Sunday, October 24, 2021

Wall Street Opens Cautiously Higher Ahead of Earnings Season; Dow up

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Stock Markets24 minutes ago (Oct 12, 2021 09:49AM ET)

(C) Reuters.

By Geoffrey Smith — U.S. stock markets opened moderately lower on Tuesday but showed little appetite for major moves ahead of the third-quarter earnings season, which begins in earnest with the major banks’ reports later this week.

By 9:45 AM ET (1345 GMT), the Dow Jones Industrial Average was down 75 points, or 0.2%, while the S&P 500 was also down 0.2% and the Nasdaq Composite was down 0.1%, all extending the losses they had made on Monday.

Stock prices continue to be pressured by rising long-term interest rates as the bond market positions for a gradual withdrawal of support from the Federal Reserve: the 10-year Treasury yield rose to a new five-month high of 1.63% overnight and was trading at 1.61% by 9:45 AM, ahead of a key test of sentiment at the Treasury’s note auction later in the day.

Weighing on sentiment was a warning from Bank of America Merrill Lynch (NYSE:BAC) strategists, who told clients in a morning note that the Federal Reserve may have a higher tolerance for a stock market selloff than it did during the Great Recession, given that inflation pressures are clearly building up.

“With tapering on the docket, the risk is the Fed put strike is lower than the market anticipates,” the authors said.

Adding to the general caution are suspicions that the upcoming season of earnings reports is going to show a sharp slowdown in earnings growth, if only because the previous quarter benefited from being measured against the depths of pandemic gloom.

“After several quarters of huge beats, it’s possible that the growth rate for Q3 will be less stellar but still positive,” said Jurrien Timmer, director of global macro at Fidelity Investments, via Twitter (NYSE:TWTR). He pointed to expectations that per share earnings will grow ‘only’ 28%, after gains of 54% of in Q1 and 96% in Q2 respectively.

Among individual movers early on, Tesla (NASDAQ:TSLA) stock pushed through $800 for the first time in six months after posting its best month for China sales in nearly two years, despite a 17% annual drop in China car sales nationwide. Airbnb (NASDAQ:ABNB) stock rose 4.2% and MGM Resorts (NYSE:MGM) stock rose 6.9% on the back of broker upgrades, while

Money continued to seep out of megacap names into cyclicals with less demanding valuations. Facebook (NASDAQ:FB) stock fell 2.2%, while Alphabet (NASDAQ:GOOG) stock fell 1.5%, Micron (NASDAQ:MU) stock fell 1.9% and Apple (NASDAQ:AAPL) stock fell 0.5%.

American Airlines (NASDAQ:AAL) stock rose 0.8% after forecasting a narrower third-quarter loss than the market expected, while Southwest Airlines (NYSE:LUV) managed a feeble bounce of 0.5% after its disastrous Columbus Day weekend. CEO Gary Kelly told CNBC that Tuesday was shaping up to be “mostly normal” for the airline.

Wall Street Opens Cautiously Higher Ahead of Earnings Season; Dow Down 75 Pts

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