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U.S. Futures Drop Amid Pause for Growth-Led Rally: Markets Wrap

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Srinivasan Sivabalan
·4 min read
U.S. Futures Drop Amid Pause for Growth-Led Rally: Markets Wrap
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(Bloomberg) -- U.S. stock-index futures retreated as traders took a month-end breather amid a record high for the S&P 500 Index and some earnings disappointments. The dollar pared April losses.

June contracts on the Russell 2000 declined 1.1% and Nasdaq 100 futures dropped 0.8% after China’s antitrust crackdown weighed on Asian technology shares. Twitter Inc. plunged 13% in premarket trading after forecasting second-quarter revenue below some expectations. The 10-year Treasury yield was steady and on course for the biggest monthly decline since July. European stocks erased gains.

Confidence in the U.S. economy has surged amid a string of positive data culminating in a report Thursday that showed quarterly growth at an accelerated 6.4%. Given the Federal Reserve’s dovish resolve, that emboldened investors to stay bullish on stocks despite concern about high valuations. Some speculated Fed Chair Jerome Powell will come under pressure later this year to reassess the extent of accommodation.

“The trouble is the asset froth that results from this -- we see asset valuations very, very stretched,” said Yves Bonzon, chief investment officer at Julius Baer Group Ltd. “Will Chairman Powell blink and start to guide for slightly less accommodative policy sooner than expected? That could be a risk as early as the third quarter.”

With uncertainties about growth and monetary policy put aside for the moment, investors are focusing on corporate profits. Of the 290 companies in the S&P 500 that have reported results so far, about 88% have met or beaten estimates.

Yet, this week brought a reality check to the earnings optimism amid the still-raging pandemic. While companies from Apple Inc. to Facebook Inc. crushed analyst estimates, there were disappointments too.

Twitter plummeted in early trading as its sales forecast missed estimates at the midpoint and the company said user growth rate may slow. Chevron Corp. slid 2% even though it posted bumper cash flow as it said it will wait before reinstating share buybacks. Apple fell amid concerns about chip shortages.

In Europe, the Stoxx 600 gauge fell 0.3%, dragged by raw-materials and technology shares. AstraZeneca Plc reported better-than-projected profit, helping the health-care sector post a gain.

Chinese regulators imposed wide-ranging restrictions on the financial divisions of 13 companies, including Tencent Holdings Ltd. and ByteDance Ltd., in a broadening effort to rein in the giants of the tech industry. China’s purchasing managers’ surveys also cooled risk appetite, pointing to slower expansion in activity.

A key index of commodities slipped, still set for the biggest monthly increase in five years. Crude-oil futures fell as traders looked past strong economic data and weighed the possibility of a resurgent coronavirus ruining the demand outlook.

Copper’s Surge Toward a Record High Hitting Chinese Industry

These are some of the main moves in markets:

Stocks

Futures on the S&P 500 Index dipped 0.6% as of 6:54 a.m. New York time.The Stoxx Europe 600 Index decreased 0.4%.The MSCI Asia Pacific Index fell 0.9%.The MSCI Emerging Market Index fell 0.9%.

Currencies

The Bloomberg Dollar Spot Index gained 0.2%.The euro declined 0.3% to $1.2084.The British pound fell 0.3% to $1.3908.The onshore yuan strengthened 0.1% to 6.466 per dollar.The Japanese yen was little changed at 108.87 per dollar.

Bonds

The yield on 10-year Treasuries gained less than one basis point to 1.64%.The yield on two-year Treasuries increased less than one basis point to 0.16%.Germany’s 10-year yield sank two basis points to -0.21%.Britain’s 10-year yield fell one basis point to 0.83%.Japan’s 10-year yield decreased less than one basis point to 0.097%.

Commodities

West Texas Intermediate crude declined 1.9% to $63.80 a barrel.Brent crude dipped 1.5% to $67.54 a barrel.Gold weakened 0.1% to $1,769.91 an ounce.

For more articles like this, please visit us at bloomberg.com

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©2021 Bloomberg L.P.

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