Market Anticipation: Stocks Edge Lower Ahead of Busy Earnings Week
Monday, Oct 21, 2024 6:30 am ET
2min read U.S. equity futures edged lower in early Monday trading, mirroring another leg higher in Treasury bond yields, as investors hit pause on the market's solid autumn rally ahead of a busy week of corporate earnings on Wall Street. Stocks ended higher on Friday, with the S&P 500 hitting a fresh all-time peak to extend its year-to-date gain to around 23%, powered in part by robust earnings from Netflix (NFLX) and a solid domestic economy heading into the final months of the year.
Earnings are likely to take center-stage this week amid a dearth in economic data releases, with around 114 S&P 500 companies expect to report third quarter earnings this week, including market heavyweights such as Tesla (TSLA) , Boeing (BA) , AT&T (T) and International Business Machines IBM. LSEG data suggests collective profits for the benchmark are likely to rise 4% from last year to a share-weighted $506.6 billion, with that set to accelerate to 11.9% over the final three months of the year.
Headwinds to another week of equity market gains, however, could come one again from the bond market, where concerns over a resurgence in inflation have lifted benchmark 10-year note yields to 4.116% in overnight trading, marking a gain of around 50 basis points since the Federal Reserve's outsized rate cut in September. Benchmark 2-year notes, meanwhile, were last seen trading at 3.983% while the dollar index was a whisker away from its two-month high against a basket of its global peer at 103.578.
The renewed inflation concerns, tied in part to the extraordinary gains the U.S. economy has made since the start of the year, helped lift gold prices to a fresh record high of $2,733 per ounce in overnight trading. Tesla and Boeing may rock markets this week Read More Tesla and Boeing may rock markets this week Read More Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 suggest a modest 11 point opening bell decline, withe the Dow Jones Industrial Average called 60 points lower from Friday's record high close. The tech-focused Nasdaq, meanwhile, is called 68 points lower with Nvidia (NVDA) , Tesla, Lucid (LCID) and MicroStrategy (MSTR) active in premarket trading. Kenvue shares were another notable mover, rising 5.2% to $22.85 each following reports that activist investors at Starboard Value have built a stake in the Johnson & Johnson (JNJ) consumer products spinoff. Boeing, meanwhile, jumped 3.9% to $161.01 after the planemaker and its striking machinists union agreed to terms on a labor deal that will be voted on later this week.
In overseas markets, Europe's Stoxx 600 benchmark slipped 0.22% lower in early Frankfurt trading ahead of an active week of earnings, lead by regional lenders Deutsche Bank, Lloyds and Barclays. Britain's FTSE 100 was marked little-changed from last week's close at 8,358.81 points. Overnight in Asia, an expected bank lending rate cut gave stocks in China a boost, but pullbacks around the region left the MSCI ex-Japan benchmark 0.49% lower heading into the close of trading. The Nikkei 225 in Tokyo slipped 0.07%.
Veteran fund manager sees world of pain coming for stocks Read More Veteran fund manager sees world of pain coming for stocks Read More
As investors await the upcoming earnings reports, the market's performance will likely be influenced by a combination of corporate earnings, geopolitical events, and economic indicators. Rising Treasury bond yields may impact the cost of borrowing for companies, potentially affecting their earnings and stock prices. Investors will need to balance the risk of higher bond yields with the potential for higher corporate earnings when making portfolio allocation decisions. Additionally, sector-specific differences in sensitivity to interest rate changes may affect the performance of different stocks and sectors during periods of rising bond yields. Central bank policies and interest rate expectations will also play a crucial role in shaping the relationship between Treasury bond yields and stock market performance.
Earnings are likely to take center-stage this week amid a dearth in economic data releases, with around 114 S&P 500 companies expect to report third quarter earnings this week, including market heavyweights such as Tesla (TSLA) , Boeing (BA) , AT&T (T) and International Business Machines IBM. LSEG data suggests collective profits for the benchmark are likely to rise 4% from last year to a share-weighted $506.6 billion, with that set to accelerate to 11.9% over the final three months of the year.
Headwinds to another week of equity market gains, however, could come one again from the bond market, where concerns over a resurgence in inflation have lifted benchmark 10-year note yields to 4.116% in overnight trading, marking a gain of around 50 basis points since the Federal Reserve's outsized rate cut in September. Benchmark 2-year notes, meanwhile, were last seen trading at 3.983% while the dollar index was a whisker away from its two-month high against a basket of its global peer at 103.578.
The renewed inflation concerns, tied in part to the extraordinary gains the U.S. economy has made since the start of the year, helped lift gold prices to a fresh record high of $2,733 per ounce in overnight trading. Tesla and Boeing may rock markets this week Read More Tesla and Boeing may rock markets this week Read More Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 suggest a modest 11 point opening bell decline, withe the Dow Jones Industrial Average called 60 points lower from Friday's record high close. The tech-focused Nasdaq, meanwhile, is called 68 points lower with Nvidia (NVDA) , Tesla, Lucid (LCID) and MicroStrategy (MSTR) active in premarket trading. Kenvue shares were another notable mover, rising 5.2% to $22.85 each following reports that activist investors at Starboard Value have built a stake in the Johnson & Johnson (JNJ) consumer products spinoff. Boeing, meanwhile, jumped 3.9% to $161.01 after the planemaker and its striking machinists union agreed to terms on a labor deal that will be voted on later this week.
In overseas markets, Europe's Stoxx 600 benchmark slipped 0.22% lower in early Frankfurt trading ahead of an active week of earnings, lead by regional lenders Deutsche Bank, Lloyds and Barclays. Britain's FTSE 100 was marked little-changed from last week's close at 8,358.81 points. Overnight in Asia, an expected bank lending rate cut gave stocks in China a boost, but pullbacks around the region left the MSCI ex-Japan benchmark 0.49% lower heading into the close of trading. The Nikkei 225 in Tokyo slipped 0.07%.
Veteran fund manager sees world of pain coming for stocks Read More Veteran fund manager sees world of pain coming for stocks Read More
As investors await the upcoming earnings reports, the market's performance will likely be influenced by a combination of corporate earnings, geopolitical events, and economic indicators. Rising Treasury bond yields may impact the cost of borrowing for companies, potentially affecting their earnings and stock prices. Investors will need to balance the risk of higher bond yields with the potential for higher corporate earnings when making portfolio allocation decisions. Additionally, sector-specific differences in sensitivity to interest rate changes may affect the performance of different stocks and sectors during periods of rising bond yields. Central bank policies and interest rate expectations will also play a crucial role in shaping the relationship between Treasury bond yields and stock market performance.
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