Finance

The USS Truxtun (DDG-103) destroyer sits in dry dock at the General Dynamics Corp. NASSCO shipyard facility on the Elizabeth River in Norfolk, Virginia, on Jan. 9, 2018.
Luke Sharrett | Bloomberg | Getty Images

Check out the companies making headlines in midday trading.
Spotify — Shares of the music streaming service company fell 2.5% after Redburn Atlantic downgraded the streaming giant to neutral from buy. The firm said Spotify’s new audiobook offer doesn’t fit into its original forecast for margin expansion, while simultaneously stoking competition from Amazon.

Zscaler — Shares of the cloud security company rallied 4.2% following an upgrade to an overweight rating from Barclays. As a catalyst, analyst Saket Kalia cited a new growth opportunity in the secure access service edge, or SASE, cybersecurity segment.
Mirati Therapeutics — Shares of the cancer drug company fell more than 5% after Bristol Myers Squibb announced a deal to acquire Mirati for $48 per share, plus a contingent value right worth up to $12 per share. Mirati’s stock closed at $60.20 per share Friday.
Tesla — The automaker’s stock fell 2.3% in Monday trading upon news that the company’s year-over-year sales declined 10.9% in China last month, according to data from the China Passenger Car Association.
On Holding — The sneaker maker rose more than 1% after Baird upgraded the stock to outperform from neutral. The firm said On’s recent investor day reinforced its confidence in the brand’s health and upcoming three-year pipeline of growth.
Motorola Solutions — Motorola added 3.3% after Bank of America initiated the stock at a buy rating. The bank cited solid pricing power, strong growth and a sustainable order pipeline.

Datadog — Datadog dropped 3.6% after Bank of America downgraded the cloud stock to neutral from buy, citing downside revenue risk from demand checks.
Oil stocks — Energy stocks soared following the escalation of the Israel-Hamas conflict over the weekend. Shares of Halliburton, CF Industries and Hess each respectively rose 6.5%, 5.5% and 5%.
Defense stocks — Similar to the energy sector, defense stocks also rallied on the back of rising conflict between Palestine and Israel. Northrop Grumman, L3Harris Technologies and General Dynamics respectively soared 10.8%, 9.1% and 8.4%.
Airline stocks — On a broader level, airline names were down after several major airlines suspended service to Israel following this weekend’s attacks. United Airlines slid 5.3%, while Delta Air Lines and American Airlines shed 4.5% and 5.3%, respectively.
— CNBC’s Yun Li, Tanaya Macheel, Sarah Min and Jesse Pound contributed reporting. More

An Exxon gas station sign in the Brooklyn borough of New York City, Oct. 6, 2023.
Michael M. Santiago | Getty Images

Check out the companies making headlines before the bell:
Walt Disney — Shares of the media giant rose more than 1% after The Wall Street Journal reported that activist investor Nelson Peltz’s Trian Fund Management has hiked its stake and could seek multiple board seats, including for himself. Trian’s stake is now worth north of $2.5 billion after it added more than 30 million shares from just 6.4 million at the end of June, the Journal reported. Trian declined to comment.

Arm Holdings — Shares of the chipmaker climbed nearly 3% after JPMorgan initiated coverage with an overweight rating and lauded the company’s potential expansion into autos.
Spotify Technology — The music streaming platform fell 2% after Redburn Atlantic downgraded shares to neutral from buy. The firm cited factors including gross margin dilution from the company’s recent decision to include audiobooks in its premium subscription package.
Zscaler — The stock edged higher after Barclays upgraded the cloud security company to overweight rating. Analyst Saket Kalia cited a new growth opportunity in an emerging segment as a reason for the upgrade.
Oracle — Shares added about 1% after Evercore ISI upgraded Oracle to outperform from in line. The Wall Street firm said the software stock is at an attractive entry point after its recent pullback.
Exxon Mobil, Chevron, Occidental Petroleum — Energy stocks popped as oil prices rallied following the Palestinian militant group Hamas’ attack on Israel over the weekend. Exxon and Chevron were up more than 2%, and Occidental gained more than 3%.

