Wall Street Braces For Mixed Open As Middle-East Tensions Offset Earnings Optimism: Analyst Points To Silver Lining In Rally Break

Earnings optimism may partly offset worries concerning rising bond yields and the volatile geopolitical situation in the Middle East, with the index futures trading mixed early Tuesday. Israel is considering its next course of action, adding to the uncertainty. Domestically, inflation concerns have pushed bond yields sharply higher.

UnitedHealth Group UNH rose solidly after its earnings report, with other health benefit companies following suit. On the other hand, several tech heavyweights are sliding in premarket trading, hinting at extended weakness. Traders may pay attention to speeches by Federal Reserve officials, including one from Chairman Jerome Powell. Global cues are negative, with most major averages plunging hard amid the macro and geopolitical concerns.

Futures Performance On Tuesday ( as of 6:50 a.m. EDT)

Cues From Previous Session:

The spike in bond yields, aided by a stronger-than-expected March retail sales report, and simmering tensions in the Middle East offset the optimism generated by earnings, and sent the major indices spiraling lower on Monday. The Dow declined for a six straight session despite the support lent by Goldman Sachs Group, Inc. GS following the investment bank’s earnings release.

The plunge took the S&P 500 and the Nasdaq Composite to a nearly two-month low, while the Dow Industrials pulled back toward its lowest close since Jan. 18. The small-cap Russell 2,000 Index fell below the psychological level of 2,000 and ended at its lowest level in more than two months.

Insights From Analysts:

Going by historical patterns, one can expect a reversal in sentiment, according to Carson Group’s Ryan Detrick. Commenting on Monday’s move, the analyst said, “First close beneath the 50-day MA for the S&P 500 in 110 trading days, longest since 2011.”

He, however, pointed to a silver lining in the cloud. When streaks over 100 days ended, stocks were higher three months later 88% of the time and six months later 81% of the time, he said.

Upcoming Economic Data:

The Commerce Department is due to release its housing starts report at 8:30 a.m. EDT. Economists, on average, expect housing starts to come in at 1.48 million units in March, down slightly from 1.52 million units in February. Building permits, an indicator of future housing activity, may have edged down from 1.52 million units to 1.51 million units.

The Fed will release its industrial production report for March at 8:15 a.m. EDT. The consensus estimate calls for a 0.4% month-over-month increase in industrial output, faster than the 0.1% growth in February.

Fed Vice Chair Philip Jefferson is scheduled to speak at 9 a.m. EDT, New York Fed President John Williams at 12:30 p.m., and Richmond Fed President Thomas Barkin at 1 p.m. EDT. Fed Chair Powell will make a public appearance at 1:15 p.m. EDT.

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Stocks In Focus:

• Tesla, Inc, TSLA fell over 2.30% in premarket trading to $157.66 in premarket amid weak China sales data and the ongoing concerns about the company’s near term.
• Bank of America Corp. BAC, Morgan Stanley MS, Northern Trust Corp. NTRS, PNC Financial Services Group, Inc. PNC and Jonson & Johnson JNJ are among those reporting earnings ahead of the market open. UnitedHealth climbed over 5% in reaction to its quarterly results, taking along with the shares of peers such as Humana Inc. HUM and Centene Corporation CNC.
• Notable names reporting after the close are J.B. Hunt Transport Services, Inc. JBHT and United Airlines Holdings, Inc. UAL.

Commodities, Bonds, and Global Equity Markets:

Crude oil futures traded lower for a second straight session but held above the $85-a-barrel mark on Tuesday and gold futures firmed up but are trading off Friday’s intraday high of $2,448.80 a troy ounce. Bond yields stayed elevated, with the 10-year note’s yield holding around the 4.65% mark.

Bitcoin BTC/USD fell about 7% and has retraced to near the $62,000 level.

The global equity markets were swathed in a sea of red, with all major Asian averages declining steeply. China’s first-quarter GDP growth came in above expectations but March retail sales and industrial production growth decelerated, missing the consensus estimates. This painted a weak demand outlook for the economy.

European stocks also fell sharply in early trading, with the Euro STOXX 50 Index down about 1.48%.

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