Stocks and Bonds Hold Firm, Investors Overlook Debt Outlook Downgrade

Barry Adams
13 Nov, 2023
New York City

Stocks on Wall Street lacked momentum, and investors looked beyond the latest U.S. credit rating downgrade.

Moody's Investors Service, one of the three key rating agencies, lowered its outlook to "negative" from "stable" but retained the U.S. debt rating at AAA, the highest level.

Three months ago, Fitch Ratings lowered its U.S. log-term credit default rating to AA+ from AAA, citing rising debt levels and interest rates, increasing polarization, and a lack of a stable budget process.

The U.S. federal government is expected to run out of cash on November 17, and lawmakers are struggling to pass even a short-term budget.

The U.S. House of Representatives, controlled by the Republican Party, is struggling to propose a spending bill to cover expenses for the next three months.

Rising interest rates and outsized defense budgets are expected to increase federal government spending in the current fiscal year, forcing the federal government to sell more debt and push interest rates even higher.

But the bond market took the latest debt rating views in strides, and Treasury yields were nearly unchanged in Monday's trading.

Investors are looking ahead to the release of the consumer price inflation index on Tuesday and the producer price index on Thursday.

 

U.S. indexes and Yields

The S&P 500 index was nearly unchanged at 4,414.09, and the Nasdaq Composite fell 0.1% to 13,786.19.

The yield on 2-year Treasury notes increased to 5.05%, 10-year Treasury notes inched higher to 4.63%, and 30-year Treasury bonds edged up to 4.76%.

Crude oil increased $1.14 to $78.29 a barrel, and natural gas prices rose 14 cents to $3.16 a thermal unit.

Gold increased $9.47 to $1,946.12 an ounce after bond yields traded in a narrow range. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.89.

 

U.S. Stock Movers

Boeing Co. jumped 3.8% to $204.0 after the airplane maker won an order for 95 planes from Emirates Airline.

The order is worth $52 billion at the list price.

The state-controlled airline, a subsidiary of Emirates Group, increased its order to 35 from 30 for 787  Dreamliners and ordered an additional 90 777X planes, increasing its order for widebody jets to 205 planes.

General Electric Co. edged up to $115.35 after Emirates Air confirmed an additional order for 202 GE9X engines, which will power 777X planes.

Monday.com soared 10.4% to $154.25 after the project management software company reported better-than-expected third-quarter results.

The company also raised its full-year sales estimate to between $723 million and $725 million, compared to its previous estimate of between $713 million and $717 million.

 

European Markets Advanced, Bond Yields Edged Lower 

European markets advanced on the first day of this week, and bond yields hovered near two-month lows.

Benchmark indexes in Frankfurt, London, and Paris edged higher after mixed trading in the previous week.

The CAC-40 index declined for the first time after advancing for seven weeks in a row, and market indexes in Frankfurt struggled to extend this year's gain.

Investors also looked ahead to inflation data from the U.S. and Eurozone later in the week.

 

German Current Account Surplus Expanded

Germany's current account surplus widened to €28.1 billion from €12.5 billion a year ago, the Bundesbank reported Monday.

The goods surplus soared to €22.5 billion from €11.1 billion, reflecting an 18.6% decline in imports and a 9.2% fall in exports, but the service sector deficit declined to €6.1 billion from €6.5 billion.

The primary income surplus rose to €15.8 billion from €12.4 billion, and the secondary income deficit fell to €4.0 billion from €4.5 billion a year ago.

 

Europe Indexes and Yields

The DAX index increased 0.7% to 15,345.0, the CAC-40 index advanced 0.6% to 7,087.06, and the FTSE 100 index added 0.9% to 7,425.83.

The yield on 10-year German bonds increased to 2.70%, French bonds traded higher to 3.27%, the UK gilts edged up to 4.31%, and Italian bonds inched lower to 4.53%.

The euro rebounded to $1.069, the British pound at $1.22, and the U.S. dollar at 90.20 Swiss cents.

Brent crude increased $1.20 to $82.61 a barrel, and the Dutch TTF natural gas edged higher by €1.24 to €47.87 per MWh.

 

Europe Stock Movers

Bilfinger SE added 1.9% to €36.02 after the civil and industrial construction and engineering company reiterated its annual outlook.

Salzgitter AG jumped 3% to €26.06 after the specialty steel company confirmed its fiscal year 2023 annual estimate.

Q.Beyond AG decreased 1.6% to €0.60 after the German software company reported a wider loss in the first nine months of the year.

The British Land Company soared 4.8% to 328.70 pence after the real estate company reported strong first-half results.

Tullow Oil plc soared 8% to 32.84 pence after the oil explorer entered into a five-year loan agreement with Glencore Energy UK Ltd.

Phoenix Group Holdings PLC advanced 6% to 492.40 pence after the UK-based insurance company lifted its cash generation target.

The company estimated cash generation at the upper end of the previously announced range between £1.3 billion and £1.4 billion.

The company declared a cash dividend of 26 pence per share, an increase of 5% from a year ago.

Insurance revenue increased to £2.9 billion from £2.6 billion, and loss attributable to shareholders declined to £245 million from £1.2 billion, and diluted loss per share fell to 27.1 pence from 130.4 pence a year ago.

Novo Nordisk AS advanced 3.2% to DKK 713.50 on a report that a trial showed its obesity drug Wegovy lowered the death risk.

The company announced the overall results of the trial in August but released details of the trial on Saturday at an industry conference organized by the American Heart Association.

The company asserted that overall cardiovascular problems declined by 20%, cardiovascular-related death by 15%, and heart strokes by 7%.

The trial covered 17,600 patients with obesity and existing heart disease without diabetes, and the trial did not look at the reasons for cardiovascular benefits and how much of that was contributed by weight loss.