Morning Bid: Risk and rates moving in tandem

Both long-term borrowing rates and riskier growth stocks of the Big Tech universe have climbed in tandem this week, a peculiar coincidence in price trends that typically offset each other.

While its often dangerous to over-interpret a few days of market developments, some argue investors are gradually pricing a more durable high-pressure economy ahead - one where demand and earnings growth stay brisk and keep credit policy and interest rates tight over the horizon.

Or it may just be a series of idiosyncratic news events.

Either way, it was enough to hand Wall St stocks (.SPX) their best day of the month on Monday just as 10-year Treasury yields eye recent 15-year highs again above 4.3% ahead of todays auction of new 10-year paper.

Although both stock futures and bond yields edged back a touch again on Tuesday ahead of the bell, the fact they are moving in tandem ahead of a critical week for macro policy is notable.

Curiously, it was the traditionally most interest-rate sensitive sectors that led Mondays stock rally, with the NYFANG+ index (.NYFANG) of mega cap tech and digital giants clocking a daily gain of more than 2% for the first time in September.

That jump was led by Teslas 10% surge (TSLA.O) after Morgan Stanley upgraded its stock recommendation to “overweight\” and said its Dojo supercomputer could boost the companys market value by nearly $600 billion.

The renewed excitement about a quantum leap in artificial intelligence also saw Meta Platforms (META.O) advance more than 3% after a report it was working on a more powerful AI system.

Cutting across that tech optimism overnight, however, were below-forecast estimates from Oracle (ORCL.N) - whose stock fell almost 10% after the bell as it flagged how a tough economy pressured cloud spending by businesses.

That sort of mixed messaging faces the Federal Reserve as it prepares to meet next week, with two critical macro updates to review over the next couple of days - the August consumer price inflation report on Wednesday and retail sales on Thursday.

Before we get there, investors await the often overlooked NFIB small business survey for last month - not least to see whether credit tightening is starting to bite beyond the mega caps for a part of the economy that employs more than half of all U.S. workers.

Overseas, European markets held up as this weeks European Central Bank meeting is awaited with economists split on its outcome.

Britains pound inched lower after data showed the UK labour market weakened even as wage growth stayed strong in July, painting a messy picture ahead of the Bank of Englands decision on rates next week.

The dollar (.DXY) was firmer more generally.

London-listed shares of Smurfit Kappa slumped 11% after the company agreed to combine with WestRock (WRK.N), to create one of the worlds largest paper and packaging producers worth nearly $20 billion.

Events to watch for on Tuesday:

* U.S. NFIB Aug survey of small businesses

* U.S. Treasury auctions 10-year notes

* U.S. corporate earnings: Optical Cable Corp, Altamira Therapeutics, InnovAge, Lesaka Technologies, Cognyte, Farmer Bros, Edgio, MamaMancinis