Article posted at 8:52 a.m. CT.
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
• Investors absorb Treasury Department buyback news
• Walmart shares fall as same-store sales slow down
• Deere’s benefiting from data center construction
Investors are trying to digest the Treasury Department's buyback efforts on the long end that broke yesterday. We see bonds selling off a bit this morning, which in turn is sending yields a bit higher and putting pressure on stock futures in early trading.
In the early going, all three major indices were heading to the downside after snapping three straight sessions of losses Wednesday, but just barely. Traders are pushing the S&P 500 Index lower by 0.38% and the Nasdaq Composite by 0.53% and the Dow Jones Industrial Average by 0.72%.
Yesterday’s upside was prompted by the Treasury Department’s announcement it would double the maximum dollar amounts of buybacks of the 10-year, 20-year and 30-year bonds to $4 billion from $2 billion. The moves are scheduled to begin September 9 and run at least through November 4.
The news immediately pulled down yields, which have been rising this summer. When all was said and done, the 10-year was standing at 4.65%, down five basis points, and the 30-year gave back nine basis points to 5.20% after rising to 5.30% earlier in the week, a level not touched in nearly two decades. Investors were questioning the move because it doesn’t address the country’s national debt, which is more than $40 trillion. Yields were edging higher in early trading, but this is something to watch to see how it plays out.
Same’s true with the Federal Reserve. The minutes of the Federal Open Market Committee (FOMC) revealed a more hawkish tone among members than the three who wanted to raise rates. In a nutshell, if inflation doesn’t cool down soon, the Fed “would adopt a more restrictive policy stance before long,” according to the minutes. That, of course, would mean a hike in interest rates. But bond futures are down 25 ticks, giving up half of what they were and implying that rates and yields are rising. We’ll need more information to see exactly what direction they’re finally heading.
Elsewhere, Walmart shares are falling 7.3% in early trading after the mega big-box retailer turned in results that missed same-store sales expectations, a critical measure of growth, but moderately lifted its guidance. As the largest retailer in the U.S., Walmart’s results tend to underscore economic activity and consumer spending.
Online sales grew faster than in-store sales, and much of the second-quarter results came after higher-income consumers lifted sales as did other sources of revenue. Among those were membership fees and advertising revenues, both of which grew in robust double-digits. The company is focusing efforts on growing membership to compete with the likes of Amazon Prime and Costco.
Speaking to news outlets, the retailer’s executives noted that lower income shoppers are feeling the burden of higher prices across the board, but particularly for gasoline. At the same time, they’re seeing headwinds in the health and wellness categories because of federal pricing negotiations that are lowering prices.
Deere & Co. is benefitting from the boom in artificial intelligence data centers, turning in its first quarterly profit in three years. The agricultural and heavy-equipment maker said construction and forestry sales gains helped offset the sales slowdown in farm equipment sales. Shares are tapering off somewhat from pre-market trading, but still moving up by 1.65%.
No surprises here: Moderna shares are backtracking moderately compared with Wednesday’s staggering 177% advance. Moderna and Merck are seeing positive results in the combination of Moderna’s cancer-fighting mRNA vaccine with Merck’s Keytruda immunotherapy drug to combat skin cancer. The two are researching new ways to treat other cancers. Moderna shares are off 5.4% while Merck shares slipped 0.60% after yesterday’s 12.6% gain.
WTI Crude Oil prices are higher by 2.7% to trade in the $88 per barrel range.
Happy Trading!
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