Bond yields dip slightly, stock futures falter ahead of earnings
Treasury yields fell from multi-year highs, while stock futures faltered amid earnings from big companies such as Hasbro and Tyson Foods.
Futures linked to the S&P 500 rose 0.1% on Monday after falling earlier, indicating a potentially choppy day for the broad index after closing up 1.6% last week. Futures on the tech-heavy Nasdaq-100 rose 0.2% and futures on the Dow Jones Industrial Average were flat.
Equities have had a volatile start to the year, amplified in recent days by extreme moves in big tech stocks. Last week saw a record drop in shares of Meta Platforms and the biggest rise since 2015 for shares of Amazon.com, after the companies reported earnings. Friday’s better-than-expected jobs report also drew traders’ attention to central bank policy, which is expected to tighten as the economy continues to recover.
Peloton jumped more than 32% in premarket trading on Monday after The Wall Street Journal reported that the stationary bike company was attracting interest from Amazon and other potential suitors. Spirit Airlines rose 13% premarket after announcing its merger with Frontier Group in a $6.6 billion deal.
Tyson Foods climbed 5.7% before market after saying it expected full-year sales to be at the upper end of its forecast. Hasbro rose 2.2% after reporting revenue and profit that beat Wall Street estimates.
The yield on the benchmark 10-year Treasury note fell slightly to 1.923% on Monday from 1.930% on Friday. Shorter-dated bond yields also fell, with the two-year yield falling to 1.304% after closing at a nearly two-year high on Friday.
“Markets have repriced, as seen in rising yields, but I think we’re getting to a point where it’s hard to assess from a much more hawkish perspective than we have today. We could now see a little stabilization,” said Esty Dwek, chief investment officer at FlowBank.
Yields remain at high levels, which is likely to make investors nervous, said Gregory Perdon, chief investment officer at Arbuthnot Latham..
Growth stocks, in particular, can be hit by higher yields, as their current value is largely determined by growth expectations, which decline when calculated with a higher interest rate.
Companies expected to report earnings this week include Pfizer and KKR on Tuesday and Uber Technologies and Walt Disney on Wednesday. Coca Cola,
PepsiCo and Twitter are scheduled for Thursday.
“Earnings have been very good, overall. We are seeing that the consumer is still quite strong and businesses that are reopening are doing better than those that are staying home,” Ms. Dwek said. “Investors are trying to look beyond the pandemic.”
Cryptocurrencies gained on Monday, with bitcoin rising 5% from its level at 5 p.m. ET on Friday. It was trading at around $42,700. The digital currency surged above $40,000 on Friday after spending two weeks below that level and held it there through the weekend and into Monday. Shares of cryptocurrency platform Coinbase rose 2.4% premarket.
Overseas, the pancontinental Stoxx Europe 600 remained stable. European government bond yields extended last week’s gains as markets continued to price in hawkish signals from the European Central Bank’s press conference on Thursday. Benchmark 10-year Italian and Greek bond yields hit their highest levels since spring 2020.
In Asia, major benchmarks were mixed. The Shanghai Composite index climbed 2% as it reopened after the Chinese New Year holiday week, despite a private gauge of China’s services sector slipping to a five-month low. The advances in onshore Chinese equities were a catch-up trade, following last week’s rally in US equities, said Patrick Ru, portfolio manager with Neuberger Berman Group’s global equities team.
Hong Kong’s Hang Seng Index closed flat and Japan’s Nikkei 225 was down 0.7%.
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