Blue Owl Capital — Shares of the investment company dropped 2.6% after Oppenheimer downgraded Blue Owl Capital to perform from outperform.
Mirati Therapeutics — Shares of the commercial stage oncology company slipped 4.7% after Bristol Myers Squibb announced Sunday that it will acquire Mirati for $58 per share in cash, for a total equity value of $4.8 billion. Mirati is known for its Krazati lung cancer medicine, which Bristol Myers Squibb will add to its commercial portfolio.
Tesla — Tesla shares fell more than 1% after data from the China Passenger Car Association showed the company saw a 10.9% year-over-year sales decline in China last month. Meanwhile, rival BYD’s sales grew more than 40%.
Lockheed Martin — The aerospace and defense company saw shares rise about 4.5% in premarket trading following the surprise attack on Israel by Hamas.
— CNBC’s Brian Evans, Lisa Kailai Han, Fred Imbert, Hakyung Kim, Yun Li, Tanaya Macheel and Pia Singh contributed reporting. More

The U.K.’s Metro Bank on late Sunday announced it had secured a £325 million ($395.6 million) capital raise and £600 million in debt refinancing, as Colombian businessman Jaime Gilinski Bacal becomes its majority shareholder.
Some bondholders will take a 40% haircut, as the bank restructures its debt, while also discussing the sale of up to £3 billion of residential mortgages.
Shares were up 26% Monday morning after volatile trade last week.

A close-up of a sign of Britain’s Metro Bank.
Matthew Horwood | Getty Images

LONDON — Shares of the U.K.’s Metro Bank were sharply higher Monday morning, after the lender on late Sunday announced it had secured a £325 million ($395.6 million) capital raise and £600 million in debt refinancing.
The capital raise includes £150 million of new equity and £175 million of “MREL” issuance, a form of bail-in debt. The bank said it will also undergo a debt restructuring that will extend the maturity of its borrowings. Holders of its £250 million of tier 2 bonds, due in June 2028, will take a 40% haircut.

Metro Bank shares were 25.5% higher at 10:28 a.m. London time.
The deal comes after investors were last week spooked by news that the bank was searching for a large financing package. Crunch talks took place over the weekend, with several large banks approached for potential offers, according to multiple reports.
The raise was led by Colombian banker and real estate developer Jaime Gilinski Bacal — an existing shareholder through Spaldy Investments Limited — which contributed £102 million to the initiative. Gilinski Bacal is now the bank’s controlling shareholder with a 53% stakehold.
“The opportunity to become the bank’s major shareholder is driven by my belief in the need for physical and digital banking underpinned by a focus on exceptional customer service,” he said in a statement.
“I believe that the package announced today enables the Bank to pursue growth and build on the foundational work undertaken over the past three years.”

Stock chart icon

Metro Bank share price.

Metro Bank said the raise will provide the opportunity to shift towards specialist mortgages and commercial lending, as well as continuing growth in current accounts and raising deposits.
The bank further said it is in discussions over the sale of up to £3 billion of residential mortgages.
Regulators last month said they were unlikely to allow Metro Bank to use its own internal risk models for some mortgages — raising concerns for investors, as this would result in higher capital requirements.
Shares of the London-based bank were highly volatile and finished 22.5% lower last week, according to LSEG data.
The challenger bank launched in 2010 and has a market capitalization of less than £100 million. It faced a major blow in 2019 when a major accounting error resulted in the resignation of its founder and in fines for its former CEO and CFO.
A number of ratings agencies and investment banks downgraded the bank’s stock amid the turbulence last week, with investment bank Stifel saying it may have capital needs of up to a billion over the next two years.
“Not the best possible outcome for shareholders and bondholders by any stretch but it does secure [Metro Bank]’s longevity as an independent institution and no one loses everything,” John Cronin, head of financials research at Goodbody, said in a note Monday.
Cronin said that the capital package still requires support from these parties, with bondholders taking a “deep haircut” and shareholders suffering material dilution under the current deal terms. However, he said recent deposit outflows and the challenges of coming up with an alternative plan quickly may push the deal over the line, even if they “feel aggrieved at this outcome.” More

China’s big “Golden Week” holiday saw domestic tourism rebound to around pre-pandemic levels, while overseas travel had yet to fully recover.
On a per capita basis, domestic tourism spending returned to 98% of 2019 levels, much higher than the 85% figure seen during holidays earlier in the year, Morgan Stanley analysts pointed out.
The uptick in Chinese tourism comes as the country’s rebound from the Covid-19 pandemic has slowed, dragged down in part by a property market slump.

