Market Wraps
Watch For:
JOLTS jobs openings data for August; Fed speak from Raphael Bostic
Today’s Top Headlines/Must Reads:
– When Will the Fed Stop Raising Rates? That’s the Trillion-Dollar Question for Bond Investors
– U.S. Car Sales Expected to Increase Again in the Third Quarter
– Why Rising Interest Rates Hurt Bank Stocks Instead of Helping Them
Opening Call:
Stock futures struggled for momentum on Tuesday as the recent surge in bond yields continued to suppress investor sentiment.
However, a steady showing for Treasuries early on Tuesday allowed stock futures to nudge a fraction higher.
“The hangover from strong economic data in the U.S. is still being felt, with the headache increasing about the likelihood of high interest rates setting in rattling nerves,” Hargreaves Lansdown said.
The path for bond yields and thus probably stocks over the short term may depend on a batch of jobs-related data in coming days.
Overseas, stocks fell across Europe and Asia, with the Hang Seng in Hong Kong down almost 3%. Markets in mainland China are closed this week for a holiday.
Premarket Movers
Airbnb was downgraded to Sector Weight from Overweight at Keybanc without a price target. The analysts said the company’s margins have reached a near-term peak and revenue growth could decelerate to 11% year over year in 2024 as room night and average daily growth rate moderates. The stock fell 1.9%.
Ford and General Motors have laid off roughly an additional 500 workers combined as the ongoing strike by the United Auto Workers forces the auto makers to idle more factories. Both rose 0.2%.
Meta is weighing a proposal that would charge Europeans almost $14 a month for ad-free versions of Instagram or Facebook, WSJ reported . Shares rose 0.4%.
Oddity Tech said it expects its third quarter “to be our strongest third quarter ever.” The stock rose 14%.
ADRs of JD.com, Alibaba Group Holding and NIO slipped premarket after Hong Kong’s Hang Seng Index closed at its lowest level of this year. Shares of each fell nearly 2%.
Monday’s Post-Close Movers
ALX Oncology will release interim Phase 2 trial results on a call Tuesday. The company said it would discuss data from its trial of evorpacept in the treatment of HER-2-positive gastric cancer, the results of which are expected in the fourth quarter. Shares rose 22%.
Delta Apparel said it had received an unsolicited offer to acquire its Salt Life unit. The company did not say the terms of the offer, but said it would conduct a review of options for the business. Shares rose 20%.
Forex:
The dollar hit its highest since late last year against a basket of currencies and the euro as U.S. government-bond yields rose further.
“The bid in dollar is relentless at the moment as is the march higher in yields,” RBC Capital Markets said.
“While markets are net long dollar, few have the position on in large size, which is facilitating the speed of the current move – most are watching on the sidelines thinking it must be near an end and yet it keeps going.”
Bonds:
Inflation-linked bonds provide investors with an “excellent risk-reward ratio” because they provide protection both against the risk that interest rates are too high and the risk that projected inflation is too low, Saxo said.
These bonds have “dual exposure to inflation and rates,” it added.
“If inflation rises, their [inflation-linked bonds’] notional and coupon will increase. However, if inflation reverts to its mean, linkers will gain from a drop in interest rates.”
Energy:
Crude oil prices moved lower in Europe, as the prospect of more rate hikes and uncertain demand pegged back key benchmarks.
BMI raised its 2023 average price forecast to $83 a barrel for Brent from $80 a barrel, after September’s rally, but noted that it expects prices to soften this quarter.
“Economic trends will inevitably impact on physical oil demand, but Brent is also highly sensitive to shifts in macro sentiment,” BMI said.
“Our current expectation is for the current economic downcycle to bottom out next year, before returning to growth heading into 2025.”
Metals:
Base metals and gold prices were falling in early London trading, with the prospect of further monetary tightening from central banks adding pressure to commodity markets.
