.
    Cutting across that tech optimism overnight, however, were
below-forecast estimates from Oracle  ORCL.N  - whose stock fell
almost 10% after the bell as it flagged how a tough economy
pressured cloud spending by businesses.
    That sort of mixed messaging faces the Federal Reserve as it
prepares to meet next week, with two critical macro updates to
review over the next couple of days - the August consumer price
inflation report on Wednesday and retail sales on Thursday.
    Before we get there, investors await the often overlooked
NFIB small business survey for last month - not least to see
whether credit tightening is starting to bite beyond the mega
caps for a part of the economy that employs more than half of
all U.S. workers.
    Overseas, European markets held up as this week's European
Central Bank meeting is awaited with economists split on its
outcome.
    China stocks closed marginally in the red but there was some
relief as the country's largest private property developer
Country Garden  2007.HK  won approval from its creditors to
extend repayments on six onshore bonds by three years.
    Britain's pound  GBP=  inched lower after data showed the UK
labour market weakened even as wage growth stayed strong in
July, painting a messy picture ahead of the Bank of England's
decision on rates next week.
    The dollar  .DXY  was firmer more generally.
    London-listed shares of Smurfit Kappa  SKG.L  slumped 11%
after the company agreed to combine with WestRock  WRK.N , to
create one of the world's largest paper and packaging producers
worth nearly $20 billion.   
    
Events to watch for on Tuesday:
* U.S. NFIB Aug survey of small businesses
* U.S. Treasury auctions 10-year notes
* U.S. corporate earnings: Optical Cable Corp, Altamira
Therapeutics, InnovAge, Lesaka Technologies, Cognyte, Farmer
Bros, Edgio, MamaMancini's

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Higher for longer takes hold    https://tmsnrt.rs/3Phjij0
Wage growth in Britain continues to be brisk    https://tmsnrt.rs/3Pd5dDk
Billion-dollar disasters in the US are becoming more frequent   
https://tmsnrt.rs/3PcaVp6
US 10-year Treasury yield    https://tmsnrt.rs/3PyFUwR
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (By Mike Dolan, editing by Ed Osmond,
mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
 ((mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: mike.dolan.reuters.com@thomsonreuters.net))