Stock futures rose Wednesday after July's consumer price index matched Wall Street's forecasts, and Nvidia partner CoreWeave's earnings beat estimates. Bond-market strategists warned that rising Treasury yields and a possible leverage buildup could still complicate the rally ahead.
Stock futures rose Wednesday after July's inflation report matched Wall Street's forecasts, and Nvidia partner CoreWeave's earnings beat estimates. Bond-market strategists, however, warned that rising Treasury yields and a possible leverage buildup could still complicate the rally.
CPI meets estimates, futures climb
Dow futures rose 0.3% Wednesday, with S&P 500 futures up 0.4% and Nasdaq-100 futures climbing 0.8% ahead of the opening bell. The move came after the Labor Department said the consumer price index rose 0.1% in July, with a 3.4% annual increase. Core CPI, which excludes food and energy, climbed 0.2% on the month and 2.5% year over year — all four metrics in line with expectations. The 10-year Treasury yield ticked lower to 4.66% after the report.
CoreWeave leads earnings winners
CoreWeave shares soared more than 18% after the company reported a smaller-than-expected loss for the second quarter as operating margins improved. The company lost $1.14 per share, versus a 60-cent loss a year earlier, as revenue rose 112% to $2.58 billion. Wall Street analysts had predicted a loss of $1.20 per share on revenue of $2.555 billion.
Treasury yields flash warning signs
Even as stocks rallied, bond-market strategists cautioned that rising long-end yields could still weigh on equities. The 30-year Treasury yield traded as high as 5.281% on July 31, the highest reading since the summer of 2007, and has stayed just below that level since. Andrew Szczurowski of Morgan Stanley Investment Management pointed to shrinking overseas demand: foreign ownership of U.S. Treasury paper has declined to 23% from roughly 33% over the past decade. According to MarketWatch: "There is less official buying" by governments, he said.
A possible leverage buildup ahead
Citadel Securities strategist Scott Rubner said falling volatility could open the door for systematic funds to add leverage again now that the summer reset has run its course. Leveraged exchange-traded-fund assets have tumbled more than $60 billion from a June peak to $154 billion, while the Cboe Volatility Index has held near 15 after climbing above 20 in late July. Rubner added that September could bring a different dynamic, as seasonality gets harder and position crowding becomes possible.
Sources: Investor's Business Daily, MarketWatch.com, MarketWatch.com
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