December Nasdaq 100 E-Mini futures (NQZ26) are down -1.04% this morning as rising Treasury yields sparked a fresh wave of selling in chipmakers.
The price of WTI crude rose over +1% on Thursday as fears of renewed escalation between the U.S. and Iran intensified. A military adviser to Iran’s supreme leader warned that Tehran could extend the Middle East war to the Indian Ocean if the U.S. or Israel attacks again, AFP reported, citing Iran’s Fars news agency.
Meanwhile, New York Fed President John Williams said on Thursday that it was reasonable to think the U.S. central bank might need to raise interest rates again before year-end amid elevated energy prices and strong demand fueled by AI investment. “But we have to see. We’re going to collect the data and do what we did between July and September,” Williams added.
The rise in oil prices, together with Williams’ mildly hawkish remarks, fueled further selling in longer-dated bonds. The 10-year T-note yield rose one basis point to 5.13%, while the 30-year T-note yield climbed three basis points to 5.44%, its highest level since 2004.
Chip and AI infrastructure stocks slumped in pre-market trading, extending yesterday’s losses as rising bond yields continued to pressure the sector. Arm Holdings (ARM) was down over -4%, while Marvell Technology (MRVL) and Intel (INTC) were down more than -3%. Richly valued chip and other AI-related stocks tend to be hit hardest by rising yields, which reduce the present value of their future profits and weigh on valuations.
“If yields keep climbing toward new cycle highs, risk assets will struggle, even with constructive AI and trade headlines,” said Tickmill Group’s Patrick Munnelly.
Investors are now awaiting a summit between U.S. President Donald Trump and Chinese leader Xi Jinping, further remarks from Federal Reserve officials, and a series of U.S. economic reports.
In yesterday’s trading session, Wall Street’s three main equity benchmarks closed lower, pressured by a jump in bond yields. Chip and AI infrastructure stocks slid, with Sandisk (SNDK) falling over -3% and Broadcom (AVGO) dropping more than -2%. Also, Paychex (PAYX) slumped over -8% and was the top percentage loser in the S&P 500 and Nasdaq 100 after the payroll and human-resources services firm posted weaker-than-expected FQ1 management solutions revenue. In addition, McDonald’s (MCD) declined more than -4% and was the top percentage loser in the Dow after the restaurant giant announced plans to spend about $8.5 billion on its NEXT strategy through 2036. On the bullish side, cybersecurity stocks climbed, with Palo Alto Networks (PANW) rising +5% to lead gainers in the S&P 500 and Nasdaq 100 and CrowdStrike Holdings (CRWD) advancing more than +4%.
Economic data released on Wednesday showed that U.S. business activity continued to expand in September as stronger service-sector activity was accompanied by a renewed pickup in the manufacturing sector. The S&P Global flash U.S. manufacturing PMI jumped to 57.0 in September, stronger than expectations of 53.6, and the S&P Global flash services PMI climbed to 58.7, topping expectations of 55.8.
“If anything, the data reinforces the risk of a renewed acceleration in demand-driven inflation even if supply-side inflation subsides. As a result, it’s unsurprising to see both October hike odds and terminal policy rate pricing move higher,” said Vail Hartman at BMO Capital Markets.
Fed Governor Michael Barr said on Wednesday that further interest rate hikes are likely necessary to bring inflation back to the central bank’s 2% target. “In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion,” Barr said.
U.S. rate futures have priced in a 70.9% chance of a 25-basis-point rate hike and a 29.1% chance of no rate change at the Fed’s October policy meeting.
Today, all eyes are on the summit between U.S. President Donald Trump and Chinese leader Xi Jinping in Washington. The two leaders will hold closed-door talks, after which Trump will host Xi at a state dinner attended by guests including Nvidia CEO Jensen Huang, Tesla and SpaceX CEO Elon Musk, and OpenAI CEO Sam Altman. U.S. Treasury Secretary Scott Bessent told Fox News that the U.S. and China had agreed to extend their trade truce by two months. With the fate of the trade truce now clear, investors will focus on potential tariff cuts and possible agreements on agriculture, energy, and AI.
On the economic data front, investors will be watching U.S. initial jobless claims data, set to be released in a couple of hours. Economists expect applications for U.S. unemployment benefits to come in at 201K in the week ended September 19th, compared with 196K in the prior week.
U.S. new home sales data will also be released today. Economists project August new home sales at 615K, compared with 607K in July.
U.S. current account data will be released today as well. Economists expect the U.S. current account deficit to widen to $258 billion in the second quarter from $226.8 billion in the first quarter.
In addition, market participants will parse comments today from Richmond Fed President Tom Barkin, Cleveland Fed President Beth Hammack, and Philadelphia Fed President Anna Paulson.
On the earnings front, membership warehouse operator Costco Wholesale (COST) is scheduled to report its FQ4 results today.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 5.13%, up +0.20%.
