Dow Futures Waver, Bond Yields Higher—and What Else Is Happening in the Stock Market Today

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Corporate earnings season is kicking into high gear this week.

Ed Jones/AFP via Getty Images

Stocks were wavering Tuesday as investors looked ahead to a wave of U.S. corporate earnings, with worries around inflation and growth continuing to pressure markets.

Futures for the Dow Jones Industrial Average were up 10 points, or less than 0.1%, after the index retreated 39 points on Monday to close at 34,411. S&P 500 futures signaled a start 0.1% into the red with the Nasdaq poised to move 0.3% lower. Stock-index futures were higher earlier in the premarket, with the Dow pointing up more than 100 points.

Overseas, the pan-European Stoxx 600 fell 1.1% as investors across the region returned from a holiday on Monday. Tokyo’s Nikkei 225 rose 0.7%.

Investors are focused on how well companies are weathering a complex macroeconomic environment amid historically high inflation and expectations that the Federal Reserve will soon move aggressively to tighten monetary policy. U.S. corporate earnings season kicks into high gear this week, with Netflix (ticker: NFLX), Johnson & Johnson (JNJ), Lockheed Martin (LMT), and International Business Machines (IBM) among the groups reporting Tuesday.

“The biggest catalyst for big moves this week is the beginning of earnings season,” said Sophie Lund-Yates, an analyst at broker Hargreaves Lansdown . “First up is Netflix, which should give some indication of how global discretionary spending is faring in a high-inflationary environment.”

Inflation remains in the spotlight as markets consider how much the Fed will raise interest rates to rein in higher prices. St. Louis Federal Reserve President James Bullard said on Monday that a 75-basis point interest-rate increase wasn’t out of the question; the Fed raised rates by a quarter-point in March, and is expected to hike by a sizable 50 basis points at its next meeting.

“Fortunately, markets do not pay too much attention to Fed President Bullard,” said Paul Donovan, the chief economist at UBS Global Wealth Management. “Assorted other Fed speakers are scheduled this week, with the Beige Book of anecdotal evidence due tomorrow.”

The global economy was also under scrutiny, after the World Bank cut its 2022 global economic growth outlook to 3.2% from 4.1% on Monday, citing uncertain geopolitics from the Russia-Ukraine war and rising inflation. Analysts are watching whether the International Monetary Fund will follow suit when it meets later this week.

Bond yields pushed higher, further into multiyear record territory as markets see the Fed tightening monetary policy significantly by reducing its bondholdings and raising the cost of borrowing. The yield on the 10-year U.S. Treasury note topped 2.9%, having closed at a new Covid-19 pandemic-era closing high of 2.87% on Monday.

Higher yields have put pressure on technology stocks in particular, with the tech-heavy Nasdaq underperforming on Monday and set to do the same Tuesday. When long-duration yields rise, they discount the value of future profit—hurting fast-growing tech stocks that are valued on the prospect of cash coming years into the future.

The Russia-Ukraine war, which has roiled equity and commodity markets alike since it began almost two months ago, remained in focus and weighed on European stocks. 

“Ukraine-Russia tensions have escalated once more, with a Russian offensive under way in the crucial Donbas region,” said Lund-Yates. “Any suggestion that tensions are going to be prolonged, or more violent, is enough to mute sentiment in western markets.”

The cryptocurrency space has seen a volatile 24 hours, with Bitcoin—the largest digital asset—dropping below $39,000 at points on Monday. Bitcoin prices were up almost 5% over the past day to near $41,000, with smaller peer ether also 5% higher to around $3,050.

“Investors have become increasingly concerned with the lethal combination of rising inflation and slowing growth—otherwise known as stagflation—afflicting economies,” noted a team of analysts at crypto exchange Bitfinex.

Write to Jack Denton at jack.denton@dowjones.com