U.S. equity futures traded mixed Wednesday, while Treasury bond yields crept modestly higher and oil prices jumped, as investors kept risk appetite in check amid a bumpy start to the first quarter earnings season and ongoing concerns over the impact of a hawkish Federal Reserve.
Tech stocks were also on the move, with the Nasdaq called modestly lower, after a grim first quarter earnings report and outlook from Netflix (NFLX) – Get Netflix, Inc. Report that more than offset an optimistic set of numbers this morning from ASML NV (ASML) – Get ASML Holding NV Report, which noted robust demand for its extreme ultraviolet lithography systems, or EUV, machines, which design complex chips used by, sector titans such as Samsung Electronics, Intel INTC and Taiwan Semiconductor TSM and cost as much as €100 million each
The focus on tech stocks was paired with another significant move in the bond market, where benchmark 10-year note yields held at 2.90% after turning their first “real yield” in late Tuesday trading — a move that occurs when the yield remains positive after subtracting for inflation expectations — for the first time in more than two years.
“The near-term uncertainty regarding the inflation outlook as well as the Fed’s expected response to stubbornly high increases in consumer prices have driven yields higher this year,” said LPL fixed income strategist Lawrence Gillum. “This largely one-way move higher in yields has caused returns for most fixed income indexes to be among the worst to start the year in decades.”
“However, the silver lining in this historic selloff is that higher yields generally mean higher potential returns,” he added. “And with interest rates higher than they’ve been over the past few years, now could be a good time to revisit fixed income as an investment.”
Such a move makes stocks less attractive than risk-free government bonds, and comes during a disappointing start to the first quarter earnings season, where collective S&P 500 profits are only likely to grow 6.1% from last year to a share-weighted total of $432.2 billion, according to Refinitiv data, a pace that would be down sharply from the 32.1% clip recoded over the final three months of last year.
Elsewhere, global oil prices added to recent gains in overnight trading, with WTI crude futures for June delivery rising $1.25 to $103.30 per barrel, ahead of today’s Energy Department data on domestic stockpiles. Last night, the American Petroleum Institute said U.S. inventories fell by 4.5 million barrels over the week ending April 15.
In Europe, the region-wide Stoxx 600 was marked 0.82% higher by mid-day Frankfurt trading as a series of solid earnings, a well as a weaker euro, provided initial support, while the MSCI ex-Japan benchmark ended its session with a modest 0.25% advance.
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On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a modest 65 point opening bell gain while those linked the S&P 500, which is down 1.5% for the month, are priced for a 1.5 point dip. Futures linked to the tech-focused Nasdaq are looking at a 20 point opening bell move to the downside.
Netflix hares plunged 27%, pulling the stock back to levels last seen in late 2019, after a surprise exodus in paid subscribers, and a grim near-term outlook, prompted a re-think on advertising sales from the world’s biggest online streaming service.
Walt Disney (DIS) – Get Walt Disney Company Report shares were marked 5.2% lower at $125.05 each, while Comcast (CMCSA) – Get Comcast Corporation Class A Report fell 1% to $47.65 each and Paramount Global (PARA) slumped 5% to $34.47 each.
International Business Machines (IBM) – Get International Business Machines Corporation Report shares moved 2.3% higher after the cloud-computing focused tech giant posted stronger-than-expected first quarter earnings linked to robust demand from global businesses ramping-up IT spending for the coming year.
Procter & Gamble (PG) – Get Procter & Gamble Company Report gained 1.3% after postin stronger-than-expected first quarter earnings Wednesday, while boosting its full-year sales forecast, as the consumer staples group sees firming demand that could offset rising commodity costs.
Tesla (TSLA) – Get Tesla Inc Report shares edged 0.1% lower ahead of the clean-energy carmaker’s first quarter earnings after the close of trading Wednesday with investors focused on the group’s profit margins following record deliveries and rising input costs.
Twitter (TWTR) – Get Twitter, Inc. Report shares moved 1% higher after billionaire Tesla CEO Elon Musk dropped yet another hint that he plans to take his $43 billion takeover bid for the social media group directly to investors.
After Tweeting the words “Love me Tender” to his 81 million followers last week, Musk again alluded to the word ‘tender’ in a Tweet channeling F. Scott Fitzgerald’s 1934 novel ‘Tender is the Night’.