U.S. stock futures moved higher early Monday, attempting to find their footing after a third-straight losing week attributed to a surge in bond yields and worries about China’s economy that have been amplified by worries over the country’s property sector.
- S&P 500 futures ES00, +0.29% rose 20 points, or 0.5% to 4,402.75.
- Dow Jones Industrial Average futures YM00, +0.12% gained 110 points, or 0.3%, to trade at 34,675.
- Nasdaq-100 futures NQ00, +0.50% rose 96 points, or 0.7% to 14,840.
On Friday, the S&P 500 SPX booked a third straight week of losses, with the large-cap benchmark down 4.8% so far in August. The Nasdaq Composite COMP and Dow Jones Industrial Average DJIA also finished Friday with weekly losses.
What’s driving markets
Futures are striving to find their footing as Wall Street comes off a three-week losing streak.
“Global markets have recently experienced a series of stumbles due to concerns about China’s economy and higher sovereign bond yields. Last week the S&P 500 dropped 2.1 %, worryingly, with every sector ending in the red,” noted Stephen Innes, managing partner at SPI asset management.
A trimming of interest rates over the weekend by China’s central bank has underwhelmed the market, while the 10-year Treasury yield is up about 4 basis points to 4.29%, holding near 15-year highs.
The rising borrowing costs have been a particular problem for some of the big technology stocks that tend to lead the market, according to Innes.
Last week saw several prominent stocks with the S&P 500, including Alphabet Inc. GOOGL, -1.89%, Tesla Inc. TSLA, -1.70%, Meta Platforms Inc. META, -0.65%, Amazon.com Inc. AMZN, -0.57%, Microsoft Corp. MSFT, -0.13%, Apple Inc. AAPL, +0.28%, and Nvidia Corp. NVDA, -0.10%, “all underperformed compared to the broader market index,” Innes said. “This dip in performance is attributed to the recent surge in interest rates…This upward rate movement has exerted downward pressure on longer-duration assets.”
With that in mind, the reception afforded Nvidia’s results, due on Wednesday, may shape market sentiment for a while. The chip maker is among the stragglers of an earnings season that has generally beaten forecasts but failed to deliver additional bullish propulsion to the market.
“This picture simply means that the fear of a further Fed tightening, prospects of higher interest rates, combined [with] the set of bad news from China simply didn’t let investors enjoy the better-than-expected earnings,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
However, Tom Lee, head of research at Fundstrat, reckons the recent selloff will be halted at or before Federal Reserve Chairman Jay Powell makes a speech at the Jackson Hole symposium at the end of the week.
“Over our many conversations with institutional investors in the past week, the vast majority cite the rise in interest rates as the most concerning for equities,” Lee wrote in a note published over the weekend.
And he thinks the Fed is worried by the surge in 10-year yields, too, because it represents a meaningful tightening of financial conditions for markets, companies and households.
“I think the Fed likely says something dovish-ish [sic]. Why? Does Fed want to risk another ‘something breaking’ ala Feb 2023? While some look back at August 2022 when Fed Chair Powell’s statement was hawkish and marked the local top in 2022 (stocks fell -19% next 8 weeks), we think the context is the opposite.” Lee concluded.
Companies in focus
- Shares of Palo Alto Networks Inc. PANW, +1.02% jumped more than 12% in premarket trade after the cybersecurity company late Friday reported results that topped expectations with its latest earnings, as well as with its forecasts for profit and billings, outlining that new reporting rules and AI-backed adversaries are driving adoption.
- Tesla Inc. TSLA, -1.70% shares rose 3% in premarket trade possibly headed for its first winning session in seven, after Baird analyst Ben Kallo said price cuts and their impact on margins will drive the narrative for the electric vehicle maker in the second half.
- Nikola Corp. NKLA, +4.81% shares fell nearly 14% after the electric truck maker said it plans to offer $325 million in senior convertible bonds in a registered direct offering. Nikola also updated its recent voluntary recall of more than 200 of its electric vehicles after investigating their battery packs.