Markets Risk-On as Amazon, OpenAI Announce Deal

Yields climb slightly following mixed Fed Commentary, Amazon & OpenAI deal. Treasury yields traded in a 2-3 bp range today after manufacturing data and Fed commentary were largely uneventful. Yields fell ~2 bps leading up to the ISM Manufacturing print but then climbed gradually throughout the afternoon, closing near intraday highs. 2-year and 10-year yields rose 3 bps today, now at 3.61% and 4.11%, respectively. Elsewhere, the S&P 500 ended up +0.17% and the NASDAQ +0.46% as tech stocks rallied on Amazon’s and OpenAI’s $38 billion deal, under which OpenAI is gaining access to hundreds of thousands of Nvidia GPUs.

US manufacturing falls for eighth straight month on soft demand. ISM manufacturing came in at 48.7 for the month of October, a contractionary level below estimates of 49.5 and September’s 49.1. Today’s print marks the eighth straight month of declining manufacturing activity in the US, predominantly pulled down by soft demand. In October, twelve manufacturing industries saw a decline in production, with textiles, apparel, and furniture leading the way, while only six sectors saw growth, including primary metals and transportation equipment. Alongside slowing manufacturing activity, ISM prices paid for raw materials came in at just 58, down nearly four points from September’s 61.9 and below expectations of 62.5. October’s price level is down almost 12 points from April, marking the lowest figure since President Trump’s tariff rollout and potentially offering a sign of easing inflation.

Fed outlook remains divided. In her first remarks since President Trump’s attempted ousting in August, Fed Governor Lisa Cook stated today that she sees weakness in the labor market as a greater risk than inflation, labeling last week’s rate cut as appropriate. Cook also emphasized that the “effect of tariffs on prices…should represent a one-time increase.” However, Fed officials continue to diverge on their policy outlooks, and Chicago Fed President Austan Goolsbee took the opposing stance, saying he is more concerned about inflation than unemployment. Despite her dovish remarks, Cook stopped short of endorsing another rate cut in December, saying that each FOMC meeting is “live” and that there is no predetermined course of action. Similarly, San Francisco Fed President Mary Daly warned that officials should “keep an open mind” about next month’s policy meeting.