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Tech sets a record, but bond yields keep climbing

The day in one line: The Nasdaq closed at a record on Monday, lifted by two big takeover deals and tech strength, even as the US 10-year bond yield rose to its highest close in about 24 years. Futures are higher this morning and oil is falling.

What moved and why

1. Stocks climbed toward records. The S&P 500 rose 51.23 points, or 0.66%, to 7,773.95, within 0.3% of its all-time high set this summer. The Nasdaq gained 286.45 points, or 1.05%, to 27,477.31, a record close. The Dow rose 90.94 points, or 0.18%, to 51,267.90. The Russell 2000 of smaller companies gained 0.50% to 2,847.14. So far this year the S&P 500 is up 13.6% and the Nasdaq 18.2%. This morning, S&P 500 futures are up about 0.25%, Dow futures about 0.4% and Nasdaq futures about 0.4%.

2. Deal Monday. Two large buyouts helped the mood. French industrial group Schneider Electric agreed to buy US software maker PTC for US$22.6 billion in cash. PTC shares jumped 33% to US$192.26. Freight broker C.H. Robinson agreed to buy rival RXO for US$5.8 billion in cash and stock, a 29% premium to RXO's Friday price. Here the buyer's shares fell: C.H. Robinson dropped about 11%, as investors worried about cost and dilution (new shares that shrink each existing holder's slice).

3. Bond yields hit new highs. The US 10-year Treasury yield rose to about 5.31%, its highest close in about 24 years. The 30-year yield reached about 5.66%. A global sell-off in government bonds is pushing yields up around the world, driven by worries about government debt and inflation. High yields raise borrowing costs for companies, homebuyers and governments. So far, stock investors have looked past it.

4. US services keep growing, but prices are hot. The ISM services index, a monthly survey of service businesses, came in at 54.9 for September, down from 55.4 in August and just below the 55.0 forecast. Any reading above 50 means growth. The worrying part: the prices-paid gauge rose to 74.0 from 72.6, the highest since July 2022. That means service companies are paying more, which can feed inflation. The employment gauge edged up to 50.1.

5. Oil slides as Middle East exports recover. US crude (WTI) was down about 2% to 2.5% early Tuesday, trading between about US$87.14 and US$87.77 a barrel. Brent, the global benchmark, was near US$97.66 to US$98.67, down from about US$102.90 on Monday. Middle Eastern crude shipments have recovered to 17.5 million barrels a day, about 98% of pre-war levels, according to Trading Economics. Saudi Arabia also cut its prices for Asian buyers, and Group of Seven countries are releasing 100 million barrels from emergency stocks over four months.

6. Gold up, gas steady. Gold rose about 0.7% to 0.9% early Tuesday, to about US$4,176 to US$4,186 an ounce. A weaker US jobs report on Friday cut the odds of an October Fed rate hike, which helps gold. US natural gas is about US$3.07 per million BTU, near flat, supported by cooler weather forecasts for mid-October and strong export demand.

Canada corner

TSX flat as tech offsets oil. The S&P/TSX Composite rose 15.90 points, or 0.04%, to 35,518.55, its second straight gain (final figure pending confirmation, see notes). Tech stocks jumped 3.74%, led by Shopify, which rose 5.70% to C$228.17 for a sixth straight gain. Financials fell 0.53% and telecoms 0.85%. Scotiabank fell 0.92% and Bank of Montreal 0.68%.

Cenovus buys Athabasca Oil. Cenovus Energy agreed to buy Athabasca Oil for about C$5.7 billion. Athabasca holders can take C$12 cash or 0.264 Cenovus shares for each share, with limits on the total cash and stock. Athabasca produces about 40,000 barrels a day, and Cenovus aims to grow that to 115,000 by 2032. Investors worried the deal will push Cenovus's debt above its target for a while. Cenovus fell 4% to C$44.41; Athabasca rose about 14% to C$12.04. The deal is expected to close in December. It is Cenovus's second big purchase in under a year, after MEG Energy.

The loonie near a low. The Canadian dollar trades around 70 US cents, or about C$1.426 per US dollar. On Monday the US dollar touched C$1.4293, its highest since April 2025, according to Vantage Markets. The loonie has fallen four weeks in a row. Two reasons: lower oil prices, and the wide gap between US and Canadian interest rates.

The rate gap. Canada's 10-year yield is just under 4%, more than 1.3 percentage points below the US 10-year. Money tends to flow toward the higher yield, which supports the US dollar. The Bank of Canada's key rate is 2.25%. Its next decision is October 28.

Services still shrinking. S&P Global's survey shows Canada's service sector shrank for a fourth straight month in September. The business activity index rose to 48.3 from 46.8 but stayed below 50. New business has shrunk for five months, and firms cited US tariffs and the Iran war.

Coming up for Canada: August trade data and the Ivey PMI today; September jobs on Friday (forecast: 9,500 new jobs, unemployment 6.5%, up from 6.4%).

One thing to understand: why the buyer's stock often falls

On Monday, PTC shares jumped 33% after it agreed to be bought. RXO jumped too. But C.H. Robinson, the buyer in its deal, fell about 11%. This is common. A buyer usually pays a premium, meaning more than the target's current share price, to win the deal. That money (or those new shares) comes out of the buyer's pocket. Investors also worry about whether the buyer overpaid and whether the two companies will combine smoothly. When the buyer pays partly with new shares, each existing share owns a smaller slice of the company. That is called dilution. So the target's shareholders often get a quick gain, and the buyer's shareholders wait to see if the deal pays off.

On the calendar

Today (Tuesday, October 6)

Rest of the week

Sources

This newsletter is general information, not investment advice.

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