CNBC Daily Open: Oil deals ahead of Big Tech earnings
Markets start the week with optimism ahead of earnings reports from large tech companies and as Chevron bets big with Hess.
This report comes from CNBC Daily Open today, our new international markets newsletter. CNBC Daily Open keeps investors informed about everything they need to be aware of, wherever they may be. You like what you see? Subscribe here.
What you should know today
On Monday, the Nasdaq Composite ended a four-day loss streak as Treasury yields fell from their highs. Investors were waiting for the announcement of earnings by tech giants such as Alphabet and Microsoft. Asia-Pacific stocks were higher at midday as investors analyzed private surveys of Japanese and Australian business activity.
Chevron announced on Monday that it had agreed to purchase Hess, for $53 billion. This is the second mega-merger proposed by the largest U.S. oil companies after Exxon Mobil offered $60 billion to purchase Pioneer Natural Resources in early February. This deal will also increase the competition between Chevron & Exxon for drilling rights in Guyana, a new oil producer.
Reuters reported that Nvidia was working on personal computer chips using technology from Arm Holdings. These plans would allow the chipmaker to challenge Intel's long-held position in personal computers. Advanced Micro Devices is also said to be planning to produce chips for PCs using Arm technology.
Bitcoin's price has surpassed $34,000, its highest level since May of last year. This was boosted by the positive sentiment surrounding a bitcoin ETF. According to Coin Metrics, the world's biggest cryptocurrency traded 4.97% higher on Tuesday at $34,596.40.
According to a portfolio manager who spoke with CNBC Pro, the markets may be experiencing an "unusual" amount of uncertainty but still offer very good growth opportunities. He cited three areas: artificial intelligence, reshoring, and obesity drugs.
Bottom line
The Nasdaq closed higher for the first session in five after a week of market activity. Chevron made a big bet on Monday to buy Hess in order to compete with Exxon Mobil, a larger competitor.
The stock market has been under pressure due to the high yields on Treasury bonds and the concern about the impact this will have on the American economy. Some analysts believe the benchmark 10-year rate could have more room to grow.
Tony Dwyer, Canaccord Genuity's chief market strategist, said that the rapid rise in yields would "accelerate an already weakening economy that was masked by increased rates."
UBS sees Microsoft as a possible hedge against the recession that could occur next year. Microsoft, unlike more specialized software companies, "has full geographical coverage across all industry sectors," UBS analyst Karl Keirstead stated, making Microsoft less vulnerable to downturns within any particular sector or region. Alphabet will also report its quarterly results on Tuesday afternoon.
Wall Street analysts have also given their fresh take on weight loss drugs, which is fast becoming this year's most popular segment in the pharmaceutical industry.
Analysts predict that sales of weight-loss drugs like Wegovy and Mounjaro will easily surpass $100 billion. Citi has recently increased its estimates of sales for these drugs from $55 billion to $71 billion in 2035. This is still a conservative estimate compared to Guggenheim’s sales expectations of $150 to $200 billion.
Wegovy is manufactured by Novo Nordisk, the most valuable publically listed company in Europe. It's also sold under the name Ozempic. Eli Lilly, a U.S. pharmaceutical company, makes Mounjaro.
On Tuesday, investors were closely following the crypto industry in hopes of a bitcoin ETF. Bitcoin reached its highest level for over a year. A bitcoin ETF could give investors exposure to the price fluctuations of bitcoin without having to own it directly.