Today’s Top Headlines
Ford, GM Lay Off About 500 Factory Workers as UAW Strike Effects Ripple Out
Ford Motor and General Motors have laid off an additional 500 workers combined, knock-on effects from the United Auto Workers’ ongoing strike.
Late Monday, Ford said it idled two factories that supply parts to a sport-utility-vehicle assembly plant in Chicago, where workers walked off the job on Friday. Work stopped at a stamping plant near the SUV factory and an engine plant in Lima, Ohio, resulting in the layoffs of about 330 employees, the company said.
China Evergrande Shares Jump as Trade Resumes – 2nd Update
China Evergrande Group’s shares rose sharply as trading in the beleaguered property developer resumed after being halted last week.
Trading was suspended following disclosure that the property developer’s chairman was being investigated by authorities. In an exchange filing late Monday requesting the lifting of the trading halt, Evergrande said it had no further information to disclose to investors. That may have lifted sentiment in the stock, analysts said.
Americans’ Growing Reluctance to Quit Their Jobs, in Five Charts
The surge in Americans quitting their jobs has fallen from record highs it hit during the pandemic. Why that is happening could say something about where the economy is headed.
Quitting is a sign a worker is unhappy with their job, but also a sign they are confident they can find another. Quits trending down can be worrisome. The quits rate fell in each of the past three recessions.
Japan Ready to Take Measures Against Sharp Yen Falls, Finance Minister Says
TOKYO-The Japanese government stands ready to take action if the yen weakens too sharply, Finance Minister Shunichi Suzuki said Tuesday.
“We are watching [the foreign exchange market] with a strong sense of urgency,” Suzuki said at a news conference on Tuesday. “We will take every possible measures” against excessive moves in the yen.
Matt Gaetz Launches Bid to Oust Kevin McCarthy as House Speaker
WASHINGTON-Rep. Matt Gaetz (R., Fla.) and House Speaker Kevin McCarthy (R., Calif.) have been on a collision course since the start of the year. Now, the two lawmakers will finally square off in the Capitol in a historic vote over the party’s direction and leadership.
Gaetz, 41 years old and a fourth-term member of the House, took to the House floor late Monday to formally move ahead with a vote to oust McCarthy as speaker, known as a motion to vacate. “Declaring the office of speaker of the House of Representatives to be vacant, resolved that the office of the speaker of the House of Representatives is hereby declared to be vacant,” Gaetz said in brief remarks laying out his motion.
Trump Goes to Court for Opening of Civil Fraud Trial
NEW YORK-An agitated Donald Trump stewed through the first day of trial in a Manhattan civil-fraud case that has the potential to cripple his business, as New York’s attorney general sought to build upon an initial ruling last week that the former president broke the law.
Monday’s proceedings formally kicked off what is likely to be a long legal season for Trump, who is looking to cement his big lead in the 2024 GOP presidential race while simultaneously fighting a series of cases that threaten his livelihood-and his freedom.
Crypto Could Be a Mystery to Jurors in Bankman-Fried Case
When jurors size up FTX founder Sam Bankman-Fried for the first time, they might not know much about the world of cryptocurrencies. The prosecution and defense each could try to use that to their advantage.
Jury selection gets under way Tuesday morning in the criminal case against Bankman-Fried, 31, who is on trial for a series of actions that allegedly led to the abrupt meltdown of the FTX crypto exchange last year.
Inside Ukraine’s Fight to Retake Bakhmut: ‘The Ground Was Covered in Bodies’
KOSTYANTYNIVKA, Ukraine-As the squad of Ukrainian soldiers crept along the tree line toward the Russian bunker, artillery fire sent their enemies scrambling for cover. This was the chance they had been waiting for.
A soldier nicknamed Sniper sprinted forward and tossed a grenade into the tunnels where the Russians were sheltering. It exploded, sending smoke billowing. The Russian soldiers rushed out and Ukrainian forces hit them with mortars. Soon after, Ukraine took the position and then the entire road.
Source: Dow Jones Newswires