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Post: Market Snapshot: U.S. stock futures dip as Treasury yields hit fresh 14-year highs, Tesla stock tumbles post results

U.S. stock futures pulled back on Thursday as investors warily eyed Treasury yields climbing to fresh 14-year highs. Also dragging tech stocks was a sharp drop in Tesla Inc. shares after disappointment over results.

How are stock-index futures trading
  • S&P 500 futures

    dipped 16 points, or 0.4% to 3691

  • Dow Jones Industrial Average futures

    fell 31 points, or 0.1% to 30429

  • Nasdaq 100 futures

    eased 84 points, or 0.7% to 11069

On Wednesday, the Dow Jones Industrial Average

fell 100 points, or 0.33%, to 30424, the S&P 500

declined 25 points, or 0.67%, to 3695, and the Nasdaq Composite

dropped 92 points, or 0.85%, to 10681.

The Nasdaq Composite

is up 3.8% from its 2022 closing low but remains down 31.7% for the year to date.

What’s driving markets

Benchmark bond yields at fresh 14-year highs continued to pressure stock markets as investors worried that rising borrowing costs amid rampant inflation will clobber economic growth.

S&P 500 futures ticked lower as the 10-year Treasury yield

rose 3.3 basis points to 4.174%, the highest since late 2007.

Jim Reid, strategist at Deutsche Bank, noted that the equity rally at the start of the week had petered out “with Treasury yields hitting multi-year highs as investors turned their focus back to central banks and how fast they’ll hike rates”.

“All the big central banks are deciding policy over the next couple of weeks, so it’s not surprising that’s happening, but sentiment wasn’t helped either by further inflation surprises from the U.K. and Canada for September, which echoed what we’d already seen from the US last week, and added to the sense that the hiking cycle will be extended,” Reid added.

Confirming such concerns were statements this week from Federal Reserve officials, notably Minneapolis Fed President Neel Kashkari who reiterated the central bank may need to push its benchmark policy rate above 4.75% if underlying inflation does not stop rising. Markets are currently pricing in Fed funds rates of 5% by May next year.

Equity investors could at least gain succor from a mixed but mostly well-received corporate earnings reports, noted Richard Hunter, head of markets at Interactive Investor.

“The third quarter earnings season is beginning to pick up speed in the U.S., and so far the news has been marginally positive. After the bell, the releases continued the theme, with gains for IBM offset by share declines for Tesla and Alcoa,” Hunter said.

Tesla stock

was down more than 6% in premarket trading after results, forecasts and suggestions of a share buyback program failed to impress. IBM’s stock

was up 3%, though tech elsewhere was struggling after Ericsson’s

profits missed expectations and the shares fell 14%.

“For now, corporate America seems to be standing up well to the inflation storm, but a lot will depend on the big tech companies reporting next week – with the destiny of the markets in the hands of the likes of Apple

and Amazon
” said Russ Mould, AJ Bell investment director.

Results on the slate for Thursday include AT&T
American Airlines
Union Pacific
and Phillip Morris

However, Nicholas Colas, co-founder of DataTrek Research suggested that the generally welcomed earnings season may paradoxically act as a damper to sentiment in the short run as it was helping to push up bond yields.

“We can’t help but think that still-decent corporate earnings must be spilling over into bond market psychology. Companies will not meaningfully reduce hiring and the pace of wage increases – the FOMC’s targets in its efforts to reduce price inflation – until earnings start to materially disappoint. This has not yet started to happen, ” said Colas.

U.S. economic updates set for release on Thursday, include weekly initial jobless claims and the October Philadelphia Fed manufacturing index, due at 8:30 a.m. September existing home sales and also leading economic indicators will be published at 10 a.m. All times Eastern.

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