US STOCKS-Futures rise on hopes of Italy’s budget concessions
October 4, 2018
Dow tumbles on rate worries after this week’s record highs
October 5, 2018* 10-yr U.S. Treasury yield at highest since 2011
* Bank stocks among early gainers
* Constellation Brands gains after lifting qtrly forecast
* Futures drop: Dow 0.42 pct, S&P 0.43 pct, Nasdaq 0.60 pct (Adds comment, details; updates prices)
By Medha Singh
Oct 4 (Reuters) – U.S. stocks were set to open lower onThursday after robust economic data and optimistic views fromthe Federal Reserve pushed government bond yields to multi-yearhighs, while curbing the appetite for stocks globally.
The 10-year U.S. Treasury yield US10YT=RR recorded itsbiggest daily jump since the 2016 U.S. presidential election onWednesday after activity in the service sector hit a 21-yearhigh and ADP private payrolls data for September came instronger than expected. US/
Comments from Fed Chairman Jerome Powell who said the U.S.economy can expand for “quite some time” also helped the yieldrise further. urn:newsml:reuters.com:*:nL2N1WJ1HO
The upbeat views raised expectations for a faster pace ofmonetary tightening, with odds for a fourth interest rate hikein December getting a boost.
Rising bonds yields make stocks less attractive, especiallythose of high dividend-paying companies such as real estate andutilities.
“With valuations still elevated compared to historic levels,it requires an upbeat earnings season for stocks to maintaintheir bullish momentum,” said Hussein Sayed, chief marketstrategist at FXTM. “Risks are growing with borrowing cost onthe rise and fixed-income markets looking very attractive.”
The S&P 500 .SPX was less than a point shy of hitting arecord on Wednesday, before rising yields led to a pullback.
Investors will keep a close eye on the U.S. jobs data onFriday for further clues on the path of interest rate hikes.
“Yields are giving the markets a chance to take a breatherat very high levels. I think we will have a defensive, bumpysession going into Friday’s unemployment data,” said PeterCardillo, chief market economist at Spartan Capital Securitiesin New York.
At 8:37 a.m. ET, Dow e-minis 1YMc1 were down 113 points,or 0.42 percent. S&P 500 e-minis ESc1 were down 12.5 points,or 0.43 percent and Nasdaq 100 e-minis NQc1 were down 46points, or 0.6 percent.
Out of the 27 stocks trading premarket on the Dow .DJI , 24 were lower.
However, Banks stocks, whose profits typically get a boostfrom higher interest rates, eked out gains with Citigroup.C.N , JPMorganJPM.N and Bank of America.BAC.N risingbetween 0.4 percent and 0.5 percent.
Constellation BrandsSTZ.N shares jumped 3.6 percent afterthe Corona beer maker raised its full-year profit forecast andtopped Wall Street’s estimates for second-quarter sales andprofit. urn:newsml:reuters.com:*:nL4N1WK2O4
Eli LillyLLY.N rose 3.3 percent after the company’sexperimental diabetes drug showed promise in a mid-stage trial. urn:newsml:reuters.com:*:nL4N1WK28G
Snap IncSNAP.N fell 4.5 percent after two brokeragesraised concerns over Snapchat’s declining user trends.
Data due at 10:00 a.m. ET include the Commerce Department’sreport for factory goods orders, which is expected to rise 2.1percent in August after a 0.8 percent fall in July. (Reporting by Medha Singh in Bengaluru; Editing by AnilD’Silva) (([email protected]; within U.S. +1646 223 8780,outside U.S. +91 80 6749 1130; Reuters Messaging:[email protected]))
