Wall Street finishes higher despite spiking bond yields

Wall Street bounced off a session low and finished higher despite surging Treasury yields as markets tried to rebound from a three-week losing streak. Amazon’s shares rose on an announcement that the e-commerce giant will invest US$4 billion in an AI startup Anthropic, lifting broad technology stocks. The Fed signalled one more rate hike before the year-end last week and sent the US 10-year bond yield to hit a fresh high since 2007, flagging tightening liquidity conditions. The bounce, however, may not be sustained as key indicators continue to flash recession risks, with the 2-year and 10-year bond yields staying inverted since July 2022. The fear gauge, the VIX, remained at a one-month high of close to 17.

The US dollar strengthened further on the rising bond yields, worsening the deprecation in the Yen, with USD/JPY jumping to an 11-month high of just under 149. Most other G-10 currencies weakened against the king dollar, except for the New Zealand dollar, showing resilient moves since the country reported a bounce of its GDP growth in the second quarter ahead of the election next month.

Elsewhere, the Chinese property woes are far from over, as the notorious developer Evergrande defaulted on its 4 billion yuan onshore bond repayment and delayed the restructuring meetings. This fuels market fears ahead of China’s manufacturing and service PMIs later this week. Futures point to a mixed open across Asia. The Nikkei 225 futures were up 0.14%, the ASX 200 futures slid 0.02%, and the Hang Seng Index futures were down 0.02%. 

Price movers:

8 out of 11 sectors in the S&P 500 finished higher, with Energy leading gains, up 1.28%. The growth sectors, including Consumer Discretionary, Technology, and Communication Services, all closed in the green. Defensive sectors, such as Consumer Staples and Utilities, slid due to faded risk-off sentiment.    Amazon’s shares rose 1.6% on the news that the tech giant will invest US$4 billion in the AI startup Anthropic. Anthropic’s founder is a former OpenAI research executive, and it has debuted a ChatGPT-like bot called Claude 2. The collaboration positions Amazon as a major rival to Microsoft and Alphabet. Nio’s US ADRs fell to a more than three-month low as the Chinese EV maker plans to raise approximately US$3 billion, approaching investors from the Middle East. Nio has been at a loss since it was founded in 2014, and its shares plunged about 86% from the peak in January 2021. USD/JPY rose to above 148.80, the highest seen in October 2022 after the BOJ’s governor Kazuo Ueda and Deputy Governor Shinichi Uchida said they would keep the ultra-loss policy due to economic uncertainties. The bank kept the negative interest rate unchanged at -0.1% and the 10-year JGB yield at close to 0% last week.

ASX and NZX announcements/news:

No major announcement.

Today’s agenda:

BOJ Core CPI for August US CB Consumer Confidence for September

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