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Top 5 Things to Know in the Market on Monday

Published 23/04/2018, 10:31
Updated 23/04/2018, 10:46
© Reuters.  Top 5 things to know today in financial markets

© Reuters. Top 5 things to know today in financial markets

Investing.com - Here are the top five things you need to know in financial markets on Monday, April 23:

1. Treasury Yields Continue Higher; U.S. 10-Year Nears 3%

U.S. Treasury yields continued higher, with the benchmark 10-year note reaching an intraday high of 2.998%, a level not seen since January 2014.

It was last at 2.990%, up 3.9 basis points, or 1.3%, inching closer to the psychologically important 3%-threshold, as strengthening inflation prospects added to expectations of a more hawkish approach from the Federal Reserve.

The 10-year yield has not been above 3% - the point at which strategists and fund managers say equities will really hurt - since early 2014. It started the year at 2.4%.

And it's not just the 10-year yield which has been shooting higher.

The 2-year note yield hit a high of 2.478%, its strongest level since Sept. 2008, while the 5-year yield touched a peak of 2.828%, a level last seen in June 2009.

If yields continue to breakout, that will certainly start weighing on equities again, like they did earlier this year.

Rising bond yields can crimp demand for assets perceived as riskier, such as stocks, particularly when those yields are higher than those of equities.

2. Dollar Jumps To 1-1/2 Month Highs

The increase in U.S. bond yields helped underpin the dollar, which jumped to a more than seven-week high against a basket of major currencies in early action.

Expectations that the Federal Reserve would raise interest rates three more times in 2018 was also supporting the greenback.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.4% to 90.44, the strongest level since March 1.

The dollar rose to more than two-month highs against the safe haven yen, with USD/JPY up 0.4% to 108.10.

The euro slid to two-week lows, with EUR/USD down almost 0.5% to 1.2230.

Sterling was also lower, with GBP/USD slipping 0.2% to 1.3971.

On the data front, the Chicago Fed national activity index for March is scheduled for release at 8:30AM ET (1230GMT).

Preliminary readings of the manufacturing and services purchasing managers’ indexes for April from Markit are expected at 9:45AM ET (1345GMT), followed by data on existing home sales for March at 10AM ET (1400GMT).

3. U.S. Stock Futures Point To Lower Open

U.S. stock futures pointed to a lower open, as Treasury yields resumed a move higher and investors waited for another big week of earnings to get underway.

The blue-chip Dow futures fell 38 points, or about 0.2%, the S&P 500 futures dipped 3 points, or nearly 0.1%, while the tech-heavy Nasdaq 100 futures fell 7 points, or roughly 0.1%.

U.S. stocks fell on Friday, as a decline in technology stocks and worries about the impact of rising U.S. bond yields weighed, though the major indexes still managed to end the week with a slight gain.

In Europe, the continent's major bourses edged lower, as results from Switzerland’s biggest bank, UBS (SIX:UBSG), disappointed investors.

Earlier, in Asia, most markets in the region closed mostly lower, tracking a pullback in U.S. equities late last week.

4. Alphabet Kick Off Busy Week Of Earnings

This week will be the busiest week of the first-quarter earnings season, with more than a third of the S&P 500 set to report.

Most of the focus will be on the FAANG group of stocks.

After the bell on Monday, Google parent Alphabet (NASDAQ:GOOGL) is expected by analysts on average to report a 22% increase in revenue to $30.3 billion, with net income rising 21%, equivalent to $9.28 per share on a non-GAAP basis, according to Thomson Reuters data.

Results from Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), Qualcomm (NASDAQ:QCOM), eBay (NASDAQ:EBAY) and PayPal (NASDAQ:PYPL) are due on Wednesday, followed by Amazon (NASDAQ:AMZN), Intel (NASDAQ:INTC), Microsoft (NASDAQ:MSFT) and Baidu (NASDAQ:BIDU) on Thursday.

Among non-tech names, Boeing (NYSE:BA), Caterpillar (NYSE:CAT), 3M (NYSE:MMM), United Technologies (NYSE:UTX), Verizon (NYSE:VZ), AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), Visa (NYSE:V), Ford (NYSE:F), General Motors (NYSE:GM), UPS (NYSE:UPS), Starbucks (NASDAQ:SBUX) and ExxonMobil (NYSE:XOM) are some of the names on the docket for this week.

First-quarter profit at S&P 500 companies are expected to have recorded their strongest gain in seven years. Of the 87 companies that have reported so far, around 80% have topped profit expectations, according to FactSet.

5. Oil Starts The Week In Negative Territory

Oil prices started the week in negative territory, as market players continued to weigh a steady increase in U.S. production levels against ongoing efforts by major global crude producers to reduce a supply glut.

U.S. drillers added five oil rigs in the week to April 20, bringing the total count to 820. That was the highest number since March 2015, underscoring worries about rising U.S. output.

New York-traded WTI crude futures lost 40 cents, or about 0.6%, to $68.00 per barrel, while Brent futures slumped 39 cents, or roughly 0.5%, to $73.68 per barrel.

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