By Sruthi Shankar
(Reuters) -Wall Street was set to open flat on Tuesday as Treasury yields hit new highs on expectations of aggressive interest rate hikes, while investors awaited more earnings reports to assess the impact of inflation and the Ukraine war on company profits.
St. Louis Federal Reserve Bank President James Bullard on Monday repeated his case for increasing the rates to 3.5% by the end of the year to slow a 40-year-high inflation. He also said he did not rule out a 75 basis points rate hike.
Shares of rate-sensitive megacap companies including Microsoft Corp and Apple Inc dipped slightly in premarket trading as the 30-year U.S. Treasury yield rose to 3% for the first time since early 2019. [US/]
The 10-year yield, the benchmark for global borrowing costs, rose to a new high at 2.909%, their highest since late 2018.
“When you think about what has been hit the hardest as rates moved higher this year, the damage has been done to the average Nasdaq Composite stocks. I think the market is already assuming 3% yield on the 10 year,” said Art Hogan, chief market strategist at National Securities in New York.
“The earnings season is taking some of the attention that had been hyperfocused on the correlation between yields and falling growth stocks.”
After recovering in March from a selloff driven by the Ukraine war, U.S. stocks have again come under pressure this month as the prospect of higher U.S. rates weigh on growth and technology stocks.
The S&P 500 growth index has shed about 14% so far this year, while its value counterpart is down just 0.9%.
Johnson & Johnson slipped 0.7% after it suspended its sales forecast for COVID-19 vaccine due to global supply surplus and demand uncertainty.
Only 38 companies in the S&P 500 index have reported first-quarter earnings so far, with 78.9% of them topping profit estimates, as per Refintiv data. Typically, 66% beat estimates.
At 08:45 a.m. ET, Dow e-minis were up 21 points, or 0.06%, S&P 500 e-minis up 0.75 points or 0.02%, and Nasdaq 100 e-minis were down 4 points, or 0.03%.
The main indexes ended lower in thin trading on Monday as investors returned from Easter holidays to weigh bank earnings, with Bank of America Corp posting a better-than-expected quarterly profit.
Meanwhile, data showed U.S. homebuilding unexpectedly rose in March, but starts for single-family housing tumbled amid rising mortgage rates.
Twitter Inc slipped 1% despite overnight reports that more private-equity firms have expressed interest in participating in a deal for the micro-blogging site.
Netflix Inc, set to report after the closing bell, was down 0.1%. The streaming giant is expected to report its slowest quarterly revenue growth in nearly eight years, with analysts warning it could lose about a million subscribers due to its exit from Russia.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur and Anil D’Silva)