Nasdaq, S&P, Dow reverse course and push higher even as yields climb

Major market averages opened up on Wednesday to the downside but have since reversed course despite yields topping new decade highs.

Early on and the Nasdaq (COMP.IND) is +0.1%, the S&P 500 (SP500) has gained 0.2%, and the Dow (DJI) is higher by 0.3%.

Rates have increased. The 10-year Treasury yield (US10Y) is up 7 basis points to 4.07% and the 2-year yield (US2Y) up 7 basis points to 4.51%. Moreover, at one point the 2Y topped levels not seen since 2007 and the 10Y notched a high not observed since 2008.

The S&P closed above 3,700 on Tuesday, which Citi says raises the odds of a squeeze with half the notional short positions on the index in the red.

“It’s interesting that we appear to be back in a ‘no news is good news’ dynamic for risk sentiment, given how long the bears have been in control for, though I’m still not convinced how prolonged the gains will prove to be,” Caxton’s Michael Brown said. “I’d have to see the S&P move north of the October high around 3,800 to become convinced that the move has legs.”

Netflix is gaining more than 10% after reversing two quarters of subscriber losses and topping estimates.

Oil prices are rising, helping related stocks, following a selloff in the previous session, despite President Joe Biden confirming the release of 15M barrels from the SPR.

U.K. gilts yields are moving higher again after consumer inflation rebounded to 10.1% annually, matching a 40-year high.

On the U.S. economic calendar, September housing starts and permits figures came in mixed. Starts came in at -8.1% M/M to 1.439M compared to the 1.475M expected number. Building permits on the other hand came in at +1.4% M/M to 1.564M versus the forecasted 1.550M.

“The reversal of the US housing market has led to collapsing sentiment, but as yet residential construction employment has not fallen,” UBS’ Paul Donovan said. “This may be misreporting (self-employment is poorly served by labor market data). It may also reflect underemployment – working fewer hours still counts as employment, but affected workers may need to seek second or third jobs.”

This afternoon, the Fed’s Beige Book of regional economic activity arrives. Investors will also be watching what once-dovish-now-hawkish Minneapolis Fed President Neel Kashkari has to say.

“The Beige Book prepared for the November FOMC meeting will likely remain more important than usual considering FOMC participants’ increased attention to anecdotal evidence in the current volatile data environment,” Nomu4a chief economist Richard Koo said. “The previous Beige Book, prepared for the September FOMC meeting, demonstrated surprisingly weak sentiment for both current conditions and expectations for future activity, thus lending support to our US recession call. Anecdotal information on consumer spending, inflation, wages and the broader outlook for growth are all likely to be of note.”

Among other active stocks, United Airlines is popping post-earnings with optimism on Q4.