Equity futures pointed to a weaker open for Wall Street on Tuesday, as momentum behind the biggest two-day tech rally since November fizzled and investors geared up for a raft of marquee firms to report earnings.
(Bloomberg) — Equity futures pointed to a weaker open for Wall Street on Tuesday, as momentum behind the biggest two-day tech rally since November fizzled and investors geared up for a raft of marquee firms to report earnings.
Forecasts for the worst tech earnings slump since 2016 are setting up a test for the year-to-date stock rally, with US equity futures losing ground after the tech-heavy Nasdaq 100 gained as much as 5.5% in the two previous sessions. Europe’s regional Stoxx 600 Index erased an early advance to fall into the red.
Purchasing Managers’ Index data, while better than expected, highlighted ongoing weakness across the euro bloc and in Britain, while US figures later in the day will offer investors a snapshot of how the world’s largest economy is faring.
But the upcoming wave of US corporate earnings — from tech giants such as Microsoft Corp. and Texas Instruments Inc. as well as industrials such as GE — is likely to dominate attention.
“It’s all about earnings,” said Peter Kinsella, head of FX strategy at asset manager UBP. “Given that equities are trading at elevated levels, any earnings disappointment would justify a shift lower in stocks.”
Kinsella said there was scope for bonds to rally and reckons that the dollar, already down about 1.7% this year against a basket of rivals, has likely seen its peak as the Federal Reserve approaches the end of its rate-hiking cycle. The US central bank bank is expected to raise rates by a smaller 25 basis points at a Jan. 31-Feb. 1 meeting.
The dollar held just above nine-month lows plumbed on Monday against a basket of currencies, with the euro down against the greenback for the first time in five sessions and the British pound slipping to a one-week low.
Yields on 10-year German and British government bonds fell, with the latter weighed down by a particularly poor business activity reading.
“The market is saying inflation is done and dusted, which justifies a turn in tone from the Fed,” Kinsella added. “Overall I am off the view we saw the multi-year dollar peak last year.”
Elsewhere in markets, oil rose as traders waited for fresh signals on the state of Chinese crude demand after the nation ditched Covid curbs. Copper held near the highest level in seven months and gold gained, benefiting from the broadly weak dollar.
Key events this week:
- PMIs for US, euro area, UK, Tuesday
- Richmond Fed Manufacturing, Tuesday
- ECB President Christine Lagarde delivers a video message on “the euro as a guarantee of resilience,” Tuesday
- US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
- US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
- US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 8:33 a.m. New York time
- Nasdaq 100 futures fell 0.5%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0875
- The British pound fell 0.7% to $1.2298
- The Japanese yen rose 0.3% to 130.28 per dollar
Cryptocurrencies
- Bitcoin fell 0.3% to $22,925.27
- Ether fell 0.4% to $1,625.95
Bonds
- The yield on 10-year Treasuries declined one basis point to 3.50%
- Germany’s 10-year yield declined one basis point to 2.20%
- Britain’s 10-year yield declined three basis points to 3.33%
Commodities
- West Texas Intermediate crude rose 0.2% to $81.76 a barrel
- Gold futures rose 0.4% to $1,953.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller.
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