Global risks are mounting and investors are looking for havens.
But the flight to safety is excluding one major traditional haven asset — U.S. Treasuries.
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The growing uncertainty caused by the Israel-Hamas war, and the risk of a wider conflict, would typically see U.S. government bonds come into their own as a haven asset — as gold did last week. They sort of did, before Thursday’s 30-year Treasury debt auction pointed to weak demand and consumer price inflation came in hotter than expected.
There’s too much going on in the bond market for it to perform as a haven right now.
With another key Treasury auction Wednesday, bonds may once again dictate the markets’ direction, despite earnings from Tesla, Netflix, and Goldman Sachs also being on tap.
Aside from the auction, Federal Reserve Chairman Jerome Powell’s speech at the Economic Club of New York could be pivotal, as investors look for further direction on how high interest rates will stay and for how long.
If Powell echoes Vice Chair Philip Jefferson’s view that surging bond yields have done some of the Fed’s work for it, leading it away from further rate increases, that could help lower yields and boost stocks.
But for now the bond market remains something of an unknown quantity, and anything but a haven. In fact, despite being a high-growth stock and facing several questions heading into earnings, Tesla could be a safer bet.
— Callum Keown
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U.S. Working to Evacuate Americans, Keep Gaza Civilians Safe
The State Department said American citizens and their immediate families will have the chance to leave Israel today on chartered flights from Tel Aviv and by sea from Haifa as the conflict between Israel and Hamas intensified over the weekend.
National security adviser Jake Sullivan said Sunday that the U.S. is working to ensure civilians in Gaza, including Palestinians who aren’t part of Hamas, can get to safe areas protected from the fighting and access essentials such as food, water, medicine, and shelter. Israel said the attack killed 1,400, and that at least 155 others, including children, were captured by Hamas. The Gaza Health Ministry has said more than 2,670 Palestinians have been killed and 9,600 wounded since the fighting started last weekend. Separately, as lawmakers return to Capitol Hill on Monday, Ohio Republican Jim Jordan aims to schedule a floor vote for House speaker on Tuesday. Jordan needs 217 votes to win the gavel, but it was unclear whether he would be able to garner that many votes. House Minority Leader Hakeem Jeffries (D., N.Y.) told NBC on Sunday that Democrats are ready to back a bipartisan governing coalition. Congress faces critical decisions on the Israel-Hamas war and an approaching deadline to fund the federal government past an already-extended date.
What’s Next: Secretary of State Antony Blinken will return to Israel today, after meeting with seven Arab leaders in six nations to try to prevent the Israel-Hamas war from spreading. He said the U.S. is confident Egypt’s border with Gaza will be opened to humanitarian aid.
— Janet H. Cho
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In Earnings This Week: Tesla, Netflix, and Goldman Headline
Third-quarter earnings season continues with 50 S&P 500 companies scheduled to report, including Tesla, Netflix, and Goldman Sachs among the most anticipated. Investors will also receive fresh data on the U.S. housing market, including housing starts and existing-home sales.
Tesla reports on Wednesday, amid concerns about its margins, demand after its latest price cuts, and lower third-quarter deliveries, MarketWatch reported. Analysts polled by FactSet expect the EV maker to post adjusted earnings of 73 cents a share on sales of $24.3 billion. Netflix’s earnings, also Wednesday, arrive amid greater pressure to boost profit in the streaming era. Wolfe Research analyst Peter Supino has said Netflix’s ad-supported tier has been slow to catch on with viewers, while Bernstein analysts have compared Netflix to a mature, durable “utility.” Goldman Sachs and Morgan Stanley also report this week, offering a read on the health of Wall Street’s deal-making pipeline after a flurry of recent initial public offerings and merger announcements. In housing data, the National Association of Home Builders will release its October Housing Market Index on Tuesday, while new residential construction statistics and housing starts are expected on Wednesday. The National Association of Realtors reports existing-home sales for September on Thursday.
What’s Next: The Conference Board on Thursday will release its Leading Economic Index for September. Analysts expect a 0.4% monthly decline, matching August’s drop. The index has fallen for 17 consecutive months, a possible recession sign over the next year.
— Janet H. Cho and Nicholas Jasinski
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Nvidia’s AI Chip Exports to China Are Under Threat
Nvidia was under pressure early Monday following a report the chip maker could face further restrictions on exports of its artificial-intelligence chips to China.
