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Briefing.com Summary:
*The 10-yr note yield reached 5.35%, eclipsing the intraday high it saw on Monday.
*SpaceX is looking to secure $40 billion in new financing to buy NVIDIA's AI chips.
*Oil prices are higher on continued geopolitical unrest.
The S&P 500 and Nasdaq Composite hit record highs yesterday, so they can be forgiven if they need to take a breather this morning. That is what is happening, with rising Treasury yields in particular forcing them to catch their breath.
The 10-yr note yield reached 5.35% this morning, up eight basis points from yesterday's settlement and eclipsing Monday's intraday high yield of 5.34%. Why the reversal after yesterday's retreat? Well, "everybody's doing it."
Sovereign bond yields are all noticeably higher today, paced by a 13-basis-point jump in France's 10-yr OAT to 4.91%. That move is rooted in renewed angst about its perilous deficit, which compelled IMF Managing Director Georgieva to remind France to "get your house in order."
To be fair, the U.S. has its own deficit problem, so it isn't necessarily getting a free pass on the matter. The 10-yr note yield is also paying heed to rising oil prices (WTI +0.7% to $90.10/bbl) and some supply issues that are percolating with today's $39 billion 10-yr note auction and an FT report that SpaceX (SPCX) is looking to raise $40 billion, with $30 billion from the investment-grade debt market, to buy NVIDIA's (NVDA) AI chips.
NVIDIA itself has been in a nice run, up nearly 15% from its September 14 low and reaching a record high of its own. That move has been instrumental in pushing the market cap-weighted S&P 500 and Nasdaq into record territory, but NVIDIA, down 0.9%, is also taking a breather.
All the exhaling has hit the equity futures market. Currently, the S&P 500 futures are down 33 points and are trading 0.4% below fair value, the Nasdaq 100 futures are down 230 points and are trading 0.8% below fair value, and the Dow Jones Industrial Average futures are down 419 points and are trading 0.9% below fair value.
Mortgage rates have been pushing higher alongside the 10-yr Treasury yield, crimping purchase demand and refinancing interest. That much was evident in the Mortgage Bankers Applications Index, which was down 4.2% week-over-week, with purchase applications down 2% and refinance applications down 8%.
The struggle for the housing sector is real. Over the same time NVIDIA has risen nearly 15%, the iShares U.S. Home Construction ETF (ITB) has dropped 3.9%. The ITB is down 9.7% year-to-date versus a 23.7% year-to-date gain for the Nasdaq 100.
We digress.
The point is that higher interest rates have their share of deleterious effects on stocks, and the higher they rise, the higher the risk there is that the stock market will fall.
