Markets Await Powell’s Speech as Bond Yields Rise
Fed Chair Jerome Powell to Speak at Economic Club of New York
Federal Reserve Chairman Jerome Powell is set to hold the spotlight Thursday as he speaks at the Economic Club of New York. Market participants are nervous that he may strike a hawkish tone after recent U.S. data pointed to strength in the economy. Fed policy makers have hinted at the possibility of ending the rate-hiking cycle, but robust labor market data and sticky inflation have prompted some officials to adopt a more hawkish stance. The benchmark 10-year Treasury yield surged past 4.9% for the first time since 2007.
Stock Futures Decline as Bond Yields Increase
U.S. stock futures traded lower on Thursday as rising bond yields prompted investors to exit riskier assets. The previous session saw major indices weighed down by escalating tensions in the Middle East and concerns over elevated bond yields. The odds of a December rate hike have jumped to 40% this week from 26% last week. Economic data on deck include weekly jobless claims, existing home sales for September, and the Leading Economic Index for October.
Netflix Surpasses Expectations, Tesla Disappoints
Netflix’s subscription service saw a significant boost as the streaming giant shattered expectations for new customers. Paid subscribers rose by over 8.76 million in the third quarter, well above the estimated 6 million. Netflix also reported revenue of $8.54 billion, in line with forecasts, and earnings per share of $3.73, surpassing Wall Street’s expectation of $3.49. Meanwhile, Tesla’s stock fell over 4% premarket as the company’s recent wave of price cuts weighed on margins. Gross margins excluding credits slowed to 16.1% in the third quarter.
Third-Quarter Earnings Season Continues
Various companies, including American Airlines, AT&T, Philip Morris, CSX, Blackstone, and regional banks, are set to release their quarterly earnings reports. According to FactSet data, 83% of companies have so far surpassed earnings expectations, while about 70% have exceeded sales estimates.
Crude Oil Prices Retreat
Oil prices fell as markets awaited developments in the Israel-Hamas conflict and assessed the global supply outlook. Concerns of disruptions to global supplies after Iran called for an oil embargo on Israel and a larger-than-expected draw in U.S. oil inventories drove prices up in the previous session. However, worries over potential disruptions eased as the Organization of the Petroleum Exporting Countries showed no immediate signs of taking action on Iran’s call. Prices were also pressured after a deal was reached between the Venezuelan government and the country’s political opposition.
Overall, investors are closely monitoring Powell’s speech and the ongoing earnings season, while keeping an eye on geopolitical tensions and the impact of rising bond yields on the markets.
