Stock futures remain well in the red ahead of the trading session as the continuing releases of earnings reports from several large companies weighed down prices. Some of the larger financial institutions recorded underwhelming results today, including Ally Financial (ALLY), which reported weaker-than-expected top-line result and higher funding costs. However, this was partially offset by strength in its auto lending business. Morgan Stanley (MS) also reported declining revenues and lower earnings year over year. Still, not all quarterly earnings data were negative, as Dow-30 component The Travelers Companies (TRV) recorded better-than-expected adjusted earnings results. Underwriting gains and higher net investment income at the insurer more than offset higher catastrophe losses, and the company announced a $5 billion share-repurchase plan while it hiked its dividend payout by 8%. Overall, the market has trended lower following the release of these and other results and appears to be on track for a weak start to the trading day.
The stock market traded choppily yesterday, as stronger data out of China following its exit from strict COVID-19-related policies has caused its gross domestic product to expand a better-than-anticipated 4.5%. However, the market fell back to around breakeven levels after a slew of earnings results and weak housing market data caused future growth expectations to fall, exacerbated by worries about the effects of higher interest rates. Overall, the market traded sideways for most of the session and finished not too far from its starting position. Specifically, the S&P 500 rose 4 points (up .09%), the NASDAQ fell 4 points (down .04%), and the Dow Jones Industrial Average declined 11 points (down .03%). Market breadth slightly favored the decliners, which outpaced advancers by a 1.2-to-1.0 ratio. Industrial stocks were among the best performers on the day, while healthcare equities were among the weakest.
In commodity news, oil prices fell yesterday following several weeks of higher prices after the Organization of Petroleum Exporting Countries (or OPEC) cut supplies. Elsewhere, United States Treasury bond yields were mostly higher across the board, and the yield curve remains heavily inverted, with short-term rates trading well above long-term ones. That usually portends a coming recession .Traders are largely pricing in an anticipated 25-basis-point hike at the upcoming Federal Reserve Open Market Committee meeting in May. The Chicago Board Options Exchange Volatility Index, or VIX, fell slightly yesterday as expectations for future stock price volatility declined.
Several economic reports will be released in the days ahead. These include initial and continuing jobless claims and existing home sales on Thursday. On Friday, the Standard & Poor’s flash U.S. Services and Manufacturing Purchasing Managers’ Indices will be released for April, giving some insight into further inflation. Additionally, several regional Federal Reserve Presidents will be giving remarks on the broader economy. Elsewhere, earnings season will continue in the days ahead, with several hundred larger companies reporting quarterly results and guidance. This includes Dow-30 companies IBM (IBM), American Express (AXP), and Proctor & Gamble (PG) over the rest of the week. Overall, we think most eyes will be on earnings results and any inflationary data that could give insight into future Federal Reserve interest rate policy. - John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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