S&P 500 fades gains as bond yields rise

Live10 updates

• 

  Mon, April 29, 2024 at 8:20 PM GMT+1

  Big tech’s massive AI spending surge isn’t all a bad thing

  The AI spending wars is sending capital expenditures soaring for big tech giants.

  Analysis from Jefferies tech sector leader Brent Thill shows that spending on capital expenditures is expected to more than double from 2023 to 2025 for Microsoft. Meanwhile, significant pickups are also expected for Alphabet and Meta.

  The market didn’t appear to love Meta’s plans for spending as shares slid more than 10% in the day following the company’s earnings release in part due to a higher-than-expected guide for capital expenditures spending.

  But for investors in the broader market, the spending from big tech should be a welcome sign, per the equity research team at Bank of America.

  Bank of America US and Canada equity strategist Ohsung Kwon told Yahoo Finance that increased AI spending will benefit companies in the semiconductor (as companies buy GPUs to enhance AI appliations) and energy sectors (as companies need more energy to power their GPUs).

  Kwon notes that this has also been one of the reasons copper prices have soared in recent months, as the metal is used in the electrification of data centers.

  Kwon’s team estimates that capital expenditures spend for Microsoft, Amazon, and Meta is expected to increase 27% year-over-year in 2024 compared to a 1% increase for the rest of the S&P 500. Typically, Kwon said, capex growers underperform the broader market.

  “I think that’s really the next leg of this AI cycle is the capex takers are going to do better,” Kwon said.

• 

  Mon, April 29, 2024 at 7:52 PM GMT+1

  Oil slides as US pushes for Middle East ceasefire

  Oil slid more than 1% on Monday as the US took diplomatic steps towards brokering a ceasefire in Gaza between Israel and Hamas.

  West Texas Intermediate (CL=F) futures settled at $82.63 per barrel, while Brent (BZ=F), the international benchmark price, fell below $89 per barrel.

  “Most traders feel the cease fire talks in Gaza could gain some traction and given the heavy long positions from hedge funds it wouldn’t take much to trigger some long liquidation,” Dennis Kissler, senior vice president at BOK Financial said in a Monday note.

  WTI and Brent are up roughly 15% year-to-date.

• 

  Mon, April 29, 2024 at 6:55 PM GMT+1

  The stock market has a ‘systemic problem’

  Stocks are facing a familiar problem.

  Even as earnings for the first quarter come in better than expected, the market has struggled to climb higher consistently as rising Treasury yields weigh on sentiment for equities, reminding investors of the period in 2023 when higher yields sent stocks crashing.

  “Higher rates are now a systemic problem for equities,” Piper Sandler chief investment strategist Michael Kantrowitz wrote in a weekly note to clients on Friday.

  Kantrowitz pointed to the market action over the last month, which could be simplified to a basic formula: When Treasury yields have risen, stocks have fallen. And recently, yields have soared. The 10-year Treasury yield is up more than 40 basis points to 4.63% since the start of April, its highest level since November 2023. In that time, the S&P 500 has fallen about 3%.

  “At this point it’s really hard to see equities going up without rates going down,” Kantrowitz said in a video breakdown of his research distributed to clients.

  The same action could be seen in the two-year Treasury yield, where Evercore ISI’s Julian Emanuel has flagged 5% as the key technical level that weighed on stocks during last year’s bond-driven sell-off. Notably, stocks’ recent decline from their highs throughout April came as the two-year hit 5%. On Monday, the two-year sat at 4.98%.

  The rise in yields has come as investors have heavily scaled back their bets on Federal Reserve interest rate cuts this year. Market expectations have shifted from nearly seven cuts to around just one in 2024, per Bloomberg data. And Morgan Stanley’s chief investment officer Mike Wilson wrote in a research note on Sunday this upside pressure in yields is likely to remain unless Fed Chair Jerome Powell “surprises on the dovish side” during his press conference on Wednesday.

  Given recent hot inflation readings, economists don’t expect that to be the case when Powell speaks.

  “We expect the main message from the press conference to be that policy needs more time to work,” Bank of America US economist Michael Gapen wrote in a research note previewing the event. “Powell should indicate the next move is still likely to be a rate cut, but the Fed will be in wait-and-see mode until it achieves confidence it desires on inflation.”

  This would be a reiteration of prior comments from Powell, which brought little relief to the bond market.

  Read more here.

• 

  Mon, April 29, 2024 at 6:24 PM GMT+1

  Tesla stock, up 15% hits highest level since early March

  Yahoo Finance’s Pras Subramanian reports:

  Tesla (TSLA) stock soared at the open on Monday following reports that CEO Elon Musk won Chinese approval to deploy the automaker’s Full Self-Driving (FSD) autonomous software on the mainland.

  As was first reported by the Wall Street Journal, people familiar with the matter said that officials told Tesla that they had tentatively approved FSD in the country during Musk’s 24-hour visit to Beijing over the weekend.

  Separately, Bloomberg earlier reported that Tesla will use Chinese tech company Baidu’s street-level mapping data to power FSD. Tesla had been previously using Baidu’s mapping data for satellite navigation in its cars. Working with a Chinese company helped with regulatory approval as data privacy and security risks are minimized, the reports said.

  Tesla stock popped as much as 15% during the session, hitting its highest level since early March.

  Read more here.

• 

  Mon, April 29, 2024 at 5:30 PM GMT+1

  Deutsche Bank still looking for an interest rate cut in 2024

  I caught up with Deutsche Bank chief US economist Matthew Luzzetti on the Opening Bid vodcast (full watch below) this morning — he says his team is still looking for one rate cut from the Fed later this year. He didn’t rule out one more rate hike, but definitely has a low probability assigned to it happening.

