Wall Street looks set for another rough session as a surge in Treasury bond yields, as well as the highest oil prices in seven years, grips global markets.
Stocks futures slump amid a surge in global oil prices and a jump in benchmark Treasury bond yields.Inflation fears resurface as oil hits a new seven-year high and JPMorgan CEO Jamie Dimon sees as many as six Fed rate hikes before the end of the year.Benchmark 2-year note yields rise to 1.03%, the highest in two years, while 10-year yields hit a post pandemic peak of 1.831% in overnight trading.Earnings take center-stage this week with 40 S&P 500 companies reporting; Refinitv forecasts see collective profits rising 23.1% to $434.4 billion.Goldman Sachs misses Q4 earnings forecast even as investment banking fees surge amid a record year for M&A activity.Airlines warn of flight cancellation chaos as 5G network rollouts are set to begin later this week.
U.S. equity futures slumped lower Tuesday, while Treasury bond yields leapt and oil prices surged to the highest levels in seven years, as investors look to kick-off another key week in corporate earnings gripped by concern over inflation and Federal Reserve rate hikes.
Benchmark 2-year note yields rose past 1% in overnight trading for the first time in nearly two years, reflecting investor concern for not only a prolonged period of faster inflation readings but also an aggressive response from the Fed, which could rate rates at least three times this year.
The CME Group’s FedWatch tool is pricing in an 88.4% chance of a hike in March, while JPMorgan CEO Jamie Dimon warned last week that as many as six rate increases could be needed to combat the fastest inflation in forty years.
The rise is bond yields is likely to dictate trading today, particularly in tech, where the Nasdaq Composite is down 4.8% for the year and trading in negative territory for the past three months.
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Oil prices will also be in focus after Brent crude neared $88 a barrel in overnight trading, the highest in seven years, following an attack on the United Arab Emirates by Houthi rebels from Yemen — which are aligned with Tehran — that has sparked concerns over supply disruption in the mid east region.
Earnings will also take center-stage later this week, with updates from Procter & Gamble (PG) – Get Procter & Gamble Company Report, United Health (UNH) – Get UnitedHealth Group Incorporated Report, United Airlines (UAL) – Get United Airlines Holdings, Inc. Report and Netflix (NFLX) – Get Netflix, Inc. Report highlighting a week where 40 S&P 500 companies will report.
Collective S&P 500 earnings are expected to rise 23.1% from last to $434.4 billion, according to Refinitiv forecasts, before slowing to an annual rate of around 19.5% for the whole of 2022.
On Wall Street, futures tied to the Dow Jones Industrial Average are indicating a 275 point opening bell gain while those linked to the S&P 500 are priced for a 50 point slump to the downside.
Futures tied to the Nasdaq are indicating a 250 point opening bell gain as benchmark 10-year Treasury note yields climb to a post-pandemic high of 1.831% in overnight trading.
Goldman Sachs (GS) – Get Goldman Sachs Group, Inc. Report kicked-off this week’s earnings slate with a weaker-than-expected fourth quarter report, sending shares 3.6% lower in pre-market trading.
Airline shares were also in focus following yet another weekend of flight chaos and a warning on the impact of 5G networks on aircraft navigation systems.
United Airlines was marked 1% lower in pre-market trading at $46.30 each, while American Airlines (AAL) – Get American Airlines Group, Inc. Report fell 1.25% to $18.26 each. Delta Air Lines (DAL) – Get Delta Air Lines, Inc. Report was marked 2% lower at $39.51 each.
In overseas markets, Europe’s Stoxx 600 was marked 1.1% lower in mid-day trading in Frankfurt, while Japan’s Nikkei 225 closed 0.27% lower in Tokyo at 28,257.25 points.