Passengers return from Nanjing Railway Station in Nanjing, Jiangsu province, China, Oct 6, 2023.
Nurphoto | Getty Images

BEIJING — China’s big “Golden Week” holiday saw domestic tourism rebound to around pre-pandemic levels, while overseas travel had yet to fully recover, according to official figures.
Those numbers for the eight-day holiday that ended Friday also came in lower than the government had initially predicted.

Golden Week domestic tourism revenue was 753.43 billion yuan ($103.24 billion) — a 1.5% increase from that in 2019, according to China’s Ministry of Culture and Tourism. The number of domestic tourist trips rose by 4.1% from 2019 to 826 million during the latest eight-day holiday, the ministry said.
Both figures were lower than what Chinese state media had earlier cited the ministry as predicting: 896 million trips and 782.5 billion yuan in domestic tourism revenue.
However, the final tourism revenue figure still marked a rebound to 2019 levels for the first time since China ended its Covid-19 restrictions late last year, Morgan Stanley’s Chief China Economist Robin Xing and a team pointed out in a note Friday.

They added that on a per capita basis, spending returned to 98% of 2019 levels, much higher than the 85% figure seen during holidays earlier in the year.
“This is likely due to an extra-long Golden Week holiday (eight days vs. seven usually), which encouraged long-distance travel and thus boosted average spending,” the Morgan Stanley analysts said.

This year, the traditional Chinese Mid-Autumn Festival and the Oct. 1 National Holiday were close enough that Beijing declared an eight-day holiday from Friday, Sept. 29 to Friday, Oct. 6, the official dates of this year’s Golden Week.
That meant the subsequent Saturday and Sunday were officially working days, but some businesses did not resume work until Monday.
In a country where businesses typically only provide a handful of paid vacation days, the week-plus break also meant more people chose to travel overseas.
The National Immigration Administration recorded about 11.8 million trips in and out of mainland China during the holiday, for a daily average of nearly 1.5 million trips — that’s 85.1% of 2019 levels.
That was also below earlier predictions, reported by state media, which forecast nearly 1.6 million trips across the border a day.
Chinese travel booking site Trip.com Group said outbound travel during the holiday surged by more than eight times versus a year ago, with people in their mid-20s to early 30s accounting for nearly 30% of such travelers.
Top destinations included Thailand, Singapore, Malaysia and South Korea, Trip.com said. It noted that Switzerland, Spain, Turkey, the U.K. and France saw the fastest growth in tourist numbers versus China’s Labor Day holiday in May.
Trip.com did not provide comparisons to 2019. CEO Jane Sun previously told CNBC’s Eunice Yoon that long wait times for visa applications — such as two to six months to visit Europe — are keeping people in China from traveling internationally as much as they’d like to.

Read more about China from CNBC Pro

The uptick in Chinese tourism comes as the country’s rebound from the pandemic has slowed, dragged down in part by a property market slump.
“The National Day golden week tourism data, together with the still above-50 September services [purchasing managers indexes], suggest the services recovery has decelerated but continues,” Goldman Sachs analysts wrote in a note Sunday.
“We believe additional policy easing will be necessary for further recovery in consumption and services, especially given the continued property downturn and still-dampened confidence,” the report said.
The analysts maintained their China GDP forecast of 5.4% for the year. More

“We call on relevant parties to remain calm, exercise restraint and immediately end the hostilities to protect civilians and avoid further deterioration of the situation,” China’s Ministry of Foreign Affairs said in a statement Sunday about the “escalation of tensions and violence between Palestine and Israel.”
China did not mention the Palestinian militant group Hamas, which controls the Gaza Strip and has been designated a terrorist group by the U.S. and the European Union.
“The fundamental way out of the conflict lies in implementing the two-state solution and establishing an independent State of Palestine,” the Chinese foreign ministry said.

Smoke rises following Israeli strikes in Gaza, October 8, 2023. 
Mohammed Salem | Reuters

BEIJING — China called for a ceasefire in the Israel-Hamas conflict — and for “establishing an independent State of Palestine,” according to a Ministry of Foreign Affairs statement Sunday.
“The fundamental way out of the conflict lies in implementing the two-state solution and establishing an independent State of Palestine,” the Chinese foreign ministry said.