The Euro Stoxx 50 Index is down -0.48% this morning as elevated bond yields and rebounding oil prices dampened sentiment. Defense stocks led the declines on Thursday. Technology and bank stocks also slid. Energy stocks bucked the trend, tracking the rise in oil prices. Providing some support, Germany’s Ifo Institute said its closely watched business-climate index rose for a fifth consecutive month in September to its highest level since May 2023 as the country’s tentative economic recovery continued. “Companies assessed their current business situation more positively. Their expectations brightened again. The German economy continues its recovery,” said Clemens Fuest, president of the Ifo Institute. Meanwhile, the Swiss National Bank and the Riksbank on Thursday left their interest rates unchanged at 0% and 1.75%, respectively, as expected, although both central banks signaled they were prepared to act if inflationary pressures intensify. Norway’s Norges Bank, by contrast, raised its key rate by 25 basis points to 4.50% and said further tightening may be needed to curb inflation. European Central Bank policymaker Martin Kocher said on Thursday that the ECB will evaluate economic conditions on a meeting-by-meeting basis and determine whether to raise interest rates. Investor focus now turns to the Trump-Xi summit. In corporate news, Shelly Group (SLYG.D.DX) rose over +3% after agreeing to support a voluntary public takeover offer from Schneider Electric at 70 euros per share.
Germany’s Ifo Business Climate Index, France’s Business Survey, and France’s Consumer Confidence data were released today.
The German September Ifo Business Climate Index stood at 89.9, stronger than expectations of 89.1.
The French September Business Survey came in at 101, weaker than expectations of 102.
The French September Consumer Confidence arrived at 86, stronger than expectations of 85.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.22%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.76%.
China’s Shanghai Composite Index closed lower today despite U.S. Treasury Secretary Scott Bessent’s announcement that the U.S. and China had agreed to extend their trade truce by two months. The benchmark index posted its steepest one-day percentage drop in a month, with non-ferrous metal and AI hardware stocks among the biggest decliners. Investors were likely underwhelmed by the extension’s duration, which was shorter than the three-to-six-month period previously floated by some U.S. officials. Chinese President Xi Jinping arrived in the U.S. on Wednesday for his first state visit in 11 years. “China and the United States should be partners, not rivals,” Xi said in a written statement issued by the Chinese embassy. Trump and Xi will hold closed-door talks later today, after which Trump will host Xi at a state dinner attended by U.S. tech executives. With the fate of the trade truce now clear, investors will shift their focus to potential tariff cuts and possible agreements on agriculture, energy, and AI. Meanwhile, Chinese ports recorded their busiest week on record ahead of the Trump-Xi summit. Data from the Ministry of Transport showed that Chinese terminals handled a record 7.3 million containers in the seven days through September 20th, up 9% from a year earlier. Elsewhere, China’s central bank said on Wednesday that it would inject up to 1 trillion yuan ($149 billion) per day through short-term liquidity operations around month-end. Mainland China’s financial markets will be closed on Friday for the Mid-Autumn Festival.
Japan’s Nikkei 225 Stock Index closed higher today as trading resumed after the Silver Week holiday, with Tokyo catching up with a global AI-driven rally. Chip stocks led the gains on Thursday after the AI trade got a boost earlier this week from initial signs of success for Meta Platforms’ new AI agent Muse and Alibaba Group’s launch of an AI chip it says is the most powerful in China. CPU-related shares were standout performers as Muse requires substantial computing power, fueling expectations for stronger demand for processors. Socionext jumped +15%, while Ibiden surged more than +14%. Still, concerns over surging bond yields capped the Nikkei’s gains. Japan’s benchmark 10-year government bond yield climbed to its highest level since 1996 on Thursday, tracking Wednesday’s surge in U.S. Treasury yields. “Growth stocks, including chips, are likely to come under pressure if borrowing costs keep rising,” said Koji Takeuchi at Itochu Research Institute. On the economic front, a survey showed on Thursday that Japan’s manufacturing activity expanded at a slower pace in September than in the previous month as output and new orders weakened. Elsewhere, Reuters reported that Japan’s Ministry of Finance will discuss reducing issuance under its liquidity-enhancement auctions for medium-term government bonds at a meeting with primary dealers next week. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +16.01% to 28.11.
The Japanese September S&P Global Manufacturing PMI (preliminary) stood at 54.1, weaker than expectations of 55.0.
Pre-Market U.S. Stock Movers
Chip and AI infrastructure stocks slumped in pre-market trading. Arm Holdings (ARM) was down over -4%, while Marvell Technology (MRVL) and Intel (INTC) were down more than -3%.
The Magnificent Seven stocks slipped in pre-market trading, with Meta Platforms (META) falling over -2% and Nvidia (NVDA) dropping about -1%.
MGM Resorts (MGM) plunged more than -9% in pre-market trading after Barry Diller’s People Inc. withdrew its offer to acquire the company.
Dropbox (DBX) slumped over -5% in pre-market trading after Citi downgraded the stock to Sell from Neutral with a price target of $29.
CoreWeave (CRWV) rose nearly +1% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $125.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - September 24th
Costco Wholesale (COST), Darden Restaurants (DRI), TD SYNNEX (SNX), Scholastic (SCHL).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
