Pullback By Treasury Yields May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to regain ground following the steep drop seen in the previous session.

The advance by the futures comes as treasury yields are giving back ground following the spike seen during trading on Thursday.

The yield on the benchmark ten-year note has pulled back below 1.7 percent after soaring to its highest closing level in over a year.

After ending the previous session at its highest closing level since last summer, the thirty-year bond yield has also shown a notable move to the downside.

The pullback in bond yields may inspire traders to pick up stocks at reduced levels, with bargain hunting potentially contributing to considerable strength among tech stocks.

Overall trading activity may be somewhat subdued, however, as a lack of major U.S. economic data may keep some traders on the sidelines.

Among individual stocks, shares of FedEx (FDX) are moving sharply higher in pre-market trading after the delivery giant reported fiscal third quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, athletic apparel and footwear giant Nike (NKE) may come under pressure after reporting fiscal third quarter earnings that beat expectations but weaker than expected revenues.

Stocks moved sharply lower over the course of the trading session on Thursday, with the Dow eventually joining the broader Nasdaq and S&P 500 in negative territory as the day progressed. The Nasdaq showed a particularly steep drop amid a sell-off by technology stocks.

The major averages all closed in negative territory, although the Nasdaq underperformed its counterparts by a wide margin. The Nasdaq plunged 409.03 points or 3 percent to 13,116.17, while the Dow fell 153.07 points or 0.5 percent to 32,862.30 and the S&P 500 slumped 58.66 points or 1.5 percent to 3,915.46.

The weakness on Wall Street came as another spike in treasury yields renewed concerns about the outlook for high-growth companies.

The yield on the benchmark ten-year note jumped above 1.7 percent to reach its highest levels since January of 2020, while the thirty-year bond yield shot up to its highest levels since last summer.

Yields skyrocketed despite yesterday’s assurances by the Federal Reserve that interest rates will remain at near-zero levels through 2023.

Analysts attributed the jump in yields to concerns that the Fed’s apparent willingness to let inflation accelerate more than normal will reduce the appeal of bonds. Yields move in the opposite direction of bond prices.

In U.S. economic news, the Labor Department released a report showing an unexpected increase in first-time claims for U.S. unemployment benefits in the week ended March 13th.

The report said initial jobless claims climbed to 770,000, an increase of 45,000 from the previous week’s revised level of 725,000.

The rebound came as a surprise to economists, who had expected jobless claims to edge down to 700,000 from the 712,000 originally reported for the previous week.

However, the unexpected increase in jobless claims was partly due to jump in claims in Texas due to the impact of Winter Storm Uri.

A separate report released by the Philadelphia Federal Reserve showed its reading on regional manufacturing activity spiked to a nearly 50-year high in March.

Energy stocks showed a substantial move to the downside on the day, moving sharply lower along with the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index and the NYSE Arca Oil Index plunged by 5.8 percent and 5.3 percent, respectively.

Significant weakness was also visible among semiconductor stocks, as reflected by the 4.2 percent nosedive by the Philadelphia Semiconductor Index.

Computer hardware, software and networking stocks also saw considerable weakness on the day, contributing to the steep drop by the tech-heavy Nasdaq.

Meanwhile, banking stocks were among the few groups to buck the uptrend, with the KBW Bank Index climbing by 1.2 percent.

Commodity, Currency Markets

Crude oil futures are falling $0.38 to $59.62 a barrel after plummeting $4.60 to $60 a barrel on Thursday. Meanwhile, after rising $5.40 to $1,732.50 an ounce in the previous session, gold futures are climbing $7 to $1,739.50 an ounce.

On the currency front, the U.S. dollar is trading at 108.86 yen versus the 108.89 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1899 compared to yesterday’s $1.1915.

Asia

Asian stocks fell on Friday as a spike in treasury yields and plummeting oil prices on the back of demand concerns and a rising dollar weighed on investors’ risk appetite.

China’s benchmark Shanghai Composite Index slumped 58.40 points, or 1.7 percent, to 3,404.66, while Hong Kong’s Hang Seng Index ended down 414.78 points, or 1.4 percent, at 28,990.94.

