Major U.S. stock indices opened higher as Treasury yields and oil prices both fell, giving equities a much-needed breather. The Dow slipped 0.10%, the S&P 500 rose 0.13%, and the Nasdaq gained 0.28%.
Tech stocks led the broader market, with AMD and Nvidia rising 1% and 0.7% respectively. AMD's share price climbed after it announced the acquisition of AI company World Labs. Among the "Magnificent Seven": Meta Platforms rose 1.23%, Nvidia gained 0.90%, Amazon added 0.18%, Microsoft fell 0.22%, Tesla dropped 0.22%, Google declined 0.25%, and Apple slid 1.37%.
Earlier this week, Treasury yields had continued to surge, but they have now eased somewhat. On Tuesday, the benchmark 10-year Treasury yield fell more than 3 basis points to 5.209%, while the 30-year Treasury yield retreated about 2 basis points to 5.54%. Oil prices also declined. Brent crude dropped more than 1%, trading at around $103.75 per barrel, while West Texas Intermediate (WTI) fell 1.8% to $90.85. Recent rising oil prices combined with climbing yields have continued to weigh on the stock market. On Monday, the Dow Jones Industrial Average fell more than 300 points, while the S&P 500 and Nasdaq Composite declined 0.8% and 0.9% respectively. The 10-year Treasury yield remains near its highest level since 2007, while the 30-year Treasury yield hovers near its 2004 peak.
Even so, Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said in a Tuesday morning research note: "We believe investors should still prepare for further upside in equities, with diversification at the core of asset allocation." "We continue to rate fixed income as attractive. We recommend investors manage credit risk and duration appropriately based on their investment objectives and time horizon. Income-seeking investors can choose short-duration bonds to reduce duration risk, while those who can tolerate volatility can seize tactical opportunities in medium- to long-duration high-quality bonds."
A Data Storm Is Approaching
Meanwhile, a dense series of U.S. labor market data is about to begin, starting with the August job openings report. The market will also focus on speeches from six Federal Reserve officials for clues on the future path of interest rates. Currently, the market has priced in the possibility of up to four rate hikes over the next 12 months. Geoff Yu, Senior Macro Strategist at Bank of New York Mellon, said: "We've seen considerable volatility in the market over the past few days, and the truly important data catalyst will be Friday's nonfarm payrolls report, so I think it's reasonable for investors to adjust positions now. Also, with month-end approaching, there will be some passive fund flows unrelated to economic data."
Spotlight on the Trump Luncheon
One of the key events that could affect the market next is a luncheon between U.S. President Trump and tech industry leaders on AI safety risks, with traders closely watching for signals from the talks. At the same time, discussions about the potential risks of AI have further intensified, with some industry executives, including Anthropic CEO Dario Amodei, calling for slowing the pace of AI development. As Amodei and others prepare to meet with Trump, traders will also be watching OpenAI CEO Sam Altman's remarks on related issues at the company's annual developer conference. ChatGPT developer OpenAI is currently delaying the release of a version of its Astra model to further strengthen safety protections.
A Big Reversal Amid the Treasury Selloff! Bond Veteran Bianco Turns Bullish for the First Time in Six Years, Calling 5% Yields a "Value Buy"
On Wall Street, few are willing to turn bullish on bonds at the darkest moment. But Jim Bianco did. A macro strategist with over 40 years of experience who previously worked at First Boston and UBS, he now heads Chicago-based Bianco Research. Since the 10-year Treasury yield hit a historic low of 0.3% at the depths of the pandemic in 2020, he has been one of the most steadfast bears on bonds. Now, however, with the benchmark yield surging to near two-decade highs, he has unclenched his bearish fist for the first time, shifting to a "value buy" stance and gradually building long positions.
JPMorgan: Valuation Reset for the Magnificent Seven May Be Largely Complete
After the Nasdaq 100 hit a new high last week, Wall Street financial giant JPMorgan began following Goldman Sachs, Jefferies, Yardeni Research and other giants in turning bullish on U.S. tech stocks, which also partly drove institutional and retail investors to increasingly focus on buying-the-dip strategies during Monday's pullback. JPMorgan believes the overall valuation adjustment for the seven tech giants that carry heavy weight in the U.S. stock market (the Magnificent Seven, or Mag 7) may be largely complete, and earnings growth is expected to once again become the main force supporting share prices. JPMorgan said the ratio of the Magnificent Seven's forward 12-month price-to-earnings relative to the broader market has fallen to about one standard deviation below the historical median, at a decade low.
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