MARKET WRAPS
Watch For:
ADP National Employment Report for September; ISM Report on Business Services PMI for September; EIA Weekly Petroleum Report
Today's Top Headlines/Must Reads:
- As the Fed's Inflation Fight Drags On, Government Interest Payments Climb
- Bond Selloff Threatens Hopes for Economy's Soft Landing
- Why 8% Mortgage Rates Aren't Crazy
- How China's BYD Became Tesla's Biggest Threat
Follow WSJ market coverage here
Opening Call:
Stock futures rallied off session lows on Wednesday after Treasurys recovered from a sharp sell-off that took yields to fresh 16-year highs.
A spike in Treasury yields around the European open - which some analysts partly attributed to anxiety about political dysfunction in Washington - rattled markets, pushing stock-index futures to fresh four-month lows.
However, a subsequent surge of bond buying - as investors snapped up a 30-year yield of more than 5% - helped lift S&P 500 futures to minor losses on the session.
"We're at risk of repeating ourselves on a daily basis now, but the last 24 hours saw the relentless bond sell-off continue, with yields rising to fresh multi-year highs on both sides of the Atlantic," Deutsche Bank said.
"I struggle to see how the recent yield moves don't increase the risk of an accident somewhere in the financial system given the relatively abrupt end over recent quarters of a near decade and a half where the authorities did everything they could to control yields," it added.
Overseas stocks mostly declined with Japan's Nikkei 225 tumbling 2.3%, in its worst session since early August, Hong Kong's Hang Seng fell 0.8%, while indexes in Europe traded mixed.
Premarket Movers
A10 Networks expects third-quarter revenue to fall and miss analysts' estimates, based on preliminary results. The cloud security software company said delays from customers caused deals to be pushed into future reporting periods. Shares fell 14%.
Apple was downgraded to Sector Weight from Overweight at KeyBanc. The stock was down 1.4%.
Cal-Maine Foods reported fiscal first-quarter earnings that missed analysts' expectations and said sales slumped about 30% as average egg prices tumbled to $1.59 per dozen from $2.28 a year earlier. Shares were down 12%.
Intel was up 2% after it said it plans to spin off its programmable solutions group in a public offering over the next two to three years.
Tuesday's Post-Close Movers
Brooge Energy said it had received a buyout offer from Gulf Navigation, a Dubai-based maritime and shipping company. The company said it hasn't responded to the offer and didn't disclose the terms of the bid, but GulfNav said it was optimistic the transaction could close by the fourth quarter, according to Brooge. Shares rise 26%.
Cal-Maine Foods reported fiscal first-quarter profit well below analysts estimates and saw revenue slide by around 30%. The quarter's results were weighed down by lower egg prices, as the company saw the average selling price for conventional eggs drop by about half. Shares fell 12%.
Forex:
The dollar's strong gains should continue due to higher bond yields and the "relentless run of strong data," including Tuesday's bumper Jolts jobs data, ING said.
Strong data mean money markets continue to reduce expectations for how far the Fed will cut interest rates and they now price a low point above 4.50% in two to three years' time, up from 3.68% at the start of September, ING added.
"There seems little reason to sell the dollar at present--perhaps only a shock drop in ISM services could weigh on the dollar today." The DXY dollar index could rise to 108, from 107.204 currently, it said.
Read Euro Set to Weaken Near Term as Economy Favors Dollar, Julius Baer Says
Energy:
Oil prices fell in Europe, ahead of a key OPEC meeting later, with Standard Chartered saying it is unlikely producers at the meeting will be less cautious around production due to uncertainties around the global economy and central-bank policy.
"In particular, we think it is too early for the market to start to factor in any reduction in Saudi Arabia's voluntary output cuts," the bank said.
The recent slide from $97 a barrel for Brent should demonstrate that the current price situation remains fragile, Standard Chartered added.
Metals:
Base metals and gold prices remained under pressure, with the prospect of further monetary tightening from the Fed boosting safe-haven assets.
"Subdued manufacturing activity in China and in the U.S. added to the bearish market sentiment," ANZ said.
ANZ also highlighted that LME copper inventories rose to 168,000 tons-the highest level since June 2022.
Read Lithium Tipped to Fall Further Now, Rally Harder Later
Read Mining Stocks to Take Cues From China Stimulus, U.S. Economy
TODAY'S TOP HEADLINES
SoftBank's Son Says Artificial General Intelligence Will Soon Surpass Humans
TOKYO-SoftBank's chief executive officer, Masayoshi Son, said artificial general intelligence is so powerful that within a decade it will surpass all human knowledge.
"Take advantage of it or be left behind," Son said to a crowd gathered for the technology investment company's annual SoftBank World event.
