Tuesday's Final Takeaways: SoftBank Secures OpenAI Financing, Clarity Act Vote Fails

Marley Kayden (0:01)

Welcome back to Market on Close. I'm Marley Kayden here in Chicago alongside Sam Vadas at the New York Stock Exchange. We'll close out today's show with the final thoughts that we always have. Today, of course, we're talking about Treasury yields. The 10-year climbed above 5%, hitting its highest level since 2007 as investors continue to sell government debt ahead of tomorrow's Federal Reserve decision. The yield rose as much as eight basis points to around 5.04%, while the 30-year Treasury yield climbed above 5.4%.

That's also the highest level we've seen since 2007 Rising oil prices are adding to inflation concerns and strengthening the expectations that the Fed could raise interest rates tomorrow that move higher in long-term yields, also putting additional pressure on stocks by raising borrowing costs and increasing the discount rate that investors use to value equities.

The Senate held its vote on the Clarity Act earlier this afternoon, and the massive 600-page bill failed to muster enough support to make the leap over the 60-vote hurdle. The procedural vote of 49 to 50 marks a major blow for the crypto industry, and the fact that it failed to win even a majority of support leaves the crypto space in an increasingly tough position. Now the industry will have to turn to regulators at the SEC and the CFTC, who are working on initiatives that aim to provide enough regulatory stability to help bring more investors off the sidelines until an updated Clarity Act or even new regulation can be signed into law. Sam, what caught your eye during the session today? There's certainly no shortage of things for us to watch.

Sam Vadas (1:29)

No, that's right. There were a few spots of green amongst the international stocks today. SoftBank staged a rebound. The company has reportedly secured a near $12 billion loan to support its investment in OpenAI. According to Bloomberg, SoftBank sealed a two-year facility last week from around 20 banks. Shares sold off the most since July yesterday on AI slowdown talk and delay of the OpenAI IPO. But in other news, SBA Energy, that's the datacenter company that's backed by SoftBank, is now looking to raise up to $500 million specifically from Japanese investors. The tranche is a domestic portion of its upcoming US. IPO up the road on the NASDAQ. So the company will begin taking orders from investors as early as this month and will use it for building datacenters and power plants. That traded up about 9% higher. And Chinese ADRs also outperformed the broader tech sector again today, despite mixed data out of the economy overnight. We saw Tencent and Barber rallying, really matching what we saw in the domestic session overnight. And it came after a bullish note from Morgan Stanley on China's consumer-facing AI sector. Analysts there project the domestic market to reach 300 billion yuan by 2030 And Csmpc really is a beneficiary of consumer adoption because of its ubiquitous social media app that is called WeChat. Now, Barber remains a top pick from Morgan Stanley, analyst based on full stack AI and LLM capabilities, obviously with what it's got with Quen. But heading into tomorrow, I think it's pretty much a no-brainer at this point, Marley.

Marley Kayden (2:56)

It certainly is. It's that FOMC decision tomorrow at 2 p.m. Eastern. We've got the press conference that follows at 2.30. We'll, of course, have live coverage of both the decision and Warsh's commentary on a special edition of the watch list. And that will continue then on to our show tomorrow. But as we've been discussing throughout, I mean, traders are pricing in a nearly 95 percent chance that the Fed is going to raise those rates by 25 basis points. So we'll see what the reaction looks like. Sam, what are you watching for?

Sam Vadas (3:22)

Well, it's going to be interesting, as KG pointed out, what those retail sales tell us tomorrow morning. I mean, there has been some suggestion from one of the guests that I spoke to earlier today that if it comes in softer, that could actually do them a favor. But let's see, because we've also got some import and export prices that should give us a little bit more information on the inflation side and mortgage apps as part of more household data that we'll be getting this week as well, Marley.

Marley Kayden (3:43)

Absolutely, all right, that's going to do it for us today on Market On Close. For Sam Vadas, I'm Marley Kayden. Please download our Schwab Network app for free in the Apple App Store and you can tune in 24-7 on schwabnetwork.com. We hope you have a great rest of your Tuesday.