Its online statement described the situation as an “escalation of tensions and violence between Palestine and Israel.”
It did not mention the Palestinian militant group Hamas, which controls the Gaza Strip and has been designated a terrorist group by the U.S. and the European Union.
According to NBC News, at least 700 people in Israel have been killed since Hamas militants infiltrated Israel on Saturday and abducted dozens, including civilians. Israel responded with counteroffensive strikes on Gaza, with the latest death toll at 370, according to the Palestinian health ministry.
“We call on relevant parties to remain calm, exercise restraint and immediately end the hostilities to protect civilians and avoid further deterioration of the situation,” the Chinese foreign ministry said.
“The international community needs to act with greater urgency, step up input into the Palestine question, facilitate the early resumption of peace talks between Palestine and Israel, and find a way to bring about enduring peace,” the statement added. “China will continue to work relentlessly with the international community towards that end.”

On Monday, China’s permanent representative to the United Nations, Zhang Jun, took a more pointed stance on the developing conflict by saying “China condemns all violence and attacks against civilians.”
That’s according to a CNBC translation of the Chinese-language comments on X, formerly known as Twitter. More

There may be advantages to owning corporate bonds right now.
JPMorgan’s Bryon Lake believes his firm’s Ultra-Short Income ETF (JPST) is ideal for those looking to make money outside the volatile stock market.

“Some of the corporates got higher quality than the U.S. government [bonds] right now,” he told CNBC’s “ETF Edge” this week.
Lake, JPMorgan’s global head of ETF Solutions, also sees the firm’s active management strategy as an advantage of owning the JPST.
“We’re only taking on six-month duration, and so we got it nice and tight in there, so you’ve got very attractive credit quality,” he said.
The JPST has $23 billion in assets under management and has an “A” fund rating, according to FactSet. However, gains have been anemic. The fund’s performance is virtually flat year to date.
But that could be about to change.

Strategas Securities’ Todd Sohn also likes corporate bonds, citing the the monetary policy backdrop.

‘This is candy’

“As long as you’re in this higher-for-longer environment, this is candy — especially after not having it for 10-plus years during the QE [quantitative easing] era. You now just put a bowl of M&Ms in front of a child and can get that 5% … . That’s the analogy I like to use,” said Sohn, the firm’s managing director and technical strategist. “The TLT (iShares 20+ Year Treasury Bond ETF) has the same standard deviation as the S&P 500 roughly right now.”
Sohn said that factor is a key reason why money market funds and short-duration products are attractive.
“Duration makes sense when the [Federal Reserve] is done hiking in anticipation of cuts,” Sohn said. “But if no cuts are coming, I don’t think you want that volatility. It’s not fun to sit in.”
The TLT is down almost 15% so far this year and off 25% over the past five years.

Disclaimer More

The Tesla logo is seen on a charger station in Virginia on Aug. 16, 2023.
Celal Gunes | Anadolu Agency | Getty Images

Check out the companies making headlines in midday trading.
Pioneer Natural Resources — The energy stock added nearly 10.5%. The action comes after The Wall Street Journal reported that Exxon Mobil is close to a deal to acquire Pioneer for about $60 billion. Exxon shares slid 1.7%.

Tesla — Shares of the electric vehicle company added 0.2% after Tesla cut the price of some Model 3 and Model Y versions in the U.S. Tesla began slashing prices on its cars across the world at the end of last year in a bid to stoke demand. Tesla also reported third-quarter deliveries that missed market expectations.
Levi Strauss — Shares slid 0.8% after the denim apparel maker cut its full-year sales forecast. Late Thursday, Levi posted fiscal third-quarter revenue that missed expectations, and it cut its full-year sales guidance again. Levi’s CEO said consumers were buying fewer items due to inflation and rising mortgage and gas prices.
MGM Resorts — The resort and casino operator rose 4.9% after offering an update on a cybersecurity issue experienced last month. Late Thursday, MGM said the cyberattack it suffered in September would cost the company about $100 million, but it expects the effect beyond the third quarter would likely be “minimal.” The company said any effect on full-year financial conditions and operational results won’t be material.
Freedom Holding — Shares rose about 1.5% after CNBC reported that the financial services company was under investigation by federal prosecutors and the Securities and Exchange Commission. The company is being probed over compliance issues, insider stock moves and an offshore affiliate.
Philips — U.S.-listed shares fell 7.2% a day after the U.S. Food and Drug Administration said Philips’ handling of its sleep apnea device recall in 2021 wasn’t adequate. The FDA is requiring additional testing on the machines, known as CPAP devices.

