Bond market selloff; Costco earnings - what’s moving markets

Investing.com - Futures linked to the main U.S. stock indices tick up, although investors are keeping a wary eye on a deep bond-market selloff this week. The U.S. 10-year Treasury yield touches its highest level since 2007, fueled by a combination of elevated oil prices, U.S. economic strength, and bets on the Federal Reserve’s interest rate trajectory. Elsewhere, Costco posts fiscal fourth-quarter results that top expectations.

1. Futures edge up

U.S. stock futures pointed higher on Friday, but a surge in Treasury yields kept pressure on risk assets heading into the final trading session of the week.

By 03:12 ET (07:12 GMT), the Dow futures contract had risen by 63 points, or 0.1%, S&P 500 futures had advanced by 11 points, or 0.1%, and Nasdaq 100 futures had ticked up by 126 points, or 0.4%.

The main averages on Wall Street notched a mixed close on Thursday, with the blue-chip Dow Jones Industrial Average and benchmark S&P 500 both dipping, while the tech-heavy Nasdaq Composite eked out a marginal 0.01% gain.

"One important theme at the moment is that Treasuries continue to sell-off with oil but that breakevens aren’t moving, with pretty much all the move being driven by real yields," analysts at Deutsche Bank said in a note.

2. Bond selloff continues

The selloff in global debt has weighed on equity-market sentiment since Wednesday.

Driven by the twin forces of elevated oil prices and signs of U.S. economic resilience, bets have increased that the Federal Reserve will have more room to raise interest rates later this year. Last week, the Fed lifted rates by a quarter of a percentage point, citing a need to quell energy-fueled inflation.

These wagers on the Fed’s rate path powered a jump in the benchmark 10-year U.S. Treasury yield to a post-2007 peak of 5.2% by the close of trading on Thursday, and pushed the longer-dated 30-year yield up to its highest level since 2004. The 10-year yield, in particular, logged its biggest two-day climb since President Donald Trump rolled out his sweeping "Liberation Day" tariffs last year.

A pattern has recently emerged in which a rise in oil prices pushes bond yields higher and stocks down, although some observers have questioned the economic logic of oil dictating long-term interest rates.

3. Oil dips after Iran reportedly offers U.S. new ceasefire proposal to reopen Hormuz

Oil prices fell on Friday as reports that the U.S. and Iran were exploring a phased deal to reopen the Strait of Hormuz tempered some supply concerns, although a Houthi missile attack on Saudi Arabia kept geopolitical risks elevated.

Both benchmarks had climbed as much as 5% during the previous session before paring some gains on reports of the U.S.-Iran talks.

Gains on Thursday came after Saudi Arabia said it intercepted six ballistic missiles fired by Yemen’s Iran-backed Houthis toward areas including Taif and the Yanbu region on the Red Sea.

The attacks revived concerns about Saudi oil infrastructure and export routes, particularly after earlier damage to the kingdom’s East-West pipeline disrupted crude shipments to Yanbu.

The security risks are especially significant because Yanbu is a major Red Sea export hub connected to Saudi Arabia’s eastern oil fields. Saudi Arabia has been increasing crude pumping toward Yanbu, but tanker loadings from the port had yet to fully resume.

The rally was tempered after reports showed that U.S. and Iranian negotiators in New York are exploring a phased path out of the conflict that would involve Tehran reopening the Strait of Hormuz in exchange for Washington lifting its economic blockade of Iran.

4. Musk aiming to double Colossus 2 Nvidia chip count by the end of 2026

Elon Musk said he plans to roughly double the amount of advanced Nvidia chips used by the Colossus 2 data center by the end of the year.

In a post on X, Musk said the Tennessee-based center has used 110,000 of Nvidia’s GB200 chips and 440,000 of Nvidia’s GB300 chips.

The SpaceX CEO said an additional 220,000 GB300 chips will come online by next week and another 220,000 in November.

“If we get lucky, yet another 220k GB300 by late December,” Musk said in response to a post on xAI’s computing capacity. Musk has touted the Colossus center as the “world’s largest AI supercomputer,” with Colossus 1 having been initially built in 2024 to train xAI’s flagship AI Grok.

5. Costco earnings

Costco reported fourth-quarter results that beat Wall Street’s top- and bottom-line expectations, although shares in the members-only warehouse chain were slightly lower in extended-hours trading on Friday.

Earnings per share of $6.75 topped the consensus estimate of $6.55 by $0.20. Revenue reached $95.7 billion, surpassing the analyst estimate of $94.85 billion.

Net sales for the 16-week fourth quarter increased 11.2% to $93.9 billion from $84.4 billion in the prior year period. The company’s adjusted EPS of $6.75 included a non-recurring benefit of $0.15 per share from tariff refunds received during the quarter, less partial reinvestment of those refunds in increased member values.

Comparable sales for the fourth quarter increased 9.4% on a reported basis and 6.7% when excluding the impacts from changes in gasoline prices and foreign exchange, ahead of the analyst estimate of 6.44%. U.S. comparable sales rose 10.7% on a reported basis and 7.2% on an adjusted basis. Canada comparable sales increased 5.0%, or 4.6% adjusted, while Other International markets posted 7.0% growth, or 6.2% adjusted.

Original Article

You May Also Be Interested In

• Raytheon Technologies (RTX) Tops Q3 EPS by 48c, Beats on Revenue; Offers FY Guidance
• Tesla reports third quarter earnings Wednesday, Sell-side comments
• General Aerospace (GE) Tops Q3 EPS by 25c, Beats on Revenue; Raises FY EPS Guidance