The US Treasury building during a renovation in Washington, DC, US, on Tuesday, Aug. 15, 2023.
Nathan Howard | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Samsung’s expecting profits to plunge 78%
Samsung Electronics expects operating profit to come in at 2.4 trillion Korean won ($1.79 billion) for the third quarter. That’s a staggering plunge of 78% year over year, dragged down by the firm’s semiconductor business. Still, that’s more than triple the 670 billion won in operating profit the company earned last quarter — and slightly higher than analyst expectations. Shares jumped 3%.
China’s consumers are still cautious
Retail sales in China for the Sept. 29 to Oct. 5 holiday period rose by 9% from a year ago, according to state reports. While that’s a faster rate of growth compared with August, retail sales grew less than 3% a year since the start of the pandemic, according to estimates from UBS. In other words, there’s a recovery in consumption — but it’s a gradual one.
Alameda allegedly took FTX money
Caroline Ellison, the former head of Alameda Research and ex-girlfriend of FTX founder Sam Bankman-Fried, took the stand as the government’s star witness Tuesday. Ellison testified she and her ex-boss committed fraud. Alameda “took around $14 billion” from FTX customers, Ellison said. “I sent balance sheets to lenders at the direction of Sam that incorrectly stated Alameda’s assets and liabilities.”
[PRO] Safety in dividend stocks
Investors worried about recent volatility in markets — surging oil prices, spiking Treasury yields and the Israel-Hamas war — can turn to safe stocks with high dividends, said analysts. After screening for such stocks, CNBC Pro found 10 with dividend yield above 4% and a debt-to-capital ratio of less than 80%, among other criteria.
The bottom line
In times of risk, investors turn to safe assets. And there’s no asset perceived as safer — while remaining liquid — than a U.S. Treasury bond.
Yields for U.S. Treasurys fell Tuesday as investors swarmed for safety amid the Israel-Hamas war. The 10-year Treasury yield dropped around 13 basis points to 4.649%, while the 2-year yield settled just above the 5% level during Asia trading hours. As yields move inversely with prices, that means bond prices went up, driven up by demand.
Falling yields provided some relief to stocks. The S&P 500 rose 0.52%, the Dow Jones Industrial Average picked up 0.4% and the Nasdaq Composite advanced 0.58%.
Another bright spot was the small-caps Russell 2000, which climbed 1.14% for its fifth consecutive winning day, the first time it’s done so since July 13. That gives the index a 0.83% gain year to date — pretty remarkable if you remember it sank into the red for the year just over a week ago.
(Readers will notice this means both stocks and bonds moved in tandem — but their typically inverse relationship has been severed ever since the pandemic.)
“I think that move lower in yields has supported equity markets broadly. It may also be bringing relief to markets that perhaps there is some sort of peak in this rapidly upward moving yield in the last few weeks,” said Mona Mahajan, Edward Jones senior investment strategist.
Still, the Bank of England issued a rare warning on the valuation of U.S. technology stocks. “Given the impact of higher interest rates, and uncertainties associated with inflation and growth, some risky asset valuations appear to be stretched,” the U.K. central bank’s financial policy committee said Tuesday. And the high price premiums are “driven primarily by the continued strength in the U.S. tech sector,” the report added.
With September’s producer price index coming out later today, and the consumer price index Thursday, investors can better judge how much risk is worth taking — or if a safer asset like the U.S. Treasury bond makes more sense amid potentially higher rates and geopolitical upheaval.