Netflix falls after downbeat forecast
Tesla down on latest cuts to US prices
Morgan Stanley slips as Q1 profit falls
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Futures down: Dow 0.37%, S&P 0.64%, Nasdaq 0.86%
(Adds comment, updates prices)
By Sruthi Shankar and Ankika Biswas
April 19 (Reuters) – U.S. stocks were set to open lower on Wednesday as Treasury yields rose on growing expectations that the Federal Reserve could keep interest rates higher for longer, while mixed earnings from regional banks and weakness in Tesla further dented sentiment.
Tesla Inc dropped 2.9% in premarket trading after the electric-vehicle maker cut prices on some of its Model Y and Model 3 vehicles in the United States ahead of its first-quarter results.
Netflix Inc fell 2.5% after the video-streaming pioneer beat analysts’ earnings estimates for the first quarter but offered a downbeat forecast.
Morgan Stanley declined 3.3% after the Wall Street bank reported a fall in quarterly profit, a day after rival Goldman Sachs Group Inc posted a 19% drop in profit on hit to dealmaking and losses from the sale of some assets in its consumer business.
The benchmark S&P 500 closed at a more than two-month high on Tuesday as strength in some big technology stocks countered disappointing quarterly reports from Johnson & Johnson and Goldman Sachs.
While the start of the earnings season has been largely supportive for equities, investors will closely watch updates from market heavyweights as well as consumer companies for signs of inflation and economic slowdown hurting margins.
Mixed economic data recently has fueled bets that the U.S. central bank will hike interest rates by 25 basis points in May, with traders seeing an 85% chance for such a move, as per CME Group’s Fedwatch tool.
The two-year Treasury yield, bokep most reflective of short-term rate expectations, hit a one-month high of 4.29% and the 10-year yield hit a four-week high as traders scaled back expectations of rate cuts later this year.
“I don’t know if they’re (Fed policymakers) going to raise a whole lot more, but all the hawkish tone is saying don’t expect rate cuts this year, another thing driving yields a little bit higher because a lot of them had been anticipating a cut,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
“Also, UK inflation came in really hot and there are fears that it could spread here.”
The Fed’s “Beige Book”, a snapshot of the health of the U.S. economy, will be released at 2:00 p.m. ET (1800 GMT), and investors will scrutinize it for the impact of the recent banking crisis on economic activity.
Chicago Fed President Austan Goolsbee and New York President John Williams are set to speak later in the day.
At 8:36 a.m. ET, Dow e-minis were down 127 points, or 0.37%, S&P 500 e-minis were down 26.75 points, or 0.64%, and Nasdaq 100 e-minis were down 113 points, or 0.86%.
Earnings from regional banks were mixed, with Citizens Financial Group Inc falling 2.4% after its first-quarter results missed estimates.
Western Alliance Bancorp rallied 20.4% after the regional bank posted stronger-than-expected earnings and said its deposits had stabilized after the March banking crisis.
Shares of banks First Republic Bank, Zions Bancorporation and Pacwest Bancorp rose between 3.2% and 5.0%. (Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru Editing by Vinay Dwivedi)
