10-year Treasury yield rises in early trading as traders await Powell speech
The closely watched 10-year Treasury yield rose in early trading, as markets anticipate a hawkish tone from the Federal Reserve’s Jackson Hole symposium Friday.
The yield was at 3.06% in morning trading, after rising above the psychological 3% level Monday for the first time in a month. Strategists expect the yield to continue to drift higher ahead of Fed Chairman Jerome Powell’s 10 a.m. speech Friday at the Wyoming conference.
Strategists have been watching the quick move up in yields in the last several sessions as a potential negative for stocks. Tech and growth stocks are particularly hit when yields rise, since they are priced more for future earnings. Those future earnings are worth less in a higher rate environment.
The 2-year note yield, however, was slightly lower ahead of a 1 p.m. ET auction of $44 billion in 2-year notes.
Treasury yields move opposite price.
–Patti Domm
Stocks open little changed
Stocks opened little changed Tuesday. The Dow Jones Industrial Average rose 2 points, or 0.01%, shortly after the bell. The S&P 500 gained 0.06% and Nasdaq Composite advanced 0.19%.
— Sarah Min
Whistleblower complain alleges Twitter has ‘extreme’ security and moderation issues
Twitter’s former head of security has alleged that the company has “extreme, egregious deficiencies” related to privacy, security and content moderation.
Peiter “Mudge” Zatko and the nonprofit law firm Whistleblower Aid have filed complaints with several federal agencies, including the Department of Justice.
The allegations include Zatko saying that Twitter CEO Parag Agrawal asked Zatko to provide false and misleading documents.
The complaint comes as Twitter is preparing to go to trial over Elon Musk’s attempt to cancel his takeover offer. Musk’s attorneys said they have issued a subpoena for Zatko.
Shares of Twitter were down more than 3% in premarket trading.
— Jesse Pound, Todd Haselton
Retail trading has picked up, and that could be a boost for Robinhood
August’s re-emergence of the meme stock trade could be a “modest positive” for retail-focused brokerage firm Robinhood, according to Piper Sandler.
“From various industry sources, it is clear that retail engagement has increased over the past few weeks. This should be a modest positive for HOOD as we expect to see activity levels to improve for the eBrokers,” analyst Richard Repetto wrote in a note to clients on Monday evening.
Robinhood has seen its active users decline sharply this year as the pandemic trading boom among retail investors has waned.
The company said last week that it had 13.2 million monthly active users in July, down from 14 million in June and 19.5 million a year ago.
— Jesse Pound
Morgan Stanley Wealth Management says, “This bear in our view has one last act”
Stocks may have pared back losses from their June lows, but Morgan Stanley Wealth Management believes there is further downside from here.
“[We] feel strongly that the bear market has not ended,” read a note from the firm’s global investment committee led by CIO Lisa Shalett.
Investors are underestimating inflation, growing recession risks, and the likelihood that earnings expectations will have to come down, according to the note.
“We view earnings risks as potentially delayed but not denied. Rising costs, slowing growth, strong-dollar headwinds, bulging inventories and loss of pricing power could drive disappointment. We see expectations for 2023 profits resetting by the start of the fourth quarter,” read the note.
“This bear in our view has one last act.”
— Sarah Min
Zoom Video gets downgrade after cuts to full-year outlook
Zoom Video reported mixed quarterly results and cut its full-year outlook, leading BTIG to downgrade the video conferencing company.
“Overall, the pullback in FY23 profitability and FCF is somewhat concerning as topline growth slows further, and thus we are downgrading shares of ZM to Neutral given significantly reduced near-term expectations,” analyst Matt VanVliet said.
CNBC Pro subscribers can read the full story on this downgrade here.
—Fred Imbert
U.S. stocks will be challenged in the next nine to 18 months, fund manager says
U.S. markets might suffer in the coming months as a result of quantitative tightening by the Fed, Mary Nicola of PineBridge Investments told CNBC’s “Street Signs Asia.”
It means the U.S. central bank will likely continue reducing its balance sheet, which lowers liquidity in financial markets.
The Fed has been removing cash from the system that was pumped into the economy when the pandemic first started, and is expected to continue to do so even if the pace of rate hikes slows.
“We’ve seen such a rapid response and such aggressive returns from the markets as a result of balance sheet expansion,” the portfolio manager said. “Now that we’re seeing a tightening … in balance sheet, that’s where we’re concerned about financial markets.”
“Over the next nine to 18 months, you know, we think that equities are going to be challenged. So we’ve been taking a more cautious stance on equities overall and on risk assets.”
— Abigail Ng
European markets drift lower at the open
The Euro Stoxx 600 Index slipped 0.3% in early deals with media stocks the biggest laggard. Shipping firm Maersk saw its shares dip 2.7% after a price target cut for Citi.
Oil stocks rose by 1% after some steady buying in the commodity markets on Monday afternoon. Both WTI and Brent crude were higher for the session on Tuesday morning.
Read more here.
—Matt Clinch
CNBC Pro: Tech investor Gene Munster reveals why this FAANG stock can top $250
FANNG stocks have rallied strongly in the second half of the year, but tech investor Gene Munster believes one stock could still see further upside ahead.
He tells CNBC why he loves this stock for the “next two to five years.”
Pro subscribers can read the story here.
— Zavier Ong
Markets have not seen peak Fed hawkishness, says Veritas Financial’s Branch
Veritas Financial Group’s Greg Branch believes markets have yet to experience peak hawkishness from the Federal Reserve.
“What we should be worried about is that this level and this persistency of inflation by all accounts is going to persist from the data that we’re seeing, and so what that means is that we haven’t seen peak Fed hawkishness at least at this point,” Branch told CNBC’s “Closing Bell: Overtime” on Monday.
According to Branch, the slowdown during the second half of the year is likely going to be deeper and longer than many investors and analysts anticipated in January when calls for a recession mounted. He also expects the Fed’s September rate hike to exceed 50 basis points.
— Samantha Subin
Where Monday’s moves put the major averages for August
Following Monday’s sell-off here’s where the major averages stand for August:
The Dow:
- Up 0.67% for the month, 10.52% off its 52-week high
The S&P 500:
- Up 0.19% in August, 14.12% off its 52-week high
The Nasdaq Composite:
- Down 0.07% this month, 23.63% off its 52-week high
— Samantha Subin
Zoom shares tumble 9% on revenue miss, weak outlook
Zoom shares dropped about 9% in extended trading on Monday after missing revenue estimates in the recent quarter and cutting its outlook.
The video conferencing company’s earnings came in at $1.05 a share on $1.10 billion in revenue, while analysts had anticipated 94 cents per share on revenues of $1.12 billion. At the same time, Zoom shared disappointing guidance for the current quarter and the full year.
Palo Alto Networks jumps about 9% on earnings beat
Shares of the cybersecurity company surged nearly 9% after posting a beat on the top and bottom lines in its fiscal fourth quarter. Palo Alto Networks beat earnings expectations by 11 cents a share on revenues of $1.55 billion.
The company also issued upbeat guidance for the current quarter and full year, while its board authorized a 3-for-1 stock split.
Stock futures open slightly higher
Stock futures opened slightly higher in overnight trading Monday. Futures tied to the Dow Jones Industrial Average were last up 32 points, or 0.1%. S&P 500 and Nasdaq 100 futures added 0.11% and 0.16%, respectively.
— Samantha Subin
Read More: Stocks open little changed a day after suffering worst rout since June