Here are five things you need to know this morning:
4.2: The U.S. 10-year yield touched 4.2 per cent this morning. Pretty stunning considering a month ago it was five per cent, and since then we have seen a global bond market rally so strong it is on track to be the best since 2008. Stocks have been taken along for the ride. The main catalyst for the rally yesterday was U.S. Fed Governor Christopher Waller saying that he is “increasingly confident” that policy is currently well-positioned to slow the economy and get inflation back to two per cent. That is all the doves needed. Chance of a rate cut in March rose to 35 per cent from 16 per cent. The chance of a rate cut by May was up to 86 per cent from 58 per cent. Against this backdrop, the U.S. dollar is down at a three-month low and that’s powering gold to a six-month high. This thesis, that we’ve done the work on inflation and rates will come down, is what is powering stocks and bonds right now. We will test this throughout the day with our guests on BNN Bloomberg.
Feeding night owls: We will watch shares of Alimentation Couche-Tard after sales and profit beat expectations. However, merchandise revenue at the convenience store and gas station operator came in below expectations in every geography. Merch sales fell a little in the U.S. and Europe. The company says weakness in the U.S. was driven by weakness in cigarettes and difficult comparisons. We will see how that clips in enthusiasm for a stock up more than 30 per cent so far this year and near all-time highs.
Rocket fuel: Shares of OpenText are popping in the pre-market after announcing it will be selling its AMC unit to Bain’s Rocket Software business for US$2.3 billion in cash. This gives OpenText some walking around money to pay down debt. OpenText says they are selling the mainframe business to focus on cloud and AI opportunities. It is interesting to see a private equity-backed player step in and do a deal in the environment.
Fancy footwork: Shares of Foot Locker are surging in the pre-market after results came in better than feared. Same-store sales only fell eight per cent compared to the nearly 10 per cent expected. Adjusted profit was also better than expected. At the same time, Foot Locker says sales won’t fall as much as initially forecasted in 2024. Clearly the fundamentals are still challenged, but recall the stock has already been under massive pressure and has more than 10 per cent shares outstanding that are short.
Revved up: Shares of General Motors are up right now after announcing a 33 per cent dividend hike and a US$10-billion share buyback. This is the biggest buyback General Motors has ever done and comes as the stock is languishing around a three-year low. It also comes shortly after a strike by its workers that resolved with a 25 per cent pay increase over the next four years. Clearly GM is trying to signal it can be both shareholder friendly and labour friendly. As a result, GM did lower its profit outlook for the year, citing higher compensation expenses. But today, investors are choosing to focus on the buyback and dividend.