Updated
US stocks struggled for direction on Monday as investors took stock of rising bond yields, eurozone economic uncertainty, and the upcoming earnings season ahead of a relatively quiet week.
The Dow Jones Industrial Average (^DJI) fell before easing to the flat line, while the S&P 500 (^GSPC) rose 0.5%. The tech-heavy Nasdaq Composite (^IXIC) gained 0.8%. Markets ended last Friday in a rally on pared-back Fed rate-hike bets.
The 10-year Treasury yield (^TNX) rose 5 basis points to 5.33%, hovering near its highest levels since 2007.
51,178.02 +1.06 (+0.00%)
As of 12:22:52 PM EDT. Market Open.
^DJI ^GSPC ^IXIC
Monday marks a light day as far as the earnings and economic calendars are concerned, with the latest readings from S&P Global and the Institute of Supply Management’s purchasing managers’ indexes highlighting Monday’s releases.
The ISM services index showed activity expanded at a slower pace in September to 54.9 from 55.4 in August, while its prices index signaled fresh cost pressure, climbing to 74 from 72.6 over the same period.
Later this week, attention will turn to the quarterly results of Levi Strauss & Co. (LEVI), Applied Digital (APLD), PepsiCo (PEP), and Delta Air Lines (DAL) before the Q3 earnings season kicks off in earnest in mid-October.
The market has remained remarkably resilient amid recent turmoil in the bond market and the ongoing war in the Middle East. Brent crude oil futures (BZ=F) above $100 per barrel have put investors on edge, with some strategists seeing plenty of reasons for a pullback, while others see more room for a rally to run.
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The bond sell-off is global
Perhaps the biggest story in the markets over the past month has been the meteoric run-up in US Treasury yields, putting increasing pressure on the US economy. But the challenge is not just the US — the global bond complex is deep in a sell-off.
In France, where political leaders are staring down a burgeoning fiscal crisis, 10-year government OAT yields have risen by roughly 130 basis points since the start of the year, while the yield on Japanese 10-year bonds has jumped by around 100 basis points.
Yields on UK 10-year gilts and German 10-year bunds have risen around 80 bps and 60 bps, respectively, while those of 10-year Australian government bonds have climbed by roughly 50 bps.
The US 10-year Treasury, often cited as the most critical number in global finance for its widespread use as a benchmark, has climbed by more than 110 bps.
Yields on 10-year government bonds across the globe have risen nearly in tandem. The pressures on the global sell-off are manifold and compounding.
The war in Iran has sent global energy prices soaring, putting pressure on inflation worldwide and shifting investor expectations for central bank rate-setting pathways higher for longer. At the same time, major world governments are facing ballooning national debt and growing deficits, forcing them to issue more debt just as investors are demanding higher yields to absorb it.
On a positive note, the global economy is also growing, as recent PMI readings throughout the developed world have shown “global growth momentum is both strong and broad-based,” per JPMorgan Chase. But a growing economy means investors expect a higher return on capital, and typically pushes central banks away from rate cuts.
Taken together, both the expected path of short-term rates and the term premium are moving higher, pushing long-term yields up across developed markets.
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SpaceX stock jumps on bullish Morgan Stanley call
SpaceX (SPCX) shares are getting a big boost after one of the Street’s biggest bulls said it’s time to buy.
In a note titled “SPCX $159: Cheap and Getting Cheaper,” Morgan Stanley’s Adam Jonas reiterated his Outperform rating and $300 price target, claiming investors only have a few weeks to “catch” an opportunity to buy the stock ahead of some big milestones.
SpaceX stock jumped 5% in early trade on Monday.
“We think that over the next few weeks (ahead of Starship Flight 15), investors can take advantage of a unique opportunity to buy shares that look unusually cheap,” Jonas said.
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US services activity expanded at a slower pace in September amidst elevated price pressure
US services activity expanded at a slower pace in September as a closely watched measure of prices climbed further, according to a Monday data release from the Institute of Supply Chain Management.
The ISM Services PMI came in at 54.9 in September, down from 55.4 in August and above the consensus forecast of 55.7, marking the 27th month of expansion for the services sector gauge.
The ISM’s prices index rose to 74 in September from 72.6 in August, signaling that price pressures remained elevated. The reading comes after the manufacturing survey’s prices index in September jumped to 77.9.
That makes the services inflation reading especially important for investors trying to gauge whether renewed price pressures are broadening beyond goods. Services account for the bulk of US economic activity and have remained a persistent source of inflation pressure.
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US stocks struggle for direction at open as yields stay uncomfortably high
US stocks held near the flat line on Monday as major indexes struggled to find direction and investors weighed stubbornly high government bond yields following Friday’s post-jobs report stock rally.
