Wall St futures slip on Treasury yields at nine-month high
Wall St futures slip on Treasury yields at nine-month high
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U.S. Stock Futures Fall as Bond Yields Rise and Fitch Downgrades U.S. Credit Rating
The U.S. stock market took a hit on Thursday as a surge in bond yields, partially driven by Fitch’s downgrade of the U.S. long-term credit rating, weighed on rate-sensitive shares and prompted another round of selloffs. Fitch’s action on Wednesday dampened the appetite for risky assets, causing a sharp decline in the market as investors took the opportunity to cash in on five months of gains.
The downgraded credit rating had a direct impact on megacap growth and technology stocks, with shares of Apple, Alphabet, and Microsoft slipping between 0.2% and 0.4% in premarket trading. Additionally, the yield on the benchmark 10-year note reached its highest level since November. This prompted Goldman Sachs senior strategist Karen Reichgott Fishman to express concerns about the vulnerability of U.S. equities, especially cyclicals, to further downside risks.
To evaluate the strength of the labor market, traders closely monitored the initial jobless claims for the week ended July 29. This followed a private payrolls report on Wednesday that showed continued resilience. The data, scheduled to be released at 8:30 a.m. ET, held significant importance for investors. Other factors under scrutiny included the U.S. non-manufacturing Purchasing Managers’ Index (PMI), June factory orders, and comments by Richmond Federal Reserve President Thomas Barkin.
As of 07:00 a.m. ET, Dow e-minis were down 54 points, or 0.15%, S&P 500 e-minis were down 10 points, or 0.22%, and Nasdaq 100 e-minis were down 52.25 points, or 0.34%. The market was also keeping an eye on earnings reports from Apple and Amazon.com that were due to be released after the closing bell.
According to Refinitiv data on Wednesday, out of the two-thirds of S&P 500 companies that had reported their earnings so far, 79.9% had surpassed estimates, providing a positive outlook for the market. However, Qualcomm’s disappointing fourth-quarter sales forecast weighed down the company’s stock, leading to an 8.4% drop in pre-market trading. The company also hinted at potential job cuts due to weak consumer spending on gadgets like smartphones amid slowing global economic growth. Semiconductor peers Nvidia and Intel each experienced a slight decline of 0.5%.
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PayPal Holdings experienced a 7.8% decrease as investors were disappointed by the quarterly operating margin. Though executives expect improvement by the end of the year, the recent performance fell short of expectations. On the other hand, DoorDash saw a rise of 5.2% after the delivery firm increased its annual core profit forecast and reported impressive quarterly revenue due to increased demand for groceries and food orders. Meanwhile, Moderna recorded a gain of 3.3% as the company raised its annual forecast for COVID-19 vaccine sales to up to $8 billion.
While uncertain factors may have caused a decline in the stock market, optimism remains as a significant portion of S&P 500 companies continue to surpass earnings estimates. Investors are eagerly awaiting additional data and analysis to gauge the market’s future direction and potential opportunities for profitable investments.
