One Stat You Must Know

  • Want to know why Caterpillar's (CAT) CFO comment of the first quarter being the "high water mark" for results spooked stocks on Tuesday? It's because Wall Street remains crazy bullish on the earnings potential of Corporate America, and any view contrary to that is worth a selloff. Points out Yardeni Research: "The 52-week forward earnings of the S&P 500/400/600 are all at record highs. On a y/y basis through April 19, they are up 20.0%, 23.1%, and 27.2%, respectively." Via @BrianSozzi

Market Overview

U.S. equity futures improved in early Wednesday trading after stronger-than-expected first quarter earnings from Boeing Co. (BA) and Twitter Inc. (TWTR) helped reverse earlier losses and steady some investor concerns over the fate of corporate profitability in the face of rising bond yields and commodity prices.

Futures contracts tied to the Dow Jones Industrial Average  were marked 18 points higher, indicating an opening bell gain of 23 points after Boeing blasted Street estimates in its first quarter earnings and lifted its full-year forecasts and better-than-expected aircraft deliveries and improving profit margins. Contracts linked to the broader S&P 500  were marked 6.75 points to the downside at 8am eastern while Nasdaq futures fell 21 points but were showing steady improvement after a stronger-than-expected first quarter earnings release from social media rival Twitter Inc. (TWTR) , which saw ad revenue rise 21% to $575 million and monthly active users rose 3% to 336 million.

Comcast Corp. (CMCSA) shares were marked 1.05% lower in pre-market trading in New York, indicating an opening bell price of $33.35 each. after the group formalized its $30.7 billion bid for Britain's Sky plc and posted a stronger-than-expected 66 cents a share in adjusted earnings and a 10.7% year-on-year increase in revenues of $22.79 billion thanks to NBCUniversal's SuperBowl and Olympic broadcasts.

Facebook Inc. (FB) shares extended declines in in pre-market trading Wednesday as investors prepped for perhaps the most important quarterly earnings report for the social media group since it went public nearly six years ago.

Facebook shares were marked 0.22% lower in pre-market trading, indicating an opening bell price of $159.33 each, a move that would take its year-to-date decline to around 9.9%. However, much of that decline can be attributed to the mid-March revelation that Cambridge Analytical, a political consultancy that worked on behalf of the election campaign of President Donald Trump, gained access to millions of Facebook users' data via an app designed by Cambridge University researcher Aleksandr Kogan.

Rising corporate input costs, either in the form of higher borrowing costs or surging commodity prices, were widely cited as two triggers for last night's selling, which spilled over into Asia markets in overnight trading, as benchmark U.S. 10-year Treasury bond yields traded past 3% -- to 3.02% --for the first time in four years and Brent crude prices hit the highest levels since November 2014.

Mentioning this as it will feature a lot in #markets commentary today: Yield on 10 year US government #bonds is trading at 3.02%.

Per yesterday's tweet, the 3% milestone -- in itself -- shouldn't be as significant for #stocks & other risk assets as many observers tend to suggest

- Mohamed A. El-Erian (@elerianm) April 25, 2018

Brent crude futures contracts for June delivery, the global standard for pricing, were marked about 25 cents lower from last night's close at $73.61 in early European trading while WTI contracts for the same month fell 9 cents a barrel to $67.61.

U.S. companies are on pace to record their best slate of quarterly earnings in more than two decades as businesses capitalise on the triple cocktail of low interest rates, significant domestic stimulus and coordinated global economic growth.

Prior to Tuesday's slate, around 80% of the 87 S&P 500 companies reporting so far this season have topped analysts' forecasts, according to data from both Thomson Reuters I/B/E/S and FactSet, a pace that, if sustained, would be the best quarter for U.S. corporate reporting since 1994. S&P 500 companies are set to notch a 20% year-on-year rise in their collective bottom lines, as well, a figure that hasn't been seen since the final three months of 2010.

However, stocks are also historically expensive, with the 12-month forward P/E ratio, a key metric of equity market value, trading at 16.6, well ahead of its ten year average of 14.3.

Europe's Stoxx 600 benchmark, the region's broadest measure of share prices, fell 0.94% by mid-day in Frankfurt as benchmarks around the region notched losses of around 1% despite a series of solid -- although not spectacular -- corporate earnings and fresh M&A news. Britain's FTSE 100 fell 0.66%, with industrial and basic materials stocks leading the declines.

Credit Suisse (CS) was one of the region's outstanding early movers, rising 4.26% to Sfr116.89 each after the Swiss investment bank topped analysts' forecasts with a 16.4% rise in first quarter net profits, the strongest in three years, even as it cautioned that "client activity levels remain sensitive" to the geopolitical and global trade tensions that are currently roiling markets.

Shire Plc ( SHPG) shares were also active, rising 0.33% to 3,943 pence each in London after it received a sweetened takeover offer from Japan's Takeda Pharmaceuticals ( TKPYY) that valued the drugmaker at around $64 billion.