The disconnect continues. With 10Y yields rising as high as 5.34% - a new 24 year high - before easing back US equities remain completely oblivious of the tightening in financial conditions and instead are obsessing with the memory bubble, and pushing higher on the first day of Q4 as strength in technology shares held up against volatility in bond markets and a renewed climb in oil.
As of 8:00am ET, S&P 500 futures were up 0.4%, erasing an earlier loss; Nasdaq 100 contracts rose 0.7% with memory and semis providing support following an upbeat forecast from chipmaker Micron.
Mag 7 and software firms were also stronger as the Nasdaq remains in a debt-funded world of its own. The AI theme is boosting Indu / Utils while the most other sectors are lagging as usual. In the near-term, with yields and the dollar higher, the market seems comfortable reverting to portions of the Q2 playbook which was dominated by Tech / Semis.
Meanwhile, Russell 2000 small caps struggles in the face of the highest bond yields in a generation; JPM points out that "more than 40% of the index are unprofitable companies though squeeze risk exists with a MidEast deal." Tempering sentiment were swings in global yields, with the yield on 10-year Treasuries briefly touching the highest since 2002 before pulling back; it was trading at 5.27% last.
JPMorgan's market intel suggests that bonds are oversold but may take some time to find a support level. USD continues its bull run, setting a new 52-wk high this morning before erasing gains. Commodities are mixed but higher with crude and Ags leading; Base over Precious with gold/silver flat.
The US economic data slate includes weekly jobless claims (8:30 a.m.), September final S&P Global US manufacturing PMI (9:45 a.
m.), September ISM manufacturing and August construction spending (10 a.m.
) ahead of the NFP tomorrow, which may have an upside surprise given the ADP print yesterday. In premarket trading Mag 7 stocks are mostly higher: Alphabet is up 1.8% after Google announced its much-awaited new frontier model called Gemini 4 Argon (Amazon +1%, Apple -0.
2%, Meta little changed, Microsoft +0.8%, Nvidia (NVDA) +0.6%, Tesla (TSLA) +0.
3%Accenture (ACN) gains 17% after the IT services company reported fourth-quarter results that beat expectations on key metrics, including revenue and bookings.Constellation Energy (CEG) rises 3% after the operator of gas power plants said it signed a 20-year power purchase agreement with Amazon, which covers 690 megawatts of nuclear capacity at Maryland’s Calvert Cliffs Clean Energy Center, including a 190-megawatt uprate.Liquidia (LQDA) falls 5% — set to extend decline for a second day — after BTIG downgraded the drugmaker to neutral from buy, citing a court ruling that found Liquidia infringed two claims of rival, United Therapeutics’ patent.
Nu Holdings (NU) gains 5% after the company said it’s not pursuing a deal with Monzo Bank Ltd.Oracle (ORCL) is up 1.9% after the Financial Times reports that Tencent agreed to a five-year lease across the US cloud technology firm’s data centers in Southeast Asia.
Rocket Lab (RKLB) gains 4% after Citi initiated coverage on the space company with a buy rating, calling it a “core holding for space bulls.”.Vicor (VICR) rises 12% after the maker of power-conversion technology raised its third quarter sequential revenue growth guidance citing increased royalties from the previously announced first non-exclusive license to Vertical Power Delivery.
In other corporate news, Netflix co-CEO Ted Sarandos said the US streaming giant isn’t growing as quickly as he would like. Amazon.com has agreed to purchase 690 MW of power from Constellation Energy, in a deal that will help the biggest US nuclear operator boost capacity at the only reactors in Maryland.
Nubank said it’s not pursuing a deal with Monzo Bank after reports that the Brazilian company was eyeing a transaction with the UK fintech firm.The global bond selloff is rippling through to equities - well at least non-chip/Mag7/semiconductor equities - while the spread on the riskiest US corporate bonds has jumped above 1,000 basis points over Treasuries for the first time since the regional banking crisis in 2023. "Momentum has collapsed outside the tech sector, as the pain threshold for valuations has been crossed,” says Bank J Safra Sarasin’s Wolf von Rotberg.
“Even financials have started to underperform” because of widening HY spreads and pressure on borrowers. For BNP Paribas CIB’s Florian Roger, yields at 5.5% is when “the pressure really starts kicking in” for equities.
“We’re nearly there and that’s when valuations can start looking excessive.”Tech, meanwhile, is ignoring the soaring interest rates, and instead focusing on Micron’s debt-fueled results which reinforced confidence that the memory maker and its peers continue to be inundated with orders as hundreds of billions of dollars pour into the global buildout of AI infrastructure. The sector has been the main driver of global stocks through a period marked by geopolitical upheaval and interest-rate hikes, with Micron alone rallying more than 270% this year.
On AI, anecdotes remain bullish, from Micron’s print to South Korea export data, which showed September chip exports rose 263% year-on-year, accelerating from the month before. Elsewhere in tech, Alphabet Inc. rose 1.
8% in early trading after beginning to roll out its latest flagship AI model, Gemini 4 Argon, its long-awaited flagship AI model, but the company is grappling with internal skepticism over how well it performs in key areas. And tech CEOs privately questioned Anthropic’s Dario Amodei for sounding the alarm bell on AI safety, the WSJ reported. In another sign of the scale of the AI buildout, Tencent Holdings Ltd.
signed an estimated $7 billion lease deal with cloud provider Oracle Corp., the Financial Times reported.Still, the memory stock rally may be losing steam, as evidenced by the equity volatility gauge in Korea (Samsung and Hynix account for 53% of Kospi) as traders shift from speculative options for upside to selling volatility.
But the underlying supply and demand imbalance remains constructive for pricing and profit: Micron capex is still going higher and customers are extending commitments beyond 2030.“Take a look at the Nikkei or Nasdaq futures, there’s clearly little gloom and doom,” said David Kruk, head of trading at La Financiere de l’Echiquier in Paris. “The next driver is the third-quarter earnings season which should be strong, just as the last one.
”Swings in oil continue to ripple through markets at a time when a resilient US economy and elevated inflation have investors seeing scope for as many as four Federal Reserve interest-rate hikes over the next 12 months. That outlook has added to strains in bond markets, with US volatility surging to a six-month high.With a day to go before the US payrolls report, fresh data showed US companies announced the fewest job cuts for any September since 2022.
Minneapolis Fed President Neel Kashkari told Bloomberg TV the economy’s resilience continued to surprise him.“We’ve identified 5.5% on US 10-year bonds as the level at which pressure really starts kicking in on equity markets,” said Florian Roger at BNP Paribas CIB.
“We’re nearly there and that’s when valuations can start looking excessive.”With macro front and center, there are no less than ten Fed speakers on the agenda today, including Waller, who will speak about Federal Reserve economic data, and Jefferson on the US economy and monetary policy. Trump said former Fed Chair Powell should be forced to resign from the central bank’s board.
Meanwhile, Europe’s Stoxx 600 fell, with the Stoxx 600 heading for its worst day in almost two weeks and back to the lowest level since June, with the UK’s FTSE 100 down 1%. French short-end bonds underperformed as the government unveiled plans to narrow the budget deficit sharply, kicking off a debate that risks toppling the prime minister. “There’s no one t