US equity futures declined along with European stocks as investors scrutinized a flood of earnings reports for clues on the outlook for corporate profits amid high interest rates and slowing economic growth.
(Bloomberg) — US equity futures declined along with European stocks as investors scrutinized a flood of earnings reports for clues on the outlook for corporate profits amid high interest rates and slowing economic growth.
Contracts on the S&P 500 and the Nasdaq 100 slipped, with First Republic Bank plunging more than 20% in premarket trading after results late Monday shook investor confidence. Other results were mixed, with General Motors Co. and PepsiCo Inc. gaining after beats, while United Parcel Service Inc. sank as guidance disappointed. Tech heavyweights including Microsoft Corp. and Alphabet Inc. will report later Tuesday amid speculation the Federal Reserve is nearing the end of its tightening cycle.
“What will be crucial for the outlook in tech is the rate expectations, and currently the market is pricing in swift cuts by the Fed for the second half of this year, which we do not agree with,” Ann-Katrin Petersen, a senior investment strategist at BlackRock Investment Institute, said on Bloomberg TV. “This sector is very rate-sensitive, so it might have digest this potential for a reversal in Fed rate expectations for the second half of this year.”
Among other US companies reporting earnings Tuesday:
- Spotify Technology SA rose after adding subscribers
- 3M Co. climbed after announcing a restructuring push to counter slumping demand
- General Electric Co. advanced after raising forecasts
- McDonald’s Corp. gained after beating sales estimates
- Danaher Corp. dropped after lowering full-year guidance
A Bloomberg gauge of the dollar climbed and Treasuries extended gains after 10-year yields slid eight basis points Monday, the biggest one-day decline since March. Government bonds across Europe rallied, with the German 10-year yield falling as much as eight basis points.
UBS Weighs on Banks
The Stoxx Europe 600 index dropped about 0.3%, with Swiss lender UBS Group AG weighing on the banking sector after results that fell short of analysts’ expectations. Spain’s Banco Santander SA slid as concern over outflows offset a first-quarter earnings beat.
In other earnings news from Europe:
- Swiss food producer Nestle SA advanced after posting healthy revenue growth
- Freight operator Kuehne + Nagel International AG jumped after a strong sea-logistics performance
- Drugmaker Novartis AG rose after first-quarter earnings exceeded analysts’ expectations
- Engineering firm ABB Ltd. climbed after raising revenue guidance for the year
- Associated British Foods Plc fell after a profit miss
- Swedish miner and smelter Boliden AB slumped, pulling the basic resources sub-index lower, after disruptions and rising costs at its mines unit weighed on earnings
Fed Peak
Markets are now pricing the peak for US interest rates in June, and then a decline to end the year below 4.5%.
The small shifts in Fed projections underscore the lack of direction at the start of a busy week for economic data and corporate earnings. Data published Monday showed US manufacturing data was weaker than economists forecast, while uncertainty over the debt ceiling persisted. Later this week, US GDP data is forecast to reveal slower growth, and the so-called core PCE deflator, the Fed’s preferred inflation gauge, is expected to show price growth cooled.
“The data justifies a 25 basis-point hike,” said Erick Muller, head of product and investment strategy at Muzinich & Co. in London. “But it’s going to be difficult for central banks to raise rates and then quickly within a few months to start reversing that.”
Elsewhere, oil dipped and gold edged lower, while iron ore extended a losing streak to a fifth day. Bitcoin slid for a third day.
Key events this week:
- US new home sales, consumer confidence, Tuesday
- Australia CPI, Wednesday
- Sweden rate decision, Wednesday
- Eurozone economic, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Bank of Japan meets on interest rates, Friday
- Euro-area GDP, Friday
- US personal income, Friday
Earnings highlights:
- Wednesday: Boeing, Meta, Hilton
- Thursday: Amazon, American Airlines, Intel, Mastercard, Southwest Airlines, Hershey, Honeywell, Barclays
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.5% as of 8:11 a.m. New York time
- Nasdaq 100 futures fell 0.4%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 fell 0.3%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.1024
- The British pound fell 0.4% to $1.2437
- The Japanese yen was little changed at 134.21 per dollar
Cryptocurrencies
- Bitcoin fell 0.3% to $27,385.19
- Ether fell 0.8% to $1,825.16
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.45%
- Germany’s 10-year yield declined four basis points to 2.47%
- Britain’s 10-year yield declined four basis points to 3.74%
Commodities
- West Texas Intermediate crude fell 0.9% to $78.02 a barrel
- Gold futures fell 0.7% to $1,986.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar, Sujata Rao and Subrat Patnaik.
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