Intel to Split Off Specialized Chip Business as CEO Pursues Turnaround
Intel intends to sell a stake in a division that makes programmable chips widely used in the defense and telecommunications industries as Chief Executive Pat Gelsinger pushes forward with the company's far-reaching and expensive turnaround bid.
The semiconductor giant said the unit, which makes chips that can be reprogrammed after they are manufactured, would begin to operate as an independent entity on Jan. 1, with a plan to sell shares in an IPO within two to three years.
How Dodgy Spare Parts Got Into Jet Engines, Leaving Airlines Scrambling
The biggest U.S. airlines are searching for thousands of jet-engine parts with fake safety certificates that were installed on their planes, an unusual incident that highlights the complexity and risks in the aerospace global supply chain.
The spare parts, from simple nuts and bolts to more critical engine fan blades, went into dozens of jet engines made by a General Electric joint venture during maintenance work. The engines were then installed back onto popular Boeing and Airbus airplanes, according to GE and safety officials.
Banks are bracing for a recession as Treasury yields surge
Bank stocks might be on pace for yearly losses as sharply higher interest rates take a toll, but the industry's reserves are at the highest level in three decades, according to DBRS Morningstar.
Bank shares have come under more selling pressure since the Federal Reserve in September signaled it could keep rates higher for longer than earlier anticipated. The tough talk has dampened the year's rally in stocks and reignited a dramatic selloff in the roughly $25 trillion Treasury market.
Kevin McCarthy Ousted as House Speaker in Historic Vote
WASHINGTON-The House removed Kevin McCarthy as speaker, after a small band of GOP dissidents moved to oust the Republican leader and Democrats didn't come to his rescue during a dramatic vote with no precedent in U.S. history.
The California Republican was dethroned after nine months of fighting with hard-line party conservatives and just days after he engineered legislation to avert a government shutdown with the help of Democrats, which drew sharp criticism from the GOP dissidents led by Rep. Matt Gaetz (R., Fla.).
Some Americans Jailed in Russia Fear Being Left Behind
When Marc Fogel, a teacher at the Anglo-American School of Moscow, was sentenced to 14 years in prison after being convicted of marijuana smuggling last year, he joined a growing number of Americans held in Russia.
Fogel had transported roughly 17 grams of marijuana on a flight into Russia. He said he intended to use the drug for medical purposes to treat chronic pain. Fogel's Russian lawyer, Dmitry Ovsyannikov, said in an interview with The Wall Street Journal that the sentence was significantly longer than those given for similar offenses, which Ovsyannikov said suggested a political motive. U.S. Embassy staffers have for decades sent their children to the school where Fogel taught.
U.S. Funding Cutoff Threatens Ukraine's Economic Stability
WASHINGTON-The U.S. funding system for Ukrainian salaries and Kyiv government expenditures is expected to run out in the next month absent a fresh infusion of money from Congress, Ukrainian and American government officials said.
As a government shutdown loomed, Secretary of State Antony Blinken warned Senate Minority Leader Mitch McConnell on Sept. 24 that Ukraine would face a severe economic and political shock in the middle of the counteroffensive this fall if Congress cut off assistance to Kyiv.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Tilray Brands 1Q
Trilogy Metals 3Q
Economic Calendar (ET):
Nothing major scheduled
Stocks to Watch:
NovaGold Resources 3Q Loss 3c/Shr; Treasury Remains Strong With $130M in Cash and Term Deposits as of Aug. 31
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Tecpetrol Investments Extends Expiry Time of Board-Backed Offer to Acquire Alpha Lithium for C$1.48 Cash/Shr to Oct 20, 5pm Vancouver Time; Extending Tender Offer After Receiving Significant Shareholder Support
Expected Major Events for Wednesday
00:30/JPN: Sep Japan Services PMI
06:00/RUS: Sep Russian Services PMI
07:45/ITA: Sep Italy Services PMI
07:50/FRA: Sep France Services PMI
07:55/GER: Sep Germany Services PMI
08:00/ITA: 2Q General Govt Quarterly Accounts
08:30/UK: Sep UK Official Reserves
08:30/UK: Sep S&P Global / CIPS UK Services PMI
08:30/UK: Sep Narrow money (Notes & Coin) and reserve balances
09:00/ITA: 2Q GDP revised
11:00/US: 09/29 MBA Weekly Mortgage Applications Survey
12:15/US: Sep ADP National Employment Report
13:45/US: Sep US Services PMI
14:00/US: Aug Manufacturers' Shipments, Inventories & Orders (M3)
(MORE TO FOLLOW) Dow Jones Newswires
10-04-23 0637ET
