Wall Street rally ends as investors fret over bonds

Stocks on Wall Street ended their latest run in record territory as investors’ nerves were frayed by another spike in government bond yields before solid demand at an auction by the US Treasury Department soothed that unease, while minutes to the Federal Reserve’s latest meeting showed officials generally thought inflation would stay elevated in the short-term.

SpaceX snapped a three-day rally amid reports the space-artificial intelligence conglomerate was in talks to raise US$40 billion to buy chips from Nvidia, while chief executive Elon Musk dashed speculation Taiwan Semiconductor Manufacturing Co would run his planned Terafab chipmaking venture in Texas.

Florida state is pressing ahead with its lawsuit against Meta Platforms seeking court orders to protect young users of Facebook and Instagram, after 48 states cut a deal with the social media giant, while OpenAI said teens are using ChatGPT for about 15 minutes a day on average.

And Australian futures are pointing to a soft start to the day for the ASX, while Firmus Technologies faces cutting its initial public offering valuation as sceptical investors push back in the bookbuild process.

Jittery markets

Stocks on Wall Street eased from their record highs as bond markets were whipped back and forth before solid demand at an auction of 10-year US treasuries settled things down.

Minutes to the Fed’s latest policy review showed officials unanimously backed last month’s rate increase, with most of them predicting another hike would be needed before the end of the year.

The yield on 10-year US treasuries hit a fresh peak of 5.36%, before retracing back to 5.29% at 7am in Auckland after the US Treasury Department’s auction. New Zealand’s equivalent bond was at 5.12%.

“Risk appetite weakened again, with global bond yields hitting fresh multi-decade highs in overnight trading as higher oil prices and a renewed widening in French-German bond spreads came into focus,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “A significant retracement subsequently saw US Treasury yields fall well below their peaks, leaving them relatively flat for the day.”

The S&P 500 dipped 0.3% in late trading, while the tech-heavy Nasdaq Composite slipped 0.4% and the Dow Jones Industrial Average fell 0.6%, with Caterpillar, Honeywell International and Sherwin-Williams at the bottom of the leaderboard.

Wells Fargo declined after the Wall Street Journal reported the US Department of Housing and Urban Development would investigate whether the bank breached fair-lending laws as it sought to boost home ownership among minorities.

Farm equipment makers such as Deere & Co were weaker as the Federal Trade Commission and US Department of Agriculture launched an inquiry into market practices amid a growing number of complaints from farmers.

SpaceX was down 2.4% in late trading amid reports the rocket and AI firm was in talks with banks to raise US$40 billion to buy Nvidia chips. Separately, CEO Musk played down the prospect of TSMC running his Terafab project in Texas, saying the semiconductor firm could sublease parts of the facility. Intel was working with SpaceX on developing the technology for the facility.

Florida goes it alone

Meta dipped as Florida state sought a temporary injunction against the social media group that would force the Big Tech firm to identify and remove users in the state under the age of 14 from Facebook and Instagram, limit teens to two hours a day across all apps and disable features such as autoplay and infinite scroll for them. Florida chose not to join the settlement by other states, calling it a slap on the wrist for Meta.

Meanwhile, OpenAI said teens on average were using ChatGPT for 15 minutes a day in its first report on teen use. Less than 2% of teens interacted with the chatbot for more than three straight hours.

Stock markets in Europe were weaker than their US peers, with the UK’s FTSE 100 down 0.8%, Germany’s DAX falling 1.4% and France’s CAC 40 sliding 1.2%, while Brent crude oil futures were down 0.8% at US$99.74 a barrel at 7am.

The subdued tone was set to continue in the antipodes, with futures pointing to a 0.6% decline for the S&P/ASX 200 index when trading opens across the Tasman. The kiwi dollar traded at 56.01 US cents at 7am from 56.09 cents yesterday.

The Australian Financial Review reported Firmus would reprice its initial public offering amid investor scepticism about the AI infrastructure firm, with the shares expected to be priced at A$9 each, down from the A$11 price that would have valued the company at A$43.9 billion.

There’s no local data on the radar today, with NZX-listed Foley Wines going ex-dividend on an upcoming payment of 2 cents a share.

Reporting by Paul McBeth. Image from Roberto Júnior on Unsplash.