The futures markets are in the red this morning, following some weaker earnings results and pressures from higher bond yields. Shares of Reddit (RDDT), which operates a social network of news forums, soared on better-than-expected results. Elsewhere, Shopify (SHOP), a multiplatform e-commerce provider, saw its share price quickly decline after the company’s second-quarter outlook underwhelmed the Street. Overall, these developments point to a weak start to the trading day. Later today, the market will digest the wholesale inventories report, and several Federal Reserve Presidents will give remarks throughout the day, which may impact trading this afternoon.
The markets started higher for the fourth day in a row yesterday after several large companies reported quarterly results. However, equities pulled back halfway through the session, a move attributed to the market reaching an overbought condition. That dynamic, which occurs when the market has risen too aggressively, often leads to a correction. The markets returned to near-breakeven levels as a result. Overall, the S&P 500 rose seven points (up 0.13%) and the Dow Jones Industrial Average increased 32 points (up 0.08%). The NASDAQ, however, finished in the red, declining 17 points (down 0.10%). Market breadth was slightly positive, with advancers outpacing decliners by a 1.3-to-1.0 ratio. Materials stocks were among the best performers, while equities tied to consumer discretionary products were among the weakest. The share price of Dow-30 component The Walt Disney Company (DIS) declined sharply after the multimedia conglomerate posted weaker-than-expected earnings and reported streaming subscriber numbers that underwhelmed the Street.
In commodity news, oil prices fell yesterday on fears of oversupply, as ministers from Russia stated that the country would be open to increasing output if certain conditions were met. Additionally, the American Petroleum Institute reported a small build in crude and fuel inventories, while the Biden Administration announced that the U.S. would purchase fuel for its strategic oil reserves. Elsewhere, U.S. Treasury bond yields were mixed, with some short-term yields falling while long-term yields increased. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, fell yesterday, trending lower for a fifth day in a row, suggesting investors are more comfortable with the amount of future price volatility.
A few economic reports will be released in the days ahead. These include initial jobless claims on Thursday, while the preliminary consumer sentiment index for May will be released on Friday. Additionally, several Federal Reserve Regional Presidents will give remarks on the state of the economy and future interest rate policy, which may change sentiment for bond yields. Elsewhere, several hundred mostly smaller companies will report first-quarter results and outlooks for the rest of the year, given an overwhelming majority of the S&P 500 companies have reported by now. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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