US open: Stocks slightly lower with all eyes on bond yields, Middle East

US stocks were slightly in the red on Monday morning as the yield on a 10-year US Treasury topped 5% for the first time in 16 years, while ongoing uncertainty surrounding the conflict in the Middle East continues to weigh on sentiment.

As of 1511 BST, the Dow Jones Industrials was edging lower by 0.11% to 33,086.63, alongside a 0.10% dip for the S&P 500 to 4,218.65 and a 0.17% decline on the Nasdaq Composite to 12,956.21.

In parallel, the yield on the benchmark 10-year U.S. Treasury note was under one basis point lower at 4.925%, having hit 5.022% in overnight trading.

At the weekend it was reported that Israeli military had conducted limited raids into Gaza to gather information and weaken pockets of Hamas terrorists.

In parallel, a spokesman for Israel's Defense Forces told ABC Radio Melbourne that the return of all hostages held by Hamas and the group's unconditional surrender would end the war.

Commenting on the recent sell-off of US Treasuries in recent weeks, analysts at Morgan Stanley said in an email that the "asymmetry in the market’s reaction to incoming data" has been particularly interesting.

"Upside surprises to growth have brought sharp increases in long-end yields, while downside surprises to inflation have met with muted rallies. To us, this means that for market participants, upside surprises to growth fuel doubts that the pace of deceleration in inflation is sustainable. In this context, it is no surprise that upside growth surprises have mattered more to long-end yields than downside inflation surprises."

The economic data calendar was looking pretty sparse for Monday's session, though things would pick up in the coming days with US PMIs, inflation, GDP and durable goods orders figures scheduled for release.

In company news, Chevron shares were down 2% on news that it was to acquire Hess in an all-stock transaction worth $53bn. The oil giant said the combined company will grow production and free cash flow "faster and for longer" than its current five-year guidance.

"This combination positions Chevron to strengthen our long-term performance and further enhance our advantaged portfolio by adding world-class assets," said Chevron's chairman and chief executive Mike Wirth.

Eyes were set to turn to tech stocks over the remainder of the week with Microsoft, Alphabet, Meta and Amazon all scheduled to release earnings over the next three days, followed by Apple during the following week.

"This week the US earnings season really hots up with earnings reports from a good chunk of the ‘Magnificent Seven’ of tech stocks who, like their cinematic counterparts, have been standing tall alone against a wave of malign forces this year," said AJ Bell investment director Russ Mould.

“Expect more chatter about AI but that alone may not be enough to sustain these stocks, with valuations allowing little margin for error when it comes to the hard currency of revenue and earnings. Even in-line numbers may result in raspberries from the market."

Dow Jones - Risers

Walgreens Boots Alliance, Inc. (WBA) $21.92 3.08%
American Express Co. (AXP) $143.37 1.27%
Merck & Co. Inc. (MRK) $103.62 0.93%
Goldman Sachs Group Inc. (GS) $302.02 0.66%
Boeing Co. (BA) $180.77 0.41%
JP Morgan Chase & Co. (JPM) $143.40 0.31%
Johnson & Johnson (JNJ) $153.27 0.18%
Microsoft Corp. (MSFT) $327.18 0.16%
Walmart Inc. (WMT) $159.01 0.15%
Procter & Gamble Co. (PG) $148.09 0.03%