S&P500 closes near flatline; Bond yields lift; US DOC plans to restrict chips

The S&P 500 closed near the flat line on Tuesday as investors analysed the latest bond yield moves and corporate earnings season gained steam.

The broad index slipped 0.01 per cent to end at 4,373.20, while the Nasdaq Composite slipped 0.25 per cent to 13,533.75. The Dow Jones Industrial Average added 13.11 points, or 0.04 per cent, to close at 33,997.65.

The 10-year U.S. Treasury yield topped 4.8 per cent, reaching its highest level since Oct. 6 — when it traded at 4.887 per cent. The move followed retail sales data that came in hotter than economists surveyed by Dow Jones had anticipated.

Rising yields have pressured the broader market in recent weeks as traders assess the prospects of tighter Federal Reserve policy for longer than expected. Investors have also considered the potential impact from the Israel-Hamas war on the global economy.

To be sure, a solid start to the third-quarter earnings season is helping ease concerns somewhat. Bank of America advanced more than 2 per cent on the back on a better-than-expected report. Bank of New York Mellon climbed nearly 4 per cent after also beating analyst forecasts in the quarter.

Beyond earnings, chip stocks including Nvidia and Advanced Micro Devices struggled in the session after the U.S. Department of Commerce announced plans to tighten restrictions on sales of advanced artificial intelligence chips to China.

Swap contracts tied to Fed rate decisions showed traders are now pricing in roughly 60 per cent odds that policymakers will raise interest rates by another quarter percentage point in January after holding steady in November and December, according to Bloomberg.

Turning to US sectors, mostly closed higher overnight. Materials was the best performer, whilst Tech was the worst.

In crypto-related news, Israeli law enforcement authorities have ordered dozens of cryptocurrency accounts to be closed and seized millions of dollars’ worth of crypto coins as they step up longstanding efforts to cut links between crypto markets and Hamas after its attack on the country.

In commodity-related news, prices for essential battery materials, including lithium, cobalt, and nickel, have sharply fallen this year due to reduced electric vehicle sales in China and increased supply. Lithium prices are down nearly 70 per cent, nickel prices have dropped 40 per cent, and cobalt is in oversupply with prices near record lows, driven by China's slowing electric car demand growth, which had doubled in early 2022 but has since slowed to a 25 per cent increase this year.

Swiss mining company Glencore will close its Mount Isa copper mining operations by the end of 2025, causing around 1000 job losses. Nevertheless, the company will keep its copper smelter in Mount Isa and Townsville refinery operational through third-party work to ensure profitability, while its zinc operations in Mount Isa will remain unaffected, as part of cost-cutting efforts amid economic uncertainty.

Germany has permitted France to use state subsidies for its nuclear power plants, ending a longstanding EU electricity market dispute. Energy ministers in Luxembourg reached an agreement, enabling France to support its state-owned nuclear facilities, despite objections from Germany, Austria, and Luxembourg over potential competitive advantages and historical opposition to nuclear power.

China's growing investments in South America's lithium resources, especially in the lithium triangle of Argentina, Chile, and Bolivia, highlight the hurdles for the US in challenging China's dominance in crucial battery metal supply chains. Chile's recent $233.2 million deal with Tsingshan Holding Group for lithium projects reflects this trend, as the US encourages global electric vehicle manufacturers to increase production in North America and secure essential minerals from sources beyond China.

Futures

The SPI futures are pointing to a 0.3 per cent gain.

Currency

One Australian dollar at 7:35 AM was buying 63.66 US cents.

Commodities

Gold added 0.06 per cent. Silver gained 1.01 per cent. Copper added 0.11 per cent. Oil gained 0.60 per cent.

Figures around the globe

European markets closed higher. London’s FTSE gained 0.58 per cent, Frankfurt added 0.09 per cent, and Paris closed 0.11 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei gained 1.20 per cent, Hong Kong’s Hang Seng added 0.75 per cent while China’s Shanghai Composite closed 0.31 per cent higher.

The Australian share market closed 0.42 per cent higher at 7,056.

Ex-dividends

K & S Corporation (ASX:KSC) is paying 8 cents fully franked
Newcrest Mining (ASX:NCM) is paying 174.0231 cents fully franked

Dividends payable

Nick Scali Ltd (ASX:NCK)
Super Retail Group Ltd (ASX:SUL)
Sims Ltd (ASX:SGM)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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