Markets bounce as Tesla surges, yields retreat

A look at the day ahead in U.S. and global markets from Mike Dolan

Markets caught a break on Thursday as the white heat of the corporate earnings season saw a beat for megacap Tesla that sent its shares surging 12% before the bell while bond yields beat a retreat on soft business surveys overseas.

There was also some wariness that recent pre-election trades betting on a win for Republican Donald Trump in next month’s White House race may be a tad premature. There’s still no clear indication from polling on how the close contest will break, with nearly 25 million early votes already cast, according to tracking data.

With U.S. flash business surveys for October and weekly jobless claims data due out later, the relentless rise in Treasury yields over the past week seemed to cool and 10-year yields fell back below 4.2% after the prior session’s Wall Street stock swoon.

Even though Federal Reserve easing projections over the next year have been pegged back by as much as 50 basis points over the past month, rate cut fever remains rife abroad.

The Bank of Canada sliced 50bps off its policy rates on Wednesday and sub-forecast euro zone business surveys for October continued to show the regional economy there in contraction this month, keeping speculation of accelerated European Central Bank easing alive.

In Japan too, business surveys showed shrinking activity this month and Bank of Japan governor Kazuo Ueda on Wednesday indicated he was in no rush to ‘normalise’ rates there further – even if he remained wary of excessive yen weakness.

Japan’s Finance Minister Katsunobu Kato then issued a warning against currency speculation on Wednesday, expressing concern over “one-sided, rapid” moves in the currency market.

With that and the cue from ebbing Treasury yields, the dollar retreated broadly from near three-month highs and dipped back below 152 yen.

For stocks, however, it was hard to see beyond the torrent of incoming earnings updates.

And Tesla’s beat stole the show overnight – lifting Wall Street stock futures by a half point or more ahead of Thursday’s open.

Shares in the electric vehicle giant shot up nearly 12% in pre-market trade after it forecast surging car sales growth and CEO Elon Musk reassured investors he was still looking to expand the company’s core EV business.

The stock jump set the company up to add around $80 billion to its market capitalization and will likely wipe out nearly all the year-to-date losses when trading resumes today.

But it wasn’t all sweetness and light on the corporate front and Boeing’s stock plunged 4% overnight on news that its factory workers voted to reject a contract offer and continue a more than five-week strike.

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