Bond Yields Haven’t Settled. Why It’s the Biggest Question for Stocks.

The first half of this week, bond yields started to drop again. The Hamas attack on Israel drove some investors to seek Treasuries as a haven, while Fed officials gave speeches saying the rise in bond yields was doing its work for it—probably negating the need for another increase in the short-term fed-funds rate.

That reprieve in bond yields helped stocks for a few days—the most consistent correlation lately is bond yields going up in tandem with stocks going down. But yesterday’s CPI numbers, along with a bond auction that suggested weak demand, reversed that story; yields rose again, stocks fell.

The scary thing for traders is that it’s far from clear where bond yields should be. The consensus from before the last Fed meeting has been shattered, but it hasn’t yet been replaced with a new one.

Where yields settle is an important question. Too high, and the economy gets hammered. Too low, and the Fed has more work to do. Either way, it’s an uncertain time for the market.

—Brian Swint

*** Join Mansion Global managing editor Beckie Strum today at noon when she chats with architect and designer Lisa Schwert about lessons learned from remodeling her century-old home in Pelham, N.Y., during the height of the pandemic. Mansion Global is kicking off its new Rebuilds & Renos column. Sign up here.

***

Scalise Quits Speaker Race Amid Struggle for Gavel

House Republicans are still trying to elect a speaker. Majority Leader Steve Scalise, who narrowly secured the nomination earlier this week, withdrew as a candidate for speaker late Thursday after struggling to win support. Some have suggested giving Speaker Pro Tempore Patrick McHenry powers to buy them time.

• Rep. Max Miller (R., Ohio) said giving extra powers to McHenry (R., N.C.) for a month or two could allow House GOP members time to back a candidate while the House can function, the Washington Post reported. Rep. David Joyce (R., Ohio) wants to push the effort.

• The Republican Governance Group, made up of moderate Republican lawmakers and led by Joyce, started circulating a petition to allow McHenry to put legislation on the floor while the caucus worked out differences on a new speaker, The Wall Street Journal reported.

• House GOP members huddled in the basement of the Capitol in a closed-door meeting Thursday that turned into a grievance-airing session. Members left the meeting appearing frustrated, the Journal reported.

• Approaching week two without a speaker, the House is unable to function, with a deadline to reach an agreement on government funding and strong pressure to make a statement of support for Israel, in addition to answering Biden administration requests for aid for Israel and Ukraine.

What’s Next: Lawmakers face the weekend uncertain of what comes next as the struggle over who gets the speaker’s gavel continues. Former Speaker Kevin McCarthy told reporters Scalise would continue to be Majority Leader in the chamber, the Post reported.

—Liz Moyer

***

Microsoft
-Activision Deal Set to Close After U.K. Approval

Microsoft’s $75 billion acquisition of
Activision Blizzard
is on the path to closing after U.K. regulators cleared the deal. However, it came with an admonishment that suggests British antitrust authorities are joining their American counterparts in an aggressive stance toward Big Tech.

• The U.K.’s Competition and Markets Authority, or CMA, said Friday that its concerns over the threat to competition posed by the deal were resolved by Microsoft’s transfer of cloud-streaming rights for Activision’s videogames to a rival company.

• Microsoft President Brad Smith said on social-media network X, formerly Twitter, that the company had cleared the “final hurdle” to close the acquisition. Microsoft and Activision had set an extended deadline of Oct. 18 for completing the merger.

• The CMA included a rebuke to Microsoft in its statement. “Microsoft had the chance to restructure during our initial investigation but instead continued to insist on a package of measures that we told them simply wouldn’t work,” said Sarah Cardell, chief executive of the CMA, in a statement.

What’s Next: The deal can now be closed despite continuing opposition from the U.S. Federal Trade Commission. The FTC said last month it plans to restart an in-house trial against Microsoft but it doesn’t currently have the power to block the deal, after federal judges rejected its attempts to obtain a court order preventing the acquisition from closing.

—Adam Clark