Japanese shares fell sharply after the Bank of Japan said it would only buy Topix-linked exchange traded funds. The Nikkei 225 Index tumbled 424.70 points, or 1.4 percent, to 29,792.05, although the broader Topix edged up 0.2 percent to 2,012.21, its highest level since 1991.

Nikkei heavyweights Fast Retailing and SoftBank Group plunged 6.1 percent and 2.5 percent, respectively. Tokyo Electron lost 2.6 percent and Advantest shed 1.2 percent, while shipping lines Mitsui OSK Lines, Kawasaki Kisen and Nippon Yusen surged 3-4 percent.

Banks Mizuho Financial, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial rose 1-2 percent on expectations they would benefit from rising interest rates.

In economic news, overall consumer prices in Japan were down 0.4 percent year-on-year in February, official data showed. That matched expectations and was up from a decline of 0.6 percent in January.

Australian stocks ended lower, dragged down by miners and energy companies. The benchmark S&P/ASX 200 Index slid 37.70 points, or 0.6 percent, to 6,708.20, while the broader All Ordinaries Index ended down 44 points, or 0.6 percent, at 6,959.60.

Oil Search, Santos and Woodside Petroleum lost 2-3 percent as oil prices plunged on demand worries due to rising Covid-19 cases. Lower copper prices weighed on the mining sector, with BHP, Fortescue Metals Group and Rio Tinto all ending down over 1 percent.

Healthcare stocks finished broadly lower, while tech stocks ended on a mixed note. Gold miners also ended mixed, with Newcrest falling 3.4 percent but Northern Star Resources surging 4.2 percent.

In economic news, a government report showed the total value of retail sales in Australia fell a seasonally adjusted 1.1 percent month-on-month in February.

Seoul stocks fell after an overnight spike in long-term U.S. Treasury yields. The benchmark Kospi fell as low as 3,022.49 before recouping some of its loss to end the session down 26.48 points, or 0.9 percent, at 3,039.53.

Heavyweight Samsung Electronics dropped 1.2 percent, No. 2 chipmaker SK Hynix gave up 2.8 percent and leading chemical firm LG Chem tumbled 3.6 percent.

Europe

European stocks are moving lower on Friday as a spike in treasury yields and plummeting oil prices weigh on investors’ risk appetite.

U.S. Treasury yields steadied after a spike sent the benchmark 10-year yield to 1.75 percent for the first time since January 2020 in reaction to the Fed’s decision to allow inflation to accelerate more than normal.

While the U.K.’s FTSE 100 Index has slumped by 1 percent, the French CAC 40 Index is down by 0.8 percent and the German DAX Index is down by 0.6 percent.

Telecommunications company Telecom Italia has come under pressure amid uncertainty over Italy’s single broadband network project.

Roche Holding is also moving lower. Genentech, a member of the Swiss drug major, is recalling prescription drug Evrysdi or risdiplam as it failed to meet child resistant packaging requirements, according to the U.S. Consumer Product Safety Commission.

Oxford Biomedica shares have also declined. The gene and cell therapy group announced that French drug maker Sanofi has given notice intending to terminate their Collaboration and License deal for process development and manufacturing of lentiviral vectors to treat haemophilia.

Pubs chain JD Wetherspoon has also shown a notable move to the downside after posting a record half-year loss.

Investec shares have also slumped. The investment advice company said that its profit in the year to March 31 was likely to fall by up to 29 percent.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today.

Stocks In Focus

Shares of Sarepta Therapeutics (SRPT) are moving significantly higher in pre-market trading after the drugmaker reported positive results from a study of its investigational gene therapy for limb-girdle muscular dystrophy Type 2E.

Auto giant Ford (F) may also seeing initial strength after Barclays upgraded its rating on the company’s stock to Overweight from Equal Weight and raised its price target to $16 per share from $9 per share.

Shares of Ollie’s Bargain Outlet (OLLI) may also move to the upside after the discount retailer reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Skillz (SKLZ) may extend the steep drop seen over the past few sessions after the mobile gaming company priced a public offering of 32 million shares of its Class A common stock at $24 per share.

Brewer Molson Coors (TAP) is also seeing pre-market weakness after Deutsche Bank added the company’s stock to its “short term sell catalyst” list.