U.S. equity futures edge lower Tuesday, with the dollar holding gains against its global peers amid another pullback in Treasury bond yields, as investors prepped for a busy slate of tech and industrial earnings that could piece through concerns over Federal Reserve rate hikes and China’s Covid lockdown.
Stocks got a solid boost late yesterday as safe-haven trading pulled bond yields — which move in the opposite direction prices — from multi-year highs while the tech sector found support for Elon Musk’s successful $44 billion take-private deal to buy the social media group Twitter (TWTR) – Get Twitter, Inc. Report.
That momentum found its way into Asia markets, which booked modest gains despite the ongoing surge in Covid infection in China that could trigger lockdown order in Beijing and is likely to keep supply chains disrupted across a number of business sectors — while adding to inflation pressures — over the coming months.
“Elon Musk’s acquisition of Twitter is a nice sentiment-driven and short-term distraction from the broader worries facing markets, like inflation, geopolitical concerns and a more hawkish Federal Reserve,” said George Ball, chairman of Sanders Morris Harris, a Houston-based investment group with around $4.9 billion in assets under management.
“The stock market’s declines are driven by higher interest rates, as investors reassess how much they’re willing to pay for certain stocks,” he added, noting that “while Covid-driven lockdowns in China may disrupt supply chains right now, they’ll have little impact on markets over the long-term.”
European stocks were marked 0.7% higher in mid-day Frankfurt trading, boosted by a solid set of blue-chip earnings and softer regional currencies, while in Asia MSCI ex-Japan index added 0.4% heading into the close of trading.
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Stateside, benchmark 10-year note yields eased to 2.789% in overnight trading while the dollar index, which tracks the greenback against a basket of six global currencies, held onto its recent two-year highs to trade at 101.867.
A major batch of earnings is expected to both drive pre-market trading and keep investors cautious into the closing bell, with General Electric GE, United Parcel Service (UPS) – Get United Parcel Service, Inc. Class B Report, 3M (MMM) – Get 3M Company Report and PepsiCo (PEP) – Get PepsiCo, Inc. Report reporting before the bell and tech giants Microsoft (MSFT) – Get Microsoft Corporation Report and Google (GOOGL) – Get Alphabet Inc. Class A Report updating investors at the end of the session.
On Wall Street, futures contacts tied to the Dow Jones Industrial Average are indicating an 150 point opening bell decline while those linked the S&P 500 are priced for a 20 point move to the downside. Futures linked to the tech-focused Nasdaq are looking at a modest 70 point opening bell dip.
Following the pre-market earnings parade, General Electric fell 3.44% despite better-than-expected first quarter profits as CEO Larry Culp said 2022 earnings could likely come in at the lower end of the industrial group’s prior forecast.
UPS, meanwhile, jumped 2.3% after it posted stronger-than-expected first quarter earnings, while re-affirming its full-year profit forecast and unveiling plans to double its annual share buybacks to around $2 billion.
3M edged 0.77% into the green after a mixed set of first quarter earnings that included litigation costs linked in part to a settlement in Belgium clipped the industrial group’s bottom line.
PepsiCo, on the other hand, fell 0.3% even after better-than-expected first quarter earnings, as well as a lift in full-year revenue forecasts, as the group’s Frito Lay snacks division continues to drive topline growth.