The U.S. government intends to tighten restrictions on AI chip exports to China and Nvidia’s H800 chip is a model the administration would like to block, Reuters reported Sunday, citing a U.S. official and industry sources. Nvidia has previously said its earnings wouldn’t suffer negatively in the near term from the expansion of export restrictions to cover the H800 and A800, two chips specifically designed for the Chinese market. Nvidia executives have said blanket bans on exports to China would affect the long-term growth of the U.S. chip industry. Chinese companies Alibaba, Tencent, Baidu, and TikTok-owner ByteDance collectively ordered around $5 billion worth of Nvidia’s A800 chips, according to a Financial Times report.
What’s Next: While the details of any new rules are yet to be announced, they could spark another round of tit-for-tat measures in the U.S.-China chip war. Beijing has previously introduced a partial ban on products from U.S. chip maker Micron Technology and announced billions in backing for its own semiconductor sector, as it looks to lessen its reliance on imported semiconductor technology.
— Adam Clark
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General Motors Reaches Deal With Striking Canadian Auto Workers
General Motors has ratified a new labor deal with Unifor, the union representing Canadian auto workers, while United Auto Workers remain on strike in the U.S. after 30 days. Unifor’s ratification leaves Stellantis the only Big Three auto maker with no deal in Canada.
The GM contract includes about 16% in wage increases over the three-year contract, with a 10% bump in the first year, inflation protections, and enhanced retirement benefits. At top wage rates, the contract provides 89,000 Canadian dollars ($65,200) for production workers and C$112,000 ($82,100) a year for trades workers. The average hourly rate for a UAW worker in the U.S., according to Federal Reserve data, is about $33 (USD), or about $66,000 a year. The total compensation rate in the U.S. is about $66 an hour, including retirement and healthcare benefits. Ford Motor is canceling a shift at its Rouge assembly complex in Dearborn, Mich., slowing production of its all-electric F-150 Lightning pickup trucks, The Wall Street Journal reported, citing a UAW memo. UAW officials have blamed falling sales, but didn’t respond to a request for comment. Ford said it was adjusting the work schedule due to “multiple constraints,” including the supply chain and working through processing and delivering vehicles held for quality checks after restarting production of the Lightning in August.
What’s Next: Ford has scaled down some of its ambitions on making EVs, the Journal reported. Ford now aims to produce 600,000 EVs a year by the end of 2024, pushing an earlier delivery target out from the end of this year.
— Al Root and Janet H. Cho
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Taylor Swift’s Concert Movie Smashes Box Office Records: AMC
The movie Taylor Swift: The Eras Touropened this weekend to a box office take estimated by AMC Entertainment to be between $95 million and $97 million, the biggest ever opening for a concert film. It could be the biggest October movie opening, beating the 2019 Warner Bros. film Joker.
Swift’s concerts this summer in the U.S. featured sold-out stadiums as the tour prepares to head overseas. With international box office sales, the movie version could bring in $126 million to $130 million globally. AMC is the domestic distributor. Show times for the movie are limited, with AMC guaranteeing running times four days a week at its U.S. theaters. The Eras Tour movie will run exclusively in theaters for 13 weeks before it becomes available on streaming. In terms of concert movies, the Eras Tour surpassed the 2011 Justin Bieber: Never Say Never film, which has brought in $73 million domestically, according to BoxOfficeMojo.com, including $29 million on its opening weekend. Joker’s opening weekend was $96.2 million. Swift’s official box office tallies come out today. It comes after a flurry of big box office takes at the movies this summer, including Warner Bros.’s Barbie, which has taken in $635 million domestically this year, according to BoxOfficeMojo.com.
What’s Next: As the Hollywood actors strike continues, fellow performer Beyoncé appeared with Swift at her movie premiere last week in Los Angeles. Renaissance: A Film By Beyoncé, her own concert film, will be released on Dec. 1.
— Liz Moyer
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MarketWatch Wants to Hear From you.
As home prices stay high and rising mortgage rates shrink how much house buyers can afford, some have turned to the idea of buying cheaper, older fixer-uppers. The Instagram account Cheap Old Houses helps people indulge in this fantasy, posting listings for older homes that are relative steals at a time when the median monthly mortgage payment is nearly $3,000.
But how does it work? The couple that created the account discusses this trend.
A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to thebarronsdaily@barrons.com.
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— Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner
