Aerial view of Valero Houston Refinery in Houston, Texas, August 28, 2023.
Brandon Bell | Getty Images
This report is from today’s CNBC Daily Open, our new international markets newsletter. The CNBC Daily Open provides investors with everything they need to know, no matter where they are. Like what you see?You can subscribe here.
Market under pressure
U.S. stocks fell on Tuesday, weighed down by higher oil prices and rising U.S. Treasury yields. The pan-European Stoxx 600 index closed 0.2% lower as economic indicators across the region were mixed. Eurozone producer prices fell by 7.6% in July from a year earlier. However, according to the HCOB/S&P World Purchasing Managers Index, business activity in August fell by the sharpest in about three years.
All eyes are on the arm
Chip designer Arm plans to list 95.5 million shares at a price of $47 to $51 per share, according to sources. Updated filing In preparation for an initial public offering on the New York Stock Exchange. This would value the company at up to $52 billion. Tech giants like Alphabet, Apple and Nvidia, as well as semiconductor companies like Intel, Samsung and TSMC, have all expressed interest in buying Arm stock.
Production will be further reduced until December
Saudi Arabia will extend production cuts of 1 million barrels per day until the end of the year, state news agency said. saudi news agency. Russia also pledged to cut crude oil exports by 300,000 barrels per day until December 2023. Brent crude futures and West Texas Intermediate crude futures both rose $1, to their highest since November.
“It was a week full of data.”
Last week, we learned that inflation is moderating and the job market is easing, as expected. Federal Reserve President Christopher Waller told CNBC that this was a week with “very good data” on the inflation front, so the Fed could “sit there and wait for the data and see if things continue.” , suggested that the Fed may actually keep inflation going. Interest rates are expected to remain unchanged at the next meeting in September.
[PRO] Goldman lowers recession probability again
Goldman Sachs has lowered the probability of the U.S. going into recession from 20% to 15%, citing encouraging signs in recently released economic data. Meanwhile, the investment bank believes the possibility of the Fed raising interest rates in September is “unexpected.” Here’s what else the bank has to say about the trajectory of the U.S. economy and interest rates.
Federal Reserve President Christopher Waller acknowledged to CNBC’s Steve Reisman that inflation numbers have been strong recently, but said he is waiting to see whether prices continue to fall in the long term. emphasized that it is more important.
“We’ve had two good reports in a row,” Waller said. The important thing now is to determine whether this low inflation is a trend or just an anomaly or a fluke.
Oil production cuts in Saudi Arabia and Russia threaten to turn the low inflation of the past few months into an outlier. After the news was announced, the October WTI contract rose to $86.75 per barrel and the November Brent contract hit $90.05 per barrel, both the highest levels in 10 months.
“Higher oil prices have a big impact on the inflation conversation,” said Bill Mertz, head of capital markets research at U.S. Bank Wealth Management. “And the story about inflation is reflected in bond yields and the story about the Fed and what the Fed is going to do.”
Indeed, U.S. Treasury yields rose in response to this news. That’s because rising inflation pressures signal a longer period of interest rates, or at least a longer period of high interest rates. Yields on the 10-year and 2-year notes rose about 9 basis points to end at 4.266% and 4.96%, respectively.
Rising U.S. Treasury yields and rising oil prices were bad news for stocks (excluding energy sector stocks like Halliburton and Occidental Petroleum, which rose more than 2%). Goldman’s assertion that the U.S. is increasingly likely to slip into recession this year has failed to boost investor sentiment.
Major indexes ended the first trading day of the holiday-shortened week lower. The S&P 500 fell 0.42%, the Dow Jones Industrial Average fell 0.56% and the Nasdaq Composite Index fell 0.08%. Additionally, the small-cap Russell 2000 index fell 2.1%, its worst performance since April 25th.
This is just one data point, so it could be an outlier or a fluke as Waller says, but September is already living up to its reputation as a tough month for stocks.