Here are five things you must know for Friday, Feb. 26:
1. -- Stock Futures Fluctuate After Selloff
Stock futures traded mixed Friday following a sharp selloff that sank both equities and Treasuries.
Contracts linked to the Dow Jones Industrial Average fell 49 points, S&P 500 futures were up 5 points and Nasdaq futures rose 30 points.
Boeing (BA) - Get Boeing Company Report shares fell 1% in premarket trading after a 777 cargo plane operated by Rossiya Airlines made an emergency landing at Moscow's Sheremetyevo airport because of problems with an engine control sensor. The 15-year-old plane operates with engines made by General Electric, not the Pratt Whitney PW4000 engines being investigated for an incident over a Denver suburb last weekend.
Stocks suffered their worst day in weeks on Thursday as Treasury yields rose to above 1.5%, the highest levels in a year.
The tech sector fared the worst, with the tech-heavy Nasdaq falling 3.52%, as high-growth stocks are considered more vulnerable to inflation pressures. Tech companies that benefited from the pandemic also were sold off as the outlook for the U.S. economy brightened.
"The tech stock sector is the most vulnerable from rising bond yields and will face the brunt of the decline," said James McDonald, CEO and chief investment officer of Hercules Investments. "Unlike other stock sectors like cyclicals, stocks in the tech sector are valued on longer-term earnings. If bond yields and borrowing costs are rising, a company's longer-term earnings may be negatively affected."
The 10-year Treasury yield fell back below 1.5% early Friday, trading at 1.48%.
"It is all about bond yields ... There was a flash spike in the 10-year yield (Thursday) and that upset the apple cart, as higher yields are spooking the stock market," said Ryan Detrick, chief market strategist for LPL Financial. "Could there be more inflation coming than what most think? Although the (Federal Reserve) isn't worried about that, the market might be."
Investors increasingly have become worried that rising inflation could prompt the Federal Reserve to raise interest rates.
Federal Reserve Chairman Jerome Powell, however, said inflation might take more than three years to hit the Fed’s target of 2%, meaning rates won't be lifted anytime before 2023.
2. -- Salesforce Falls as Sales Growth Rate Disappoints
Salesforce (CRM) - Get salesforce.com, inc. Report was tumbling 3.6% to $222.75 in premarket trading Friday after the cloud-based business software provider's fiscal fourth-quarter sales growth disappointed investors.
Sales in the quarter were $5.82 billion, up 20% from a year earlier but a pace similar to year-over-year gains in the previous period.
“Some investors would have preferred to see more business acceleration,” said Pat Walravens, an analyst at JMP Securities.
The company's forecast for first-quarter revenue of up to nearly $5.9 billion exceeded analysts' forecasts as did adjusted earnings expectations of 88 cents to 89 cents a share.
Salesforce said it expects adjusted earnings in fiscal 2022 of between $3.39 and $3.41 a share, below Wall Street estimates of $3.49.
"Even in a pandemic, Salesforce continues to consistently deliver 20% year-over-year sales growth and their industry-leading software is one of the biggest reasons why their customers have remained successful in a digital, work-from-anywhere environment," said Jim Cramer and the Action Alerts PLUS team, which holds Salesforce in its portfolio.
3. -- DoorDash Warns Growth Will Slow as Economy Reopens
DoorDash (DASH) - Get DoorDash Report was dropping 11% in premarket trading Friday after fourth-quarter revenue topped estimates but the food-delivery company warned growth likely will slow as the U.S. economy reopens.
DoorDash has benefited greatly from demand for meals from families stuck at home during the coronavirus pandemic. However, the company estimated total orders in 2021 would be between $30 billion and $33 billion, up 33% from a year earlier but a pace that doesn't match previous growth rates.
”We hope markets will begin to open up soon,” DoorDash said in its first earnings report as a public company. “As that happens, we expect declines in consumer engagement and average order values, though the precise amount remains unclear.”
In addition, DoorDash said caps on fees that it can charge restaurants will weigh on current-quarter results. The company estimated the caps crimped revenue by about $36 million in the fourth quarter and added that the impact would “almost double” in the first quarter.
“It’s our expectation that when indoor dining resumes, these price caps will fall away,” Chief Financial Officer Prabir Adarkar told investors on a conference call.
The stock fell 11.19% to $148.20 in premarket trading Friday.
4. -- AT&T to Spin Off DirecTV
AT&T (T) - Get AT&T Inc. Report reached a deal to spin off 30% of its DirecTV unit by forming a new company with TPG Capital, which will pay $1.8 billion for its stake in the satellite TV video business.
AT&T said it would retain a 70% stake in the new company, which will be called DirecTV and also will include the AT&T TV and U-Verse video services.
The transaction implies an enterprise value for the new company of $16.25 billion. AT&T bought then-public DirectTV in 2015 for about $66 billion, including about $17 billion in assumed debt.
"As the pay-TV industry continues to evolve, forming a new entity with TPG to operate the U.S. video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability,” said AT&T CEO John Stankey in a statement.
Craig Moffett, a telecom analyst at MoffettNathanson, told CNN the "nonsensical" merger would go down in history "as one of the worst deals ever made."
AT&T shares rose slightly in premarket trading to $28.70.
5. -- Friday's Calendar: DraftKings Earnings, Consumer Sentiment
The U.S. economic calendar for Friday includes International Trade in Goods (Advance) for January at 8:30 a.m. ET, Personal Income and Outlays for January at 8:30 a.m., Chicago PMI for February at 9:45 a.m. and Consumer Sentiment for February at 10 a.m.