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U.S. stock index futures on Wednesday were trading higher, hinting at a rebound for Wall Street after a bruising session Tuesday fueled by a relentless rise in Treasury yields. Banks remain in the spotlight, with Morgan Stanley and Bank of America reporting quarterly results.

How are stock-index futures trading?
  • S&P 500 index futures ES00, +0.65% rose 0.5% to 4,593
  • Dow Jones Industrial Average futures YM00, +0.45% advanced 0.4% at 35,274
  • Nasdaq-100 futures NQ00, +0.83% climbed 0.2% to 15,306.75

On Tuesday, the Dow industrials DJIA, +0.39% dropped 543.34 points, or 1.5%, to close at 35,368.47, the S&P 500 SPX, +0.67% declined 1.8% to 4,577.11, while the Nasdaq Composite COMP, +0.82% tumbled 386.86 points, or 2.6%, to finish at 14,506.90, below its 200-day moving average.

What’s driving markets?

Surging Treasury yields have been weighing on stocks, particularly yield-sensitive technology and other growth stocks. The yield on the 10-year Treasury note TMUBMUSD10Y, 1.852% on Wednesday was up another 2 basis points to 1.887%, a level not seen since roughly January 2020.

The yield on the 2-year Treasury note  TMUBMUSD02Y, 1.022%, more sensitive to Federal Reserve policy expectations, rose another 2 basis points to 1.055%, the highest levels since February 2020. The selloff in bonds helped push the German 10-year bund yield TMBMKDE-10Y, -0.003% into positive territory for the first time in three years.

“The market keeps focused on the tightening agenda of the Fed, and it is now pricing four interest rate increases for this year,” said Althea Spinozzi, senior fixed income strategist at Saxo Bank, in a note to clients.

She added that the focus Wednesday will be on a 20-year U.S. Treasury TMUBMUSD20Y, 2.237% auction, “a tenor not loved by investors. Weak demand could cause rates to go further up in the long part of the yield curve.”

The Fed is scheduled to meet next Tuesday and Wednesday, though many think January will be too soon to pencil in the first interest-rate hike. But “there’s a very good chance that policy makers will indicate a hike is on the way when the QE program draws to a close in two months time,” said Matthew Ryan, senior market analyst at Ebury, in a note.

In U.S. economic reports, home builders started construction on homes at a seasonally adjusted annual rate of roughly 1.7 million in December, representing a 1% increase from the previous month, the U.S. Census Bureau reported Wednesday. Compared with December 2020, housing starts were up 2.5%.

Meanwhile, permitting for new homes occurred at a seasonally adjusted annual rate of 1.87 million, up 9% from November and 6.5% from a year ago.

Separately, crude oil prices CL00, +1.18% BRN00, +1.04% were once again climbing, after reaching levels not seen since 2014 on Tuesday. Oil extended gains late in that session amid reports that an explosion disrupted flow through the Kirkuk-Ceyhan pipeline between Iraq and Turkey.

On Wednesday, the International Energy Agency predicted global oil demand will exceed pre-pandemic levels this year due to increased vaccination against COVID-19 and milder recent waves of the virus.

West Texas Intermediate crude for February delivery CLG22, +1.32% was last up 1.5% to $86.77 a barrel.

Read: RBC analyst says was wrong on Exxon as oil giant upgraded to sector perform

Which companies are in focus?
  • Investors were poring over a report from Bank of America BAC, +2.54% after the moneycenter bank reported fourth-quarter profit that rose above expectations while revenue came up a bit shy, while growth in loans and deposits helped boost net interest income (NII) despite a challenging interest rate environment.
  • Morgan Stanley MS were in focus after the bank beat profit estimates for the fourth quarter amid strong performances at its investment banking and wealth management divisions.
  • Procter & Gamble Co. PG shares were in focus Wednesday after the consumer products company reported fiscal second quarter results that beat expectations and narrowed its full-year sales guidance.
  • UnitedHealth Group Inc. UNH reported fourth-quarter profit and revenue that rose above expectations and affirmed its full-year outlook.
  • ASML Holding shares ASML, +2.78% rose more than 2% in premarket trading after the Dutch semiconductor-equipment maker reported better-than-forecast fourth-quarter earnings, predicted a 20% rise in sales this year and doubled its dividend to €5.50.
  • SoFi Technologies Inc. shares SOFI, +13.06% climbed 19% after the financial-technology group said that it won regulatory approval to become a bank holding company.
  • Shares of Zogenix Inc. ZGNX, +67.39% surged 60% in premarket trading after the biopharmaceutical company agreed to a deal to be acquired by Belgian peer UCB in a deal valued up to $1.9 billion.
How are other assets faring?
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six rivals, fell 0.2%.
  • Gold futures GC00 edged 0.7% higher to trade at $1,824.50 an ounce.
  • The Stoxx Europe 600 SXXP was trading 0.6% higher, while London’s FTSE 100 UKX advanced 0.6%.
  • The Shanghai Composite SHCOMP declined 0.3%, while the Hang Seng Index HSI rose less than 0.1% in Hong Kong and the Nikkei 225 NIK declined 2.8%.

Source: This post first appeared on http://marketwatch.com/

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