Earnings
Home›Earnings›Previews›Higher yields keep investors focused on free cash flow…
Higher yields keep investors focused on free cash flow signals
The 10-year Treasury yield rose toward 4.79% after an 162,000-jobs month, while analysts point to investment-driven negative free cash flow as a potential buy signal for some companies.
Markets moved quickly after the August jobs report showed 162,000 new positions versus 56,000 expected, and bond traders read it as fuel to keep yields near recent highs, according to MarketBeat Ratings.
The 10-year Treasury yield pushed back toward 4.79%, near its highest level since late 2023, with a Fed hike at the September 15 to 16 meeting described as close to a coin flip following Fed Chair Kevin Warshs Jackson Hole remarks that inflation remains too hot.
MarketBeat Ratings argues that the key driver for equity outcomes is less about the headline interest rate and more about the spread between what companies pay to borrow and what they earn on that capital, noting estimates that AI-related corporate debt issuance could total about $1.5 trillion this year, which may be pushing up the long end of the curve.
The outlet also highlights examples of companies posting negative free cash flow as they invest, saying Alphabet burned $5.9 billion in the second quarter with CapEx of $44.9 billion, while Amazon swung to negative $7.6 billion on a trailing basis; it adds that the pattern can be positive when the cash burn is tied to investment rather than operating deterioration, citing prior episodes for Amazon and the contrast with companies such as Home Depot and Starbucks when they turned free cash flow positive in earlier periods.