Rising Bond Yields Weigh on US Stocks; Starbucks, Coke Fall
On Wednesday, U.S. stock index futures indicated an additional decline, as Treasury yields increased amid concerns regarding a potentially less dovish central bank. Investors prioritized earnings reports from Starbucks (NASDAQ:SBUX) and Coca-Cola (NYSE:KO).
The Dow E-minis were down 222 points, or 0.51%, the U.S. S&P 500 E-minis were down 14.25 points, or 0.24%, and the Nasdaq 100 E-minis were down 60 points, or 0.29%.
Stocks were under pressure as markets reevaluated the extent of interest-rate cuts over the next few months in response to robust economic data, as U.S. Treasury yields were trading at three-month highs.
“The stock market’s rally is impeded by the 10-year Treasury’s price of four and a quarter.” Robert Pavlik, senior portfolio manager at Dakota Wealth, stated, “Things begin to slow down… and people become a little bit nervous.”
“The market has experienced remarkable growth in a relatively brief period of time, following its recent lows.” That is also a contributing factor to the declines.
According to data collected by LSEG, investors are anticipating approximately two rate reductions by the conclusion of 2024.
Starbucks experienced a 3.6% decline in premarket trading following the suspension of its annual forecast on Tuesday and the publication of preliminary fourth-quarter results that showed revenue and profit declines. Earnings were the primary concern.
The company’s annual profit growth forecast was reiterated, despite the expectation of higher revenue, resulting in a 2.2% decline in Coca-Cola’s stock. This was due to the increased demand for its sodas and beverages in the United States.
The shares of Boeing (NYSE:BA), a troubled planemaker, were last down 1% in choppy trading after the company reported a quarterly loss of $6 billion, which was attributed to a debilitating strike. Later in the day, factory workers will vote on a new contract proposal that has the potential to resolve the over five-week-old standoff.
Tesla (NASDAQ:TSLA) will be the initial of the “Magnificent Seven” companies to disclose results subsequent to market close. Its shares experienced a 0.4% decline.
After an E. coli infection associated with the company’s Quarter Pounder hamburgers resulted in the death of one individual and the illness of numerous others, McDonald’s (NYSE:MCD) shares experienced a 6.9% decline.
U.S. markets are currently at record highs; however, the sustainability of the recent rally may be put to the test by a combination of earnings, a changing monetary policy outlook, and the impending presidential election. This could result in some market volatility.
Investors are also preoccupied with the increasing likelihood of a second Donald Trump administration. It is anticipated that Trump’s policies regarding tariff implementation and spending will increase inflation and the U.S. fiscal deficit if he is elected.
According to LSEG data, 82% of the approximately 21% of S&P 500 companies that have reported thus far have surpassed earnings estimates.
The Federal Reserve’s Beige Book and September home sales data are scheduled for release, and Michelle Bowman and Thomas Barkin are slated to speak later in the day. [FED/DIARY]
Texas Instruments (NASDAQ:TXN), a semiconductor company, experienced a 2.9% increase in value following its third-quarter profit surpassing expectations. Conversely, AT&T (NYSE:T) experienced a 2.8% increase in value in response to its increased wireless subscriber base in the third quarter, which exceeded expectations.
Qualcomm (NASDAQ:QCOM) experienced a 3% decline in value following a report that Arm Holdings (NASDAQ:ARM) is terminating an architectural license agreement that permits the chipmaker to utilize intellectual property to develop processors.
