Bonds Scream, Stocks Shrug 📈

Welcome back to the Day Trading newsletter 📈

The Nasdaq hit another record Monday even as the 10-year Treasury yield climbed to its highest level since 2002, a rare moment where Wall Street and the bond market are telling very different stories.

Let’s get into it 👇️ 

⛽️ Services activity cooled slightly in September, but the prices index hit its highest level in more than four years. The ISM services index slipped to 54.9 from 55.4, just under the 55.0 economists expected, while prices paid rose to 74.0, the highest since July 2022. Fuel costs were the most-cited concern.

💰️ Schneider Electric agreed to buy PTC for $22.6 billion in cash, and PTC shares jumped 33%. The $205-a-share offer is a 42.3% premium to Friday's close. PTC makes industrial software, a growing priority for Schneider. The deal is expected to close by the third quarter of 2027, pending approvals.

🇧🇷 Brazil's stock market jumped nearly 8% to a record after right-wing senator Flávio Bolsonaro topped the first round of the presidential election. He took about 47% of the vote to President Lula's 45%, with a runoff set for October 25. The real also rallied, as investors bet on tighter government spending.

🔻 C.H. Robinson agreed to buy rival freight broker RXO for $5.8 billion, and its own shares fell more than 10%. RXO holders get $17.25 in cash plus 0.0856 C.H. Robinson shares each, about $30.25 total and a 29% premium. RXO stock jumped more than 20%. The deal is expected to close in the first half of 2027.

💵 S&P Global cut Nike's credit rating one notch to A from A+ and kept a negative outlook. The agency cited a prolonged turnaround and a 26% drop in Greater China revenue last quarter, and expects Nike to burn about $1.2 billion in cash a year for the next two to three years.

🔼 Bitcoin climbed back above $86,000 Monday as the weak jobs report cooled bets on a Fed rate hike. CME FedWatch now shows an 80.6% chance rates hold steady, up from 29.1% a week earlier. Even so, bitcoin is still down about 29% from a year ago.

💉 Vaxcyte shares surged after its 31-strain pneumococcal vaccine met its goals in a Phase 3 trial. Pneumococcal bacteria cause pneumonia and other serious infections, so a late-stage win for the company's vaccine candidate is a major milestone. It was one of Monday's biggest movers on the Nasdaq.

🛢️ OPEC+ agreed to keep its November oil output targets unchanged, and U.S. crude slipped to around $89 a barrel. The group had been widely expected to hold, and the G7's pledge to release 100 million barrels from emergency stocks added to the easing mood. Export disruptions in the Middle East still cloud the outlook.

The 10-year Treasury yield, the rate the U.S. government pays to borrow for a decade, rose to about 5.3% on Monday, its highest level since 2002.

The move came just days after a weak jobs report, and stocks barely noticed.

The Nasdaq gained 1.05% to close at a record 27,477, and the S&P 500 added 0.66% to 7,774. The jobs report showed the economy added just 29,000 jobs in September and cut bets on another Fed rate hike, yet yields still climbed.

Higher yields are a headwind for stocks. When safe government bonds pay more than 5%, investors have less reason to hold expensive shares, and everything tied to borrowing, from mortgages to company debt, gets pricier.

Yields are rising because inflation worries are not fading: the ISM services survey's prices index hit 74.0 in September, its highest since July 2022.

So why are stocks shrugging it off?

Monday's rally was led by AI-linked giants like Nvidia, Meta and SpaceX, and investors are betting their growth will outrun higher borrowing costs.

What to watch:

• Wednesday brings minutes from the Fed's September meeting, which will show how much appetite officials had for another rate hike. Futures pricing on the CME FedWatch tool currently shows an 80.6% chance rates hold steady.

• If yields keep climbing, the AI trade faces a real test, and third-quarter earnings season, which gets going in earnest in mid-October, will show whether big tech's profits can justify the prices.

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.