Following a short increase above 5% in the benchmark 10-year Treasury yield, stocks on Monday were divided as investors came to terms with the possibility that interest rates might remain higher for an extended period of time.
S&P 500 (^GSPC) declined almost 0.2%, while the Dow Jones Industrial Average (^DJI) plummeted 0.6%, or over 200 points. Amid this, there was a 0.3% increase in the Nasdaq Composite (^IXIC).
While investors wait for Big Tech firms to kick off earnings season this week, the market is being affected by the continued sell-off in bonds and concerns over a worsening of tensions in the Middle East. The “new normal” of high borrowing costs has set in, and stocks have faltered since Fed Chair Jerome Powell reaffirmed the central bank’s commitment to the approach.
In light of this, investors are waiting for important statistics that will reveal the health of the US economy. Later this week, the Fed’s favoured inflation gauge and third-quarter GDP readings are anticipated.
Premarket trading saw a 3% decline in Chevron (CVX) shares after the energy giant announced plans to acquire smaller rival Hess (HES) for $53 billion in stock, which is perceived as an attempt to expand operations in Guyana. In other business headlines, Roche has decided to buy Telavant for $7.1 billion. Pfizer (PFE) and Roivant Sciences (ROIV), whose shares increased by about 12%, are the owners of the intestinal pharmaceutical.
Monday’s trading day saw a mixed bag of stocks as the Nasdaq moved higher and the yields moved lower.
S&P 500 (^GSPC) declined almost 0.2%, while the Dow Jones Industrial Average (^DJI) plummeted 0.6%, or over 200 points. In the meantime, the Nasdaq Composite (^IXIC) increased by almost 0.3%. On Monday, the 10-year yield (^TNX) dropped to 4.84% from its opening day’s high of 5%. The yield on 30-year (^TYX) Treasury notes decreased as well, currently hovering around 5%.
Monday afternoon saw a more than 7% increase in Arm (ARM) shares following a Reuters article that disclosed a new alliance between the chipmaker and market leader in AI, Nvidia (NVDA).
According to Reuters, Nvida has been developing central processing units (CPUs) using Arm technology to run Microsoft’s Windows operating system. Reuters claims that a push into PC processors would harm competitors like Intel (INTC). On the announcement, Intel’s shares dropped more than 3%.
Apple’s “Killers of the Flower Moon” (AAPL) marks a change in the tech giant’s movie strategy as it now depends more on theatrically exclusive films to get viewers to sign up for its main streaming service, Apple TV+.
The corporation, which has promised to invest $1 billion in making motion pictures for theatres, has capitalised on the post-pandemic rebound in box office receipts despite an unsettling period in the business due to the ongoing strike by the actors’ union, SAG-AFTRA.
According to Box Office Pro chief analyst Shawn Robbins, “this certainly signals a transition period for [Apple] in terms of how they’re going to approach content, especially with big prestigious productions and A-plus list talent like Leonardo DiCaprio and Marin Scorsese,” Yo, Finance was informed.
The movie, which was released by Paramount (PARA), made $44 million in its first weekend of release worldwide. This was a meagre start given its expected $200 million+ price target, but it was nonetheless an impressive achievement given the film’s lengthy runtime and the strike.
Apple’s $1 billion theatrical wager equals competitor Amazon’s (AMZN), which had similar plans to invest in box office blockbusters last year. The wager includes forthcoming films including Ridley Scott’s “Napoleon” and Matthew Vaughn’s “Argylle.”
With the release of “Creed III” earlier this spring, Amazon achieved significant success following the $8.5 billion closing of its acquisition of MGM in March 2022.
“Both businesses understand that theatrical representation is a major source of support for their bottom lines and that, in the long run, this will benefit their streaming collections. Therefore, being able to accept all viewpoints is beneficial,” Robbins stated.
The week began with stocks declining due to rising rates, but over the day, attitude has changed, resulting in stocks climbing and yields falling.
The Nasdaq Composite (^IXIC) has increased by about 1%, the S&P 500 (^GSPC) has gained 0.4%, and the Dow Jones Industrial Average (^DJI) is hardly in the green.
On Monday, the United Auto Workers decided to prolong its walkout against the Big Three Detroit manufacturers. About 6,800 employees at the Stellantis Sterling Heights Assembly Plant in the Detroit suburbs went on strike at the union’s instigation.
“Despite having the highest revenue, the highest profits (North American and global), the highest profit margins, and the most cash in reserve, Stellantis lags behind both Ford and General Motors in addressing the demands of their UAW workforce,” the UAW stated in a release on Monday. “Currently, Stellantis has the worst proposal on the table regarding wage progression, temporary worker pay and conversion to full-time, cost-of-living adjustments (COLA), and more.”
As of Monday morning, equities are being negatively impacted by an increase in bond rates.
The ‘pain trade’ in bonds has been monitored intently over the last month since rising rates have often resulted in selling in the equity market. Nonetheless, Keith Lerner, co-chief investment officer of Truist, thinks there could be hope for investors.
In a fresh report on Monday, Lerner stated, “Interest rates probably need to stabilise for equities to have a sustainable rally.” “And although it has been, to put it mildly, a fool’s errand to identify a top in yields, our best assessment is that purchasers for the 10-year U.S.