Morning Bid Americas: Big Tech reports as bond yields recoil

Pentair

24/10/2023 11:00

A look at the day ahead in U.S. and global markets from Mike
Dolan
    
    Big Tech heavyweights Microsoft  MSFT.O  and Alphabet
 GOOGL.O  are set to switch global investors' focus from
Monday's bond market bounce, although the latter has improved
the market mood considerably ahead of the week's big earnings
reports.
    The two tech giants report after the bell on Tuesday, with
Meta  META.O  following on Wednesday and Amazon  AMZN.O  on
Thursday. These four stocks combined account for a whopping
23.4% weighting in the S&P500  .SPX  - just shy of their 24%
pandemic peak and twice the share they held just six years ago.
    Partly lifted by the year's artificial intelligence craze,
the tech behemoths have clearly flattered year-to-date gains of
10% in the overall S&P500. And on an equal-weighted basis, the
index is actually down 3.6% for 2023 so far.
    And yet the seemingly endless squeeze in bond markets since
midyear has seen megacap indexes  .NYFANG  retreat some 12% from
their highs for the year.
    The sight of 10-year Treasury yields  US10YT=RR  topping 5%
for the first time in 16 years early on Monday underscored that
angst - but the pressure eased significantly during the session
as some bond buyers emerged above to lock in yields above that
threshold.
    The reason for the rather sudden 10-year recoil on Monday
were sketchy beyond the breach of the milestone, though it
coincided with some major investors claiming it was time to
close short positions on Treasuries.
    Billionaire investor Bill Ackman said the covered his
previous bets against Treasuries on an expectation U.S. economic
numbers would deteriorate from here and the Gaza war would push
more investor dollars towards U.S. government bonds.
    Perhaps ironically, it was also an ebbing oil price  CLc1 
after the weekend - amid hostage releases and aid convoys that
stirred some hope for a temporary ceasefire in Israel's military
retaliation in Gaza - that helped bonds bounce on the day.   
    More broadly, sovereign debt prices were also helped on
Tuesday by signs of mounting pressure on business activity
around the world from spiralling borrowing costs, anxious
geopolitics and China's economic problems.
    Euro zone business activity took a surprise turn for the
worse this month as demand fell in a broad-based downturn across
the region, early "flash" surveys for October showed. The euro
 EUR=  fell back sharply from one-month highs.
    Sister surveys for the United States are due out later by
contrast.
    Britain's labour market also lost more of its inflationary
heat in the three months to August, according to new data,
potentially helping the Bank of England to keep interest rates
on hold next week and dragging down gilt yields.
    The upshot of the whole picture is to give U.S. stock
futures a lift ahead of the open on Tuesday - with Asia and
European bourses in positive territory too as bond markets
stabilised. The Vix  .VIX  volatility gauge fell back below 20
from seven-month highs of 23 hit in the previous session. 
    Ten-year U.S. Treasury yields held about 4.83% - some 19
basis points below Monday's peak at 5.02%. The dollar  .DXY 
bounced from one-month lows to trade higher on the day.  
    Treasury auctions this week will again test demand for U.S.
government paper, with $51 billion of 2-year notes up for sale
on Tuesday, $52 billion in 5-year notes due on Wednesday and $38
billion in 7-year notes on Thursday.
     Elsewhere, Britain's FTSE 100  .FTSE  underperformed due to
a near 7% drop in shares of Barclays  BARC.L  after the UK
lender cut its full-year guidance on net interest margins
despite beating quarterly profit forecast.
    In euro zone banking, UniCredit  CRDI.MI  climbed 1.8% as
the Italian bank posted a bigger-than-expected annual rise of
36% in its third-quarter profit.  
    
Key developments that should provide more direction to U.S.
markets later on Tuesday:
* Flash October business surveys from United States and around
the world via S&P Global; Richmond Fed Oct manufacturing survey,
Philadelphia Fed Oct service sector survey  
* U.S. corporate earnings: Microsoft, Alphabet, Visa, Coca-Cola,
Danaher, Texas Instruments, Verizon, General Electric, NextEra
Energy, Invesco, Fiserv, HCA Healthcare, General Motors,
Halliburton, Dow, Kimberly-Clark, Spotify, Dover, Nucor, Waste
Management, CoStar, 3M, F5, Chubb, Paccar, Centene,
Sherwin-Williams, Archer-Daniels-Midland, RTX, Quest, Pentair,
Synchrony 
* U.S. Treasury auctions 2-year notes

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
US 10-year Treasury yield    https://tmsnrt.rs/407yXXa
Big Tech Weight in S&P500    https://tmsnrt.rs/3tTp8jq
Equal-weighted S&P500 -3.6% YTD    https://tmsnrt.rs/46HK8bI
Canadian government debt services costs jump    https://tmsnrt.rs/46J5oxA
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (By Mike Dolan, editing by David Evans 
mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
 ((mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: mike.dolan.reuters.com@thomsonreuters.net))