The Tuesday Market Minute
- Global stocks edge higher amid limp August volumes as stocks hold gains despite persistent concerns over Delta variant infections and near-term Fed tapering.
- A host of Fed officials followed Friday's jobs report with comments suggesting an autumn change to the central bank's $120 billion in monthly bond purchases.
- 10-year note yields rise to 1.33% ahead of a $41 billion auction Wednesday as bonds slow begin to price near-term Fed changes.
- AMC soars after a narrower-than-expected second quarter loss and suggestion it could run into the black by the end of the year.
- U.S. equity futures suggest a mixed open on Wall Street with investors looking to Wednesday's inflation data and 10-year bond auction.
U.S. equity futures edged lower again Tuesday, while Treasury bond yields continued to creep higher, as markets approach an infection point predicated on changes to the Federal Reserve's extraordinary support programs.
A host of Fed officials spoke yesterday of the need to signal changes to the central bank's bond buying program, which is scooping up $120 billion a month in Treasury, agency and mortgage bonds in order to hold down market rates and add further support to corporate investment.
However, with recent employment reports suggesting the economy is bringing back nearly a 1 million new jobs each month, and inflation running at multi-year highs, officials including Raphael Bostic of the Atlanta Fed, Tom Barkin of Richmond and Boston Fed President Eric Rosengren are suggesting the time is right to being trimming purchases while plotting a path towards the first Fed rate hike since December 2018.
That has benchmark 10-year Treasury note yields back on the move Tuesday, rising to 1.33% in overnight trading, while the dollar index is marked at a three-week high of 93.02 against a basket of its global peers.
Stocks, meanwhile, are hovering at all-time highs near the tail end of a second quarter earnings season that is on pace to see collective S&P 500 profits rise 93.1% from last year to $439.5 billion.
But with rates rising, growth slowing moderately and earnings expected to return to their pre-COVID mean, some investors are looking for stocks to fade into the second half of the year.
Others, including Goldman Sachs' David Kostin, see tailwinds carrying the benchmark to 4,700 points, and possibly higher, by the end of the year.
For the moment at least, however, price action looks muted, with futures contracts tied to the Dow Jones Industrial Average indicating a 15 point dip and those linked to the S&P 500 suggesting a 0.5 point gain.
A modest pre-market decline of 0.8% for Tesla (TSLA) - Get Tesla Inc Report, possibly linked to weaker-than-expected China sales over the month of July, as well as higher Treasury bond yields will also clip gains for the Nasdaq, which is expected to open 15 points higher.
AMC Entertainment (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report shares were also active in pre-market trading, rising 9.5% to $37.00 each after the world's biggest movie theater operator posted a narrower-than-expected second quarter loss and suggested it could return to the black by the end of the year.
Drugmakers Moderna (MRNA) - Get Moderna, Inc. Report and Pfizer (PFE) - Get Pfizer Inc. Report were also on the move, rising 2.8% and 0.6% respectively, amid reports that the Pentagon is seeking White House approval to mandate the vaccination of 1.3 million members of the armed forces once the FDA approves either or both of the current two-shot vaccine candidates.
Elsewhere, oil prices rebounded from yesterday's slump, even as the dollar extended recent gains, with WTI crude rising $1.15 per barrel to $67.63 in overnight trading.
European stocks hit a fresh all-time high in Frankfurt, with the Stoxx 600 up 0.16% thanks to solid gains for travel and leisure stocks, while the Asia session ended with a 0.24% gain for the Nikkei 225 and a 0.33% bump for the MSCI ex-Japan index.