US EQUITY OPEN: Stocks lower while yields and dollar climb on strong PMI data

**US EQUITY OPEN: **

Stocks opened lower on Wednesday, with the Russell underperforming while the other major indices see more modest losses and the equal-weight S&P is down 0.3%. Sectors are mixed, with Consumer Discretionary, Utilities and Materials underperforming, while Energy, Health Care and Consumer Staples lead. There is no clear catalyst for the broader weakness, although it coincides with higher oil prices as Iran downplays Tuesday's US/Iran talks. Meanwhile, semiconductors are lower, paring some of the recent Muse-induced gains after OpenAI released Astra-6 and Anthropic released Claude Opus 5.5 on Tuesday.

Elsewhere in energy, focus has been on the diesel market after Trump remarked that he is considering a diesel export ban. However, Energy Secretary Wright recently said such a move would not work as it would raise gasoline prices, with the developments also helping support the crude complex.

Higher energy prices have coincided with higher yields across the curve, with the curve bear flattening as the front end underperforms, potentially reflecting concerns that higher energy prices could feed into inflation. Meanwhile, the long end is comparatively more anchored ahead of today's announcement for the upcoming Treasury buyback operation in the 20-30yr sector. Yields extended their move higher following the S&P Global Flash PMI report, which saw the Composite PMI rise to a five-year high, while the Services PMI recorded a sixth consecutive month of expansion and the Manufacturing PMI printed at its highest since May 2022.

In FX, the Dollar is supported by the higher-yield environment following the stronger Flash PMI data, while some of the strength may also reflect weakness in commodity-importing currencies amid concerns that a potential US diesel export ban could weigh on growth. AUD and NZD lag, while GBP is also lower. Regarding the UK, the Telegraph cited industry sources warning that a US diesel export ban would hurt the UK, given almost a third of the country's diesel imports are sourced from the US.

Stock Specifics:

• Chips (INTC, AMD, ARM): All lower in pre-market, adding to downside from late Tuesday after OpenAI announced Astra 6; all three were beneficiaries of Meta's Muse. SOXX lower in pre-market trade
• Microsoft (MSFT): Plans to increase Copilot discounts as it launches an AI 'super app', according to The Information; separately upgraded at Stifel
• Alibaba Group (BABA): Chinese AI stocks fell after a report that regulators opened a data security probe into DeepSeek and Moonshot AI
• Cedar Fair (FUN): Activist investor Jana Partners is urging Six Flags Entertainment to hire banks and explore a sale, according to WSJ
• KB Home (KBH): Reported weaker housing demand, lower deliveries and orders, and softer housing conditions, which outweighed an earnings beat
• General Mills (GIS): Inflation concerns offsetting earnings beat
• Marathon Petroleum (MPC): Paring some of Tuesday's losses after Trump said he is considering a diesel export ban; WSJ reports Trump's support for the ban was seen to 'blindside' industry officials
• GE HealthCare Technologies (GEHC): Raised quarterly dividend 14% to USD 0.04/shr
• Immunovant (IMVT): Study of IMVT-1402 in cutaneous lupus erythematosus did not achieve statistical significance on the primary endpoint
• Paychex (PAYX): Stock slides despite EPS and revenue beat
• Cintas (CTAS): Stock slides despite top- and bottom-line beat; also raised guidance in line with forecasts