Wall St set for lower open as Treasury yields climb; earnings in focus
Reuters
Published Feb 05, 2024 22:13
Updated Feb 06, 2024 01:09
By Johann M Cherian and Ankika Biswas
(Reuters) -Wall Street was poised for a slightly lower open on Monday, as Treasury yields rose after Fed Chair Jerome Powell pushed back firmly against market speculations of imminent rate cuts, while investors assessed earnings from corporate America.
In an interview aired on Sunday, Powell said more evidence was needed to show a sustainable downtrend in inflation to warrant lower interest rates as the economy's strength kept recession risks in check.
While latest data signaled the U.S. labor market's resilience in the face of the tightest credit conditions seen in years, strengthening hopes of a soft landing, uncertainty over when borrowing costs might be lowered prevailed.
U.S. Treasury yields were on the rise, with the two-year jumping to a one-month high, at 4.4%.
"Investors are concerned that while the economy is good and we're not headed for recession, it is too strong and so the Fed might cut rates later and have fewer cuts in all," said Sam Stovall, chief investment strategist at CFRA Research.
Separately, Minneapolis Fed President Neel Kashkari wrote that a resilient economy could mean that the central bank can take time to reduce benchmark interest rates.
Traders now expect a 64% chance of an at least 25-basis-point rate cut in May and a near-95% chance in June, according to the CME FedWatch Tool.
Investors also took a breather from Wall Street's recent bull-market run that saw the benchmark S&P 500 and the blue-chips Dow ending at record high levels on Friday, boosted by solid results from megacaps Meta Platforms and Amazon.com (NASDAQ:AMZN).
Results are now in from nearly half of the S&P 500 firms and fourth-quarter earnings estimates are improving sharply, with about 80% of the reports so far beating analysts' expectations, according to LSEG data on Friday.
Caterpillar (NYSE:CAT) jumped 4.7% in premarket trading after a higher quarterly profit, while Estee Lauder (NYSE:EL) surged 17.4% as the MAC lipstick maker aims to cut about 3% to 5% of its workforce, while also slashing its annual profit forecast.
Focus is also on earnings from legacy names like Eli Lilly (NYSE:LLY), Ford and PepsiCo (NASDAQ:PEP), scheduled through the week.
Traders will also parse the Institute of Supply Management's (ISM) non-manufacturing survey for January later in the day to gauge the economy's health.
Lined up through the day are remarks from Chicago's Austan Goolsbee and Atlanta's Raphael Bostic for clues on the rate-cut stance of the Fed's policymakers.
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At 8:35 a.m. ET, Dow e-minis were down 97 points, or 0.25%, S&P 500 e-minis were down 13.5 points, or 0.27%, and Nasdaq 100 e-minis were down 25.75 points, or 0.15%.
Boeing (NYSE:BA) dropped 1.8% after saying a new quality glitch in some 737 MAX planes would delay some deliveries.
Tesla (NASDAQ:TSLA) lost 1.4% after brokerage Piper Sandler slashed its price target for the electric-vehicle maker, while Nvidia gained 3.1% following a price-target raise by Goldman Sachs (NYSE:GS).
Catalent soared 9.8% on Novo Nordisk (CSE:NOVOb) parent Novo Holdings' plans to buy the contract drugmaker in an $11.5-billion all-cash deal to expand its capacity for popular weight-loss drug Wegovy.
Written By: Reuters
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