The futures market started negatively last night after a few weaker-than-expected earnings reports in the wake of yesterday’s closing bell hurt sentiment. This reversed the higher price movement the market recorded during a strong day of trading. Stock prices had been buoyed by strong housing starts, which showed a 3.9% increase year over year, largely concentrated in multifamily homes. Additionally, several companies released stronger-than-expected earnings reports and outlooks on Tuesday morning, helping to improve trader sentiment. The indices moved higher throughout yesterday’s session and closed near their daily highs. Overall, the S&P 500 was up 71 points, the Dow Jones Industrial Average increased 500 points, and the NASDAQ rose 299 points. The futures market remained lower through the night, but rebounded in the early morning hours, aided by a number of better-than-expected earnings reports.
Hundreds of companies, largely from the financial sector, reported earnings this morning, showing strong earnings growth. Further, the financials benefited from rising interest rates, pushing results higher. The futures eventually moved slightly into the green, suggesting a positive start to the trading day. In addition, several economic reports will be released throughout the day, including existing home sales at 10:00 A.M. (EDT), and several regional Federal Reserve governors will be giving remarks before the release of the Fed’s Beige Book summation of economic conditions at 2:00 P.M. (EDT).
Overall, market breadth was rather positive yesterday, with advancers outpacing decliners by a 2.1-to-1.0 ratio. Consumer discretionary stocks were among the best performers on the day, while energy stocks were the only sector in negative territory, hurt by a decline in the related commodities. Of note, oil prices fell considerably yesterday as the International Monetary Fund (IMF) slashed its global growth forecasts. It stated that the war in Ukraine and lockdowns in China were negatives that would hurt oil demand. In response, traders reduced their positions in energy holdings. Meantime, U.S. Treasury bond yields rose across the board, though long-term rates climbed more than those with shorter-term durations. This steepening of the yield curve is good for financial companies’ earnings, which borrow short and lend long. The CBOE Volatility Index (VIX), which measures the magnitude of price movements in the S&P 500, declined yesterday as demand for option protection eased.
Looking ahead, several economic reports will be released in the days ahead. These include initial jobless claims and the Philadelphia manufacturing survey tomorrow, as well as remarks from St. Louis Federal Reserve leader James Bullard and Federal Reserve Chairman Powell. Meanwhile, hundreds of earnings reports are also slated for release in the days ahead, largely from financial and telecom companies, which should give further insight into these businesses.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