  While I appreciate Luzzetti’s views on rates and inflation, his comments on the importance of Fed independence really left an impression on me. This after a new WSJ story that suggested a second term for president Donald Trump could bring with it big changes to the Fed.

• 

  Mon, April 29, 2024 at 4:45 PM GMT+1

  Tesla, Apple biggest daily gainers among Magnificent 7 stocks

  Only a few of the Magnificent 7 stocks were in green territory on Monday. Tesla (TSLA) shares rose more than 12% after the EV giant’s big win related to its Full Self Driving system in China.

  Apple (AAPL) stock also rose Monday following an upgrade to Buy with a price target of $195 from Bernstein analysts ahead of the iPhone maker’s quarterly results schedule for May 2.

  Amazon shares rose fractionally while the rest of the Magnificent 7 stocks all fell.

  Microsoft (MSFT) declined more than 1% while Alphabet (GOOGL) (GOOG), Meta (META) and Nvidia (NVDA) also fell.

  

• 

  Mon, April 29, 2024 at 4:07 PM GMT+1

  Paramount to announce CEO Bob Bakish’s departure as earnings loom: Report

  Paramount Global (PARA) is expected to announce the departure of CEO Bob Bakish, according to multiple media reports. The news comes as investors eye the company’s dealmaking options.

  Bakish’s potential departure was first reported by the Wall Street Journal, which said an announcement could come as soon as Monday amid the CEO’s growing tensions with Shari Redstone, who controls Paramount through her family’s holding company National Amusements.

  According to the report, Paramount would install an “Office of the CEO” consortium made up of company division heads in place of Bakish. Shares are up about 5% following the news.

  National Amusements is currently in exclusive talks with David Ellison’s Skydance Media to sell its controlling stake in Paramount, according to a source familiar with the matter.

  But Paramount’s nonvoting shareholders have publicly expressed concerns over the terms of the deal, which critics say unfairly benefits Redstone. The company’s exclusivity window with Skydance expires on May 3.

  Meanwhile, Sony Pictures Entertainment and private equity firm Apollo Global Management have also been in talks over a joint bid to buy Paramount, according to media reports. (Disclosure: Yahoo Finance is owned by Apollo.)

  “The clock is ticking for Ms. Redstone to come to a decision as we believe Paramount’s distribution deal with Charter is set to expire at the end of the month,” MoffettNathanson analyst Robert Fishman wrote in a note published April 22.

  Fishman said Disney’s (DIS) precedent-setting deal with Charter could have a meaningful impact on Paramount “should Charter choose to either drop Paramount’s long tail cable networks and/or force Paramount+ to be bundled at a heavily discounted wholesale price to Charter subscribers.”

  Ultimately, though, the fate of Paramount’s future all comes down to Redstone.

  “While shareholders can make appeals for her to reconsider the Apollo/Sony deal that better serves their interests, Redstone seems set on crossing the finish line with Ellison and his backers for now,” Fishman said.

  Paramount will report first quarter earnings after the bell today. Read more here.

• 

  Mon, April 29, 2024 at 3:15 PM GMT+1

  Starbucks lays out promises ahead of its Q2 report, but key issues remain unaddressed

  Starbucks (SBUX) is set to release its quarterly results on Tuesday after the closing bell.

  Yahoo Finance’s Brooke DiPalma reports:

  Starbucks laid out five promises ahead of its earnings release — but the efforts may not pass the taste test.

  Last Tuesday, the company shared promises to improve results for its employees, customers, farmers, shareholders, and others.

  Some of the initiatives include creating pop-up experiences in Los Angeles, Berlin, London, Shanghai, and Tokyo to “engage with younger generations.” Another is a global barista championship where employees come together to compete at its coffee farm, Hacienda Alsacia, in Costa Rica next year.

  CEO Laxman Narasimhan told Yahoo Finance in an exclusive interview that the company has already been operating with these principles in mind but is now laying out the promises explicitly.

  Narasimhan, who took the helm at the end of March 2023, said every decision Starbucks makes must fit the promises it has outlined. “This is what we are at our best,” he said, adding that the promises are at the core “of what makes our company different.”

• 

  Mon, April 29, 2024 at 2:33 PM GMT+1

  Stocks open higher, Tesla lifts Nasdaq

  Stocks opened higher Monday ahead of a big week that includes a Federal Reserve rate decision, the monthly jobs report, and earnings from Apple (AAPL) and Amazon (AMZN).

  The S&P 500 (^GSPC) rose 0.3%, while the tech-heavy Nasdaq Composite (^IXIC) gained roughly 0.4%, helped by soaring (TSLA) shares. The Dow Jones Industrial Average (^DJI) rose just above the flatline.

  Tesla cleared big barriers to rolling out its Full Self-Driving software in China. The EV giant rose roughly 12% at the open following an FSD-linked deal with Baidu (BIDU). The Chinese internet giant’s US-listed American Depository Shares were up roughly 6%.

• 

  Mon, April 29, 2024 at 10:36 AM GMT+1

  Important point on Tesla from Evercore ISI

  The analyst note of the morning — at least for me — is the 61 page deep dive on Tesla (TSLA) from Evercore ISI analyst Chris McNally.

  McNally cut his price target to $145 from $155 (stock is indicating up 7% premarket on Musk’s AI win in China over the weekend, which is also lifting shares of new partner Baidu (BIDU)), citing a host of concerns — notably the inability of Tesla to hit its sales for 2024.

  In the report, McNally makes a great point about Tesla being unable to expand its market because of a lack of models. He uses BMW as an example of a car company selling multiple models to attract numerous types of consumers.