The Dow Jones Industrial Average (^DJI) fell 0.2% at the open while the S&P 500 (^GSPC) rose 0.2% and the tech-heavy Nasdaq Composite (^IXIC) climbed 0.5%. Markets ended last Friday in a rally on pared-back Fed rate-hike bets.
51,178.02 +1.06 (+0.00%)
As of 12:22:52 PM EDT. Market Open.
^DJI ^GSPC ^IXIC
Investors enter October’s first full week with the question of how long stocks can continue to shrug off higher borrowing costs. The benchmark 10-year Treasury yield (^TNX) hovered around 5.3% early Monday after finishing Friday near 5.24%, while the S&P 500 remained just 1% below its August record.
Investors dialed back Fed rate hike bets after Friday’s jobs report showed the US added just 29,000 jobs in September, well below expectations, with prior months also revised lower.
Oil prices remained elevated, with Brent crude futures (BZ=F) holding above $100 per barrel.
Investors will get another economic read later Monday morning with September’s ISM services report.
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Cerebras stock pops after OpenAI CEO Altman lauds ‘close partner’
Yahoo Finance’s Michael Kelley reports:
Cerebras (CBRS) stock is up in premarket trading after OpenAI (OPAI.PVT) CEO Sam Altman reaffirmed the AI lab’s partnership with the AI chipmaker.
“Cerebras is a close partner,” Altman posted on X, “and we have a deep engagement pushing on the frontiers of speed.”
Cerebras shares have been under pressure since mid-August, when the company reported disappointing earnings and guidance.
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Euro slides as French budget impasse spurs sell-off in the country’s bonds
The euro slid on Monday morning, hitting a 17-month low after political gridlock in France raised doubts about the country’s ability to control its budget deficit, sparking a bond sell-off. The dollar strengthened against the euro, as shown in the chart below.
Paris’s CAC stock index (^FCHI) fell 0.6% on Monday, while the European STOXX (^STOXX50E) remained in the green. London’s (^FTSE) rose 0.6%.
Reuters reports:
The yield gap between French bonds and safe-haven Bunds – a market gauge of the risk premium that investors demand to hold French debt – widened to about 150 basis points on Friday, the highest since the euro zone’s sovereign debt crisis in 2011, before pulling back to 140 bps. It was last up 5 bps to 145.50.
“Latest bond market dynamics are increasingly concerning and somewhat reminiscent of a sovereign debt crisis. Friday’s acceleration of the selloff in OAT spreads and flight-to-quality patterns in Bunds are a case in point,” said Hauke Siemssen, strategist at Commerzbank.
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October may not be as bad for the stock market as investors think
October may have a scary reputation for stocks, but when it comes to seasonality, its batting average is solid.
After closing out September, historically the worst-performing month of the year, down 0.45%, this month could shape up to be more bullish.
October ranks among the top months by average return, at 1.9%, tied with November and July, despite its reputation for volatility. Much of that perception is due to 2008, when the S&P 500 (^IXIC) declined nearly 17%. Remove that outlier, and the average return jumps to roughly 2.7%.
Overall, October’s win rate over the past 30 years is 63%, with stocks posting positive returns in 19 of those years, according to Yahoo Finance AlphaSpace data.
October returns over the past 30 years -
Good morning. Here’s what’s happening today.
Economic data: S&P Global US services PMI, September final reading (58.7 expected, 58.7 prior); S&P Global US composite PMI, September final reading (58.4 prior); ISM services index, September (55.2 expected, 55.4 prior); ISM services, prices paid, September (73 expected, 72.6 prior); ISM services, new orders, September (73 expected, 72.6 prior); ISM services, new orders, September (60.5 expected, 60.9 prior); ISM services, employment, September (49 expected, 47.8 prior)
Earnings calendar: No notable earnings.
Catch up on some top stories you might have missed over the weekend:
‘A lot of sticker shock’: Home heating costs soar for millions amid oil crisis
Iraq charters supertanker through Hormuz for first time in decades
Former Disney CEO explains why he doesn’t visit the theme parks
Moody’s Zandi warns higher rates are damaging the economy
Dirty Jobs’ Mike Rowe: Skilled labor shortage remains the ‘pinch point’ for the new economy
Trump’s new rule could cut off student loans for some degree programs
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‘The market has had every reason to sell off’ — and it hasn’t
Even with bond yields hovering at more than 20-year highs, the stock market has barely flinched.
The S&P 500 (^GSPC) rose Friday to sit less than 1% from its record high while the Nasdaq Composite (^IXIC) was near an all-time high as a weak jobs report lowered expectations for a Federal Reserve rate hike this year.
Up until now, elevated oil prices, AI-related risks, and deteriorating market breadth have suggested a pullback may be just around the corner.
“The market has had every reason to sell off, and it hasn’t sold off yet, and to me it feels like it’s running out of time,” Sean McLaughlin, chief options strategist at All Star Charts, told Yahoo Finance. “The path of least resistance appears to be higher.”
