Wall Street’s main indexes were set to fall at the open on Wednesday as Treasury yields surged to 14-year highs amid rising interest rates, denting gains powered by streaming giant Netflix after it reversed customer losses.
The yield on the benchmark 10-year Treasury note climbed to its highest levels since July 2008 in a steep selloff in US government bonds, which picked up pace after data showed an 8.1% slide in housing starts in September.
A drop in the measure of new residential constructions, a key economic indicator, is another sign of the economy losing steam and could worsen the pain for stock markets attempting to break out of months of declines.
The three main stock indexes have notched two straight sessions of gains on solid quarterly results from big US banks, but they are still deep in bear market territory.
While some gauges of the equity market’s health showed that the latest rally may be the start of a sustained move higher, many investors are awaiting signs of cooling inflation.
With inflation way above the Federal Reserve’s target, the US central bank is likely to raise rates by 75-basis points for the fourth straight time in November.
“We probably just saw a bear market bounce and it is going to be in this kind of environment where the market’s going to face volatility until the Fed feels comfortable enough to slow their pace of rate hikes,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
“That probably won’t be coming until we start to see some weakness in the labor market, which is helping fuel inflation pressures.”
Analysts have cut their third-quarter profit expectations for S&P 500 companies to just 2.8%, from an 11.1% increase forecast at the start of July, according to Refinitiv data.
Apple Inc fell 1.3% in premarket trading after a report of iPhone 14 Plus production cut within weeks of starting shipments.
Other growth stocks including Tesla Inc, Amazon.com , Microsoft Corp and Alphabet Inc fell between 0.1% and 0.2%.
Netflix jumped 11.3% after it attracted 2.4 million new subscribers worldwide in the third quarter, more than double the consensus forecast, and guided for 4.5 million additions by year end.
Netflix’s subscriber turnaround also lifted stocks of rival streaming companies. Warner Bros Discovery, Walt Disney and Roku gained between 1.1% and 1.5%.
At 8:27 am ET, Dow e-minis were down 134 points, or 0.44%, S&P 500 e-minis were down 21 points, or 0.56%, and Nasdaq 100 e-minis were down 57.25 points, or 0.51%.
United Airlines Holdings Inc jumped 5.8% as the US carrier posted its strongest quarterly earnings in three years. (Reporting by Ankika Biswas and Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila and Arun Koyyur)