All eyes were on government bonds Monday as the 10-year Treasury yield topped the 5% level for the first time since mid-2007. This sent stocks lower at the open, though the main indexes were in positive territory by lunchtime as yields on Treasury bonds pulled back.
Shortly after the opening bell rang, the major indexes were down between 0.7% and 1.0%, though all three ended the day well off their session lows as the 10-year Treasury yield fell back below 5%. The Nasdaq Composite outperformed its peersk, adding 0.3% to 13,018. The S&P 500 (-0.2% at 4,217) and the Dow Jones Industrial Average (-0.6% at 32,936) finished with modest losses.
"Bond yields are driving the markets right now, even more so than earnings," says David Bahnsen, chief investment officer at The Bahnsen Group, a California-based wealth management firm. "Bond yields help to determine the valuation of all risk assets and when investors can earn 5% on a government bond, that gives them an attractive alternative to stocks with lower risk."
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Today's economic calendar was bare, though this will change as the week wears on. Most notable among the economic reports to be released this week is Friday morning's personal consumption and expenditures (PCE), the Federal Reserve's preferred measure of inflation that tracks consumer spending.
The release of this report comes ahead of the next Fed meeting, which concludes the afternoon of Wednesday, November 1, with the central bank's latest policy announcement. According to CME Group, futures traders are currently pricing in a 99% chance the Federal Reserve will keep interest rates unchanged this time around.
Buffett stock Chevron drops on M&A news
While economic headlines were sparse today, there was plenty of single-stock news for market participants to take in. Oil major Chevron (CVX), for instance, drew plenty of attention after saying it will buy fellow energy firm Hess (HES, -1.1%) in an all-stock deal valued at $53 billion.
The Hess transaction diversifies Chevron's assets by adding exposure to Bakken and Guyana, areas Chevron does not currently have investment in, says Rob Thummel, senior portfolio manager at asset management firm Tortoise. "Chevron now has exposure to the highest growth oil and gas producing regions outside of the Middle East," Thummel notes.
Additionally, it will "extend further Chevron's free cash flow growth," said Pierre Breber, chief financial officer at Chevron, in a press release. "With greater confidence in projected long-term cash generation, Chevron intends to return more cash to shareholders with higher dividend per share growth and higher share repurchases." Still, CVX – a member of Warren Buffett's Berkshire Hathaway equity portfolio – fell 3.7% today.
This is the second major M&A announcement from a blue chip energy firm this month. On October 11, Exxon Mobil (XOM, -1.5%) said it will buy Pioneer Natural Resources (PXD, -1.5%) for nearly $60 billion in stock.
Meanwhile, Okta (OKTA, -8.1%) continued to tumble after last Friday's disclosure that the cybersecurity firm's customer support unit had been breached. Hackers gained access to "files uploaded by certain Okta customers as part of recent support cases," said David Bradbury, chief security officer of Okta, in a filing. Shares are now down nearly 19% since last Thursday's close.
Big Tech earnings on deck
Looking ahead, investors will get plenty of updates on the corporate front, with several Big Tech firms on this week's earnings calendar. First up are Alphabet (GOOGL, +0.7%) and Microsoft (MSFT, +0.8%), which are both scheduled to release results after tomorrow's close.
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