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North American Morning Briefing: Yield Surge Continues to Knock Stocks

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September 26 2023 02:32AM

Market Wraps

Watch For:

S&P CoreLogic Case-Shiller Home Px Index, New Home Sales, Conference Board – Consumer Confidence, speech by Michelle Bowman

Today’s Headlines/Must Reads

– Google Trial Spills Details on Search Engine’s Deals With Apple, Samsung

– Commercial Real Estate’s Next Big Headache: Spiraling Insurance Costs

– The Big Pharma Trade: Ozempic Is In, Covid-19 Is Out

– Biden and Trump Square Off Back-to-Back in Michigan, Marking Start of 2024 Fight

Opening Call:

Stock futures fell on Tuesday as Treasury yields hit fresh cycle highs and China’s property distress rattled global sentiment.

The 10-year Treasury yield rose a couple of basis points to near 4.57% early Tuesday, the most since 2007, as the market continued to price in hawkish interest rate projections from the Federal Reserve.

Many Fed officials in recent days have reiterated they believe the central bank will need to increase rates again and keep them at elevated levels for some time.

“[R]isky assets, particularly long-duration stocks, have struggled to absorb these rate increases…the correlation between equity prices and bond yields has turned negative again, reflecting the ‘good news is bad news’ sentiment in the U.S.,” SPI Asset Management said.

Also, not helping the mood was nervousness across Asian bourses amid increased worries about China’s property sector.

Shares in China Evergrande plunged afresh after the heavily indebted developer missed a debt payment and former executives were detained by the authorities.

Hong Kong’s Hang Seng index fell 1.4% to its lowest since November, while most other overseas markets were deep in the red.

Premarket Movers

Ford said it was pausing a $3.5 billion electric-vehicle battery plant. “We haven’t made any final decision about the planned investment there,” said a company spokesman in the statement. Ford shares fell 0.2%.

Thor Industries said it expected fiscal 2024 earnings of $6,.25 to $7.25 a share on sales of $10.5 billion to $11 billion. Analysts had been forecasting earnings of $7.12 a share on sales of about $10.9 billion. The stock was down 2.2%.


Rising Treasury yields have lifted the dollar to a 10-month high against a basket of currencies and a six-month high against the euro.

ING said yields are rising due to expectations that U.S. interest rates will eventually settle higher once the Federal Reserve finishes cutting rates, and due to jitters before U.S. bond auctions amid concerns about a potential government shutdown.

The DXY dollar index can probably continue to rise, ING said, adding that “technical analysts will be dusting off calls for a move to the 107.20 area.”

LBBW said offsetting economic factors could keep EUR/USD in a relatively tight range until the end of the year, before it recovers to around $1.12 by the end of 2024.

Diverging U.S. and eurozone economies should favor the dollar versus the euro, especially as the Federal Reserve is likely to keep interest rates higher for longer than previously thought, but this is countered by the European Central Bank’s latest rate increase, LBBW added.

It expect the U.S. economy to lose momentum during 2024, with inflation likely to approach 2%, leaving room for the Fed to cut interest-rates next year and weighing on the dollar, LBBW said.


Oil was down around 1.3%, with Brent on course for its sixth consecutive loss, as a strong dollar and concerns about the global economy weighed on prices.

The dollar has climbed to its highest level since November 2022 in recent days and is dragging on dollar-denominated crude prices. Meanwhile, investors are fretting about the implications of the Fed’s higher-for-longer message on interest rates, which could crimp economic growth and with it oil demand.

“Crude trades lower for a second day with macroeconomic concerns, a stronger dollar and a stretched speculative long and easing refinery margin weighing on prices,” Saxo said.


Base metals were lower as weak demand in China and an uncertain macroeconomic environment continued to pressure industrial goods. Gold was also lower.

Data from Worldsteel showed that crude steel output fell to 152.6 million tons in August from 158.5 million tons in July – the lowest level since February, ING said. It also said gold remained under pressure from the Fed’s “higher for longer” stance on interest rates.

“U.S. 10Y treasury yields have increased to a fresh five-year high and broken above 4.5%, which continues to weigh on gold prices.”

Today’s Top Headlines

Intel’s Big Chip-Making Push in Germany Hits Bottleneck

MAGDEBURG, Germany-Intel says it needs 3,000 people to staff the semiconductor factory it plans to build in eastern Germany by the end of the decade. This year, the local apprentice program for chip-making technicians is training two.

The German government trumpeted Intel’s planned development as a game changer, backed by federal subsidies totaling 10 billion euros-equivalent to $10.59 billion-that would help the economy pivot toward new industry. The outlay is part of a European Union effort unveiled this summer to double the Continent’s share of global chip production to compete with established producers in Asia.

Ford Pauses Construction on Politically Divisive Battery Plant

Ford Motor is pausing construction of a $3.5 billion battery plant in Marshall, Mich., where it had planned to produce lower-cost cells using technology from a Chinese battery maker.

The U.S. automaker said Monday it was halting work and limiting spending on the factory until it is confident in its ability to operate it competitively. The stoppage is effective immediately, and the company hasn’t made any final decisions about its planned investment.

Hollywood Writers’ Tentative Labor Deal Shifts Focus to Actors

The tentative labor agreement between Hollywood studios, streamers and writers opens the door for actors to negotiate their own accord, and is raising hopes in the industry that film and TV production will resume before long.

After a nearly five-month strike, the writers came away with several hard-fought victories in the three-year deal, including increased royalties, mandatory staffing for television “writing rooms” and protections regarding the use of artificial intelligence, people familiar with the pact said.

Jeff Bezos Picks New CEO for Space Company as SpaceX Dominates Industry

Blue Origin, the space company backed by Jeff Bezos, hired a new chief executive as it pushes to start flying to orbit and catch up with SpaceX.

Dave Limp, a longtime executive at, will join Blue Origin as CEO in early December, according to an email Bezos sent to staff Monday. He will take over for the company’s current top leader, Bob Smith, who will leave in early January.

Americans Finally Start to Feel the Sting From the Fed’s Rate Hikes

Rising interest rates are hitting Americans’ finances.

Consumers in the market for loans to buy homes and cars are discovering that, because of the Federal Reserve’s rate increases, their money gets them a lot less than it would have a few years ago. Meanwhile, those with credit cards and other loans that carry rates pegged to broader benchmarks are finding they have gotten much more expensive.

The corporate bond markets of the U.S. and Europe are telling wildly different stories

Usually, the corporate bond markets of the U.S. and Europe move in tandem.

That’s logical. The U.S. is a major market for most European companies, and the reverse is true to an extent as well. While the U.S. economy has been consistently stronger than its eurozone counterparts, bond investors are less concerned about the magnitude of economic growth than whether economies are strong enough for their companies to meet debt obligations at all.

Why a surging U.S. dollar is about to become a problem for stock-market bulls

Analysts are ringing alarm bells over a surge by the U.S. dollar, warning it may be set to serve as another “headwind” for U.S. stocks as they struggle through a losing September.

“Since early August, the USD (U.S. dollar) has climbed above its average [second-quarter] level. That means that for corporates, the USD switched back from tailwind to headwind…and an increasing one” as investors close out the third quarter this week, said Andrew Greenebaum of Jefferies, in a Saturday note.

Source: Dow Jones Newswires