Aehr Test Systems — The semiconductor test system provider tumbled 12.6%. On Thursday, Aehr reaffirmed its guidance for full-year revenue of at least $100 million, while analysts polled by FactSet called for $102.9 million.
Apellis Pharmaceuticals — The pharmaceutical stock gained 3.5%. JPMorgan upgraded Apellis to an overweight rating, saying its eye disease treatment could boost shares more than 100%.
e.l.f. Beauty — The cosmetics retailer added 3.5% following a Jefferies upgrade to buy from hold. The firm said e.l.f. is “the leader in bringing ‘first to mass’ items to market.”
Liberty Media Formula One — Shares of the motorsports stock advanced 3.6% following an upgrade to buy from neutral by Citi. The bank said concerns around the Las Vegas Grand Prix are overblown.
Frontdoor — The home repair company’s shares climbed 4.4% on the back of a Truist upgrade to buy from hold. Truist said Frontdoor’s shares are trading at attractive levels.
MarketAxess — Shares jumped about 5.8% after UBS initiated coverage of the fixed income trading platform with a buy rating. The firm described MarketAxess as a “pure-play on the electronification of credit trading, which remains early stage.”
AES — The utility provider dropped 1.3% to a new 52-week low Friday, a day after UBS downgraded the stock to neutral from buy and significantly cut its price target. UBS said the company should be pressured by rising interest rates and an earnings deceleration in the infrastructure business as coal shuts down.
— CNBC’s Pia Singh, Yun Li, Michelle Fox and Samantha Subin contributed reporting. More

Investors have piled into short-term U.S. government bonds in a bid to wait out the upheaval caused by a blowout in longer-term yields, according to Lindsay Rosner of Goldman Sachs.
An auction this week of 52-week Treasury bills at a 5.19% rate was 3.2 times oversubscribed, its highest demand of the year, Rosner said.
“They’re saying, ‘I’m now being afforded a lot more yield in the very front end of the curve in government paper’,” Rosner told CNBC in a phone interview, referring to 1-year T-bills.

A Goldman Sachs Group Inc. logo hangs on the floor of the New York Stock Exchange in New York, U.S., on Wednesday, May 19, 2010.
Daniel Acker | Bloomberg | Getty Images

Investors have piled into short-term U.S. government bonds in a bid to wait out the upheaval caused by a blowout in longer-term yields, according to a Goldman Sachs executive.
An auction this week of 52-week Treasury bills at a 5.19% rate was 3.2 times oversubscribed, its highest demand of the year, said Lindsay Rosner, head of multi-sector investing at Goldman Sachs asset and wealth management.

“They’re saying, ‘I’m now being afforded a lot more yield in the very front end of the curve in government paper’,” Rosner told CNBC in a phone interview, referring to 1-year T-bills. “That is really where you’re seeing investors flock.”
The trade is a key way that institutions and wealthy investors are adjusting to the surge in long-term interest rates that have roiled markets lately. The 10-year Treasury yield has been climbing for weeks, reaching a 16-year high of 4.89% Friday after the September jobs report showed that employers were still hiring aggressively. Investors poured more than $1 trillion into new T-bills last quarter, according to Bloomberg.

The playbook, according to Rosner, takes advantage of the presumption that interest rates will be higher for longer than markets had expected earlier this year. If that sentiment holds true, longer-duration Treasuries like the 10-year should offer better yields next year as the yield curve steepens, she said.
“You get to collect a 5% coupon for the next year,” she said. “Then, in a year, you may have opportunities [in longer-duration Treasuries] at greater than 5% in government securities or potentially in [corporate bonds] that are now properly priced.
“You could then get a double-digit yield, but be confident about valuation, unlike now,” she added.

While 10-year Treasuries have crashed in recent weeks, other fixed income instruments including investment-grade and high-yield bonds haven’t fully reflected the change in rate assumptions, according to Rosner. That makes them a bad deal for the moment, but could create opportunities down the road.
The upheaval that’s punished holders of longer-dated Treasuries in recent weeks has professional managers reducing the average duration of their portfolios, according to Ben Emons, head of fixed income at NewEdge Wealth. 
“Treasury bills are in high demand,” he said. “Anyone out there who needs to manage duration in their portfolio, you do that with the 1-year T bill. That’s what BlackRock is doing, it’s what I’m doing.” More