Treasury Yields Spike Before the Fed
The 10-year Treasury yield climbed above 5%, its highest level since 2007, as investors kept selling government debt ahead of tomorrow's Federal Reserve decision. The yield rose as much as 8 basis points to around 5.04%. The 30-year Treasury yield climbed above 5.4%, also the highest since 2007.
Rising oil prices added to inflation worries and strengthened expectations that the Fed could raise rates tomorrow. Higher long-term yields also pressure stocks by raising borrowing costs and lifting the discount rate investors use to value equities.
The FOMC decision comes tomorrow at 2 p.m. Eastern, with the press conference at 2:30. Traders are pricing in a nearly 95% chance the Fed raises rates by 25 basis points. Tomorrow morning also brings retail sales, import and export prices for more inflation data, and mortgage applications as part of this week's household data. One guest suggested that softer retail sales could actually help the Fed.
Clarity Act Fails in the Senate
The Senate voted on the Clarity Act this afternoon. The 600-page bill failed to reach the 60-vote threshold, with a procedural vote of 49 to 50. It failed to win even a majority, a major blow to the crypto industry. The industry now turns to regulators at the SEC and the CFTC, who are working on initiatives meant to provide enough regulatory stability to bring more investors off the sidelines until an updated Clarity Act or new regulation is signed into law.
SoftBank Secures OpenAI Financing
SoftBank (SFTBY) staged a rebound after reportedly securing a near $12 billion loan to support its investment in OpenAI. According to Bloomberg, SoftBank sealed a 2-year facility last week from around 20 banks. Shares had sold off the most since July the prior day on talk of an AI slowdown and a delay of the OpenAI IPO.
SB Energy, the data center company backed by SoftBank, is now looking to raise up to $500 million specifically from Japanese investors. That tranche is the domestic portion of its upcoming US IPO on the NASDAQ. The company will begin taking orders as early as this month and will use the funds to build data centers and power plants. It traded up about 9%.
Chinese Tech Outperforms
Chinese ADRs again outperformed the broader tech sector despite mixed economic data overnight. Tencent (TCEHY) and Baidu (BIDU) rallied, matching the domestic session overnight, after a bullish note from Morgan Stanley (MS) on China's consumer-facing AI sector. Analysts there project the domestic market to reach 300 billion yen by 2030. They see Tencent as a beneficiary of consumer adoption thanks to its WeChat social media app. Baidu remains a top pick from Morgan Stanley based on its full-stack AI and LLM capabilities, including its Qwen model.
