Title: Bond Market Slide Deepens as Investors Await Jobs Report and Tech Earnings
Date: [Current Date]
The world’s largest bond market plunged further, while stocks remained sluggish ahead of the highly anticipated jobs report, which is expected to offer insights into the Federal Reserve’s future actions.
Traders eagerly awaited the earnings results from tech behemoths Apple Inc. and Amazon.com Inc., two of the key drivers behind this year’s equity rally. However, concerns over an expanding budget deficit and unexpected economic strength weighed on longer-dated Treasuries, leading to their worst week in 2023.
Thursday’s reports highlighted robust demand for workers and an increase in labor productivity, which mitigated the rising labor costs. These figures build anticipation for the forthcoming government employment data, which forecasts the addition of 200,000 jobs in July. Though this would represent the weakest print since 2020’s end, it signifies a significant historical advancement.
Ed Yardeni, the founder of a namesake research firm, expressed optimism about the likelihood of an imminent recession, stating, “The good news is that almost everyone agrees that an imminent recession isn’t very likely.” However, he cautioned that a continuous rise in bond yields could increase the downside potential for the stock market’s valuation multiple.
The S&P 500 steadied near the 4,500 level after rebounding from session lows, with megacap companies displaying better performance. Meanwhile, the yield on 30-year Treasuries experienced a three-day surge of approximately 30 basis points. The fluctuating dollar and the VIX, Wall Street’s favorite volatility gauge, approached its highest level since May.
The steepening of the yield curve continued in the wake of the Bank of Japan’s recent policy shift. Currently, the two-year yields are 71 basis points higher than those on the 10-year note, compared to a gap of 102 basis points two weeks ago.
Interest-rate options traders are paying a premium for protection against further increases in long-maturity Treasury yields, as indicated by the substantial divergence between bearish put options and bullish call options on CME Group Inc.’s US Treasury Bond Futures contract.
The surge in real yields on inflation-protected Treasuries reflects mounting concerns about the deteriorating US fiscal landscape, prompting investors to demand higher risk premiums for holding Treasury bonds.
Renewed traction in oil prices ensued after Saudi Arabia prolonged its unilateral production cut, hinting at the possibility of further reductions.
Corporate Highlights:
1. Apollo Global Management Inc. achieved an all-time high following a record profit thanks to robust inflows at its Athene annuities business.
2. Tesla Inc. reported a slump in China deliveries for July, marking the lowest level this year and raising concerns despite price cuts and incentives.
3. Qualcomm Inc., the leading producer of smartphone processors, offered a tepid sales forecast for the current quarter, indicating weak demand for mobile devices.
4. Moderna Inc. raised its Covid-19 vaccine sales outlook for the year as contracts with Japan and several American health-care companies were finalized, with the US government gradually reducing its financial support for the shots.
5. DoorDash Inc. witnessed a record number of delivery orders in the second quarter, underscoring consumers’ commitment to takeout despite rising prices.
6. PayPal Holdings Inc. reported a shrinking measure of profits in the second quarter due to the need for increased provisions to cover soured loans issued to merchants.
In the broader market, the S&P 500, Nasdaq 100, and the Dow Jones Industrial Average showed little change, while the MSCI World Index fell marginally.
Key Market Moves:
Stocks:
– S&P 500: little changed
– Nasdaq 100: rose 0.1%
– Dow Jones Industrial Average: little changed
– MSCI World Index: fell 0.2%
Currencies:
– Bloomberg Dollar Spot Index: little changed
– Euro: rose 0.1% to $1.0954
– British Pound: little changed at $1.2713
– Japanese Yen: rose 0.6% to 142.52 per dollar
Cryptocurrencies:
– Bitcoin: rose 0.5% to $29,250.85
– Ether: rose 0.1% to $1,843.43
Bonds:
– 10-year Treasuries yield: advanced 10 basis points to 4.18%
– Germany’s 10-year yield: advanced seven basis points to 2.60%
– Britain’s 10-year yield: advanced seven basis points to 4.47%
Commodities:
– West Texas Intermediate Crude: rose 2.5% to $81.49 a barrel
– Gold futures: fell 0.2% to $1,970.60 an ounce
In conclusion, the deepening slide in the bond market, coupled with the awaiting jobs report and tech earnings, has created an atmosphere of uncertainty in global markets. Investors are closely tracking economic indicators and corporate performances to calibrate their strategies amid a shifting landscape.
Source: Bloomberg Businessweek