The Daily Breakdown looks at how a fall in Treasury yields is helping to drive stocks, bonds, and crypto higher.
Wednesday’s TLDR
- Lower yields are helping stocks, bonds, and crypto.
- Hewlett Packard Enterprise pop on earnings.
- Carnival Cruise hits multi-month high.
What’s happening?
We’ve talked about the 10-year Treasury yield and its importance to the market several times this year.
This was the most recent 🔗 = https://etoroprod.wpengine.com/en-us/news-and-analysis/market-insights/the-daily-breakdown/how-rising-yields-impact-stock-prices/
Bonds and bond yields may not be the most glamorous topic, but it’s a pretty big deal to Wall Street when it comes to stocks, bonds, and crypto prices lately.
With mixed economic data to start the week, followed by weaker-than-expected jobs data yesterday, bond yields are back under pressure as investors flock back into bonds and speculate on the Fed increasing their willingness to cut interest rates.
As bond prices go up, yields go down. And for now, as yields go down, risk assets like stocks and crypto are going up. Remember, that relationship isn’t a one-to-one correlation and how closely investors watch the 10-year yield changes over time.
But for now, weakening yields — and higher odds of Fed rate cuts later this year — are giving a boost to the S&P 500 and Bitcoin, which both sit just below record highs. It’s also as Bitcoin leans on a key potential breakout level.
All I’m saying is, keep an eye on the 10-year Treasury yield — it’s likely having a bigger impact than you think.
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The setup — HPE
As part of a spinoff from HP Inc., Hewlett Packard Enterprise began publicly trading in 2015. However, the stock has mostly been stuck between $12 and $18, with a few temporary overshoots of those levels over the years.
When HPE has overshot on the upside, it would lose momentum between $19 and $20. After reporting better-than-expected earnings results on Tuesday, investors are wondering if it’s finally time for HPE to break out of this range.
Specifically, they’re wondering if HPE can get above and stay above the $20 level.
Shares are higher by about 15% in pre-market trading, so I don’t necessarily want to chase HPE. However, a rally of this magnitude lands Hewlett Packard Enterprise on my watchlist going forward.
Fresh record highs could help establish a strong long-term trend. As long as the stock can stay above the $18 to $19 area, it could become a buy-the-dips name going forward.
Options
For options traders, calls or call spreads could be one way to buy the dip if and when HPE pulls back. In these scenarios, options buyers limit their risk to the price paid for the calls or call spreads, while trying to capitalize on a bounce in the stock.
Conversely, investors who expect downside could speculate with puts or put spreads.
To learn more about options, consider visiting the eToro Academy.
What Wall Street is watching
CCL — Carnival shares surged as the company announced the integration of P&O Cruises Australia into Carnival Cruise Line. This strategic merger is part of efforts to enhance capacity and strengthen its flagship brand.
XLE — Following a drop in oil prices, energy stocks declined after OPEC+ revealed plans to gradually reduce production cuts by 2.2 million barrels per day from October 2024 to September 2025. The Energy Select Sector SPDR Fund dropped almost 1% on the day, after being down as much as 2.3%.
HPE — Shares of HPE are flying higher this morning after the firm reported Q2 earnings of 42 cents a share, beating expectations of 39 cents a share. Revenue of $7.2 billion grew 3.3% year over year and topped estimates of $6.83 billion. The company also delivered strong guidance for Q3, with revenue expected to be in the range of $7.4 billion to $7.8 billion vs. consensus estimates of $7.45 billion.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.