Stock futures gained Wednesday morning to steady after a broad sell-off a day earlier, as investors nervously eyed soaring bond yields and mixed earnings results from some major index components.
Contracts on the S&P 500, Dow and Nasdaq gained. The Nasdaq Composite had closed out Tuesday’s session with a drop of 2.6%, bringing it to its lowest level since October. The index also came within striking distance of a correction, typically defined as a closing level at least 10% below a recent record high.
Meanwhile, Bank of America (BAC) shares gained in early trading after the company topped estimates for quarterly loan growth and posted a jump in profits in its key consumer banking business. Procter & Gamble (PG) also rose after the company exceeded expectations in its latest results and raised its sales guidance for the full year, with higher prices from the company helping boost results.
Treasury yields built on recent gains, and the benchmark 10-year yield neared 1.9% for its highest level since January 2020. Commodity prices also advanced further, and U.S. West Texas intermediate crude oil futures rose above $86 per barrel.
According to many strategists, the recent volatility across risk assets has largely reflected investors’ ongoing reassessment of highly valued asset prices, with interest rate hikes and an attenuation of liquidity out of the Federal Reserve looming.
Though Fed officials are in a blackout period before their next meeting next week, policymakers over the past several weeks have telegraphed that they are gearing up to raise interest rates and eventually draw down the nearly $9 trillion on the Fed’s balance sheet as the economic recovery continues and inflation soars.
“At this point, it’s very clear that the first rate hike will be at the March meeting,” Jason Ware, Albion Financial Group partner and chief investment officer, told Yahoo Finance Live on Tuesday. “What we’re going to be looking at is the language around inflation because at the end of the day, inflation is what’s driving Fed policy.”
Other strategists offered a similar take.
“I think it’s definitely a repositioning of the market to deal with really what the Fed has done. And the Fed has basically created some certainty around the fact that there will be rate rises,” David Bailing, Citi Global Wealth chief investment officer and head of global wealth investments, told Yahoo Finance Live on Tuesday. “Then the question is, how much do they actually release from their portfolio? And it’s that that creates the enormous uncertainty.”
“What we’re seeing now is a broad-based reevaluation of the highest growth shares, which obviously are the most sensitive to interest rates. But what’s happened is it’s taking place across the board,” he added. “This is going to present a buying opportunity in areas like fin tech, in areas like cybersecurity, where you have very steady growth, you have increased cash flows and potentially profitability, as opposed to the more speculative shares.”
7:37 a.m. ET: Stock futures point to a higher open
Here’s where markets were trading Wednesday morning:
S&P 500 futures (ES=F): +9.75 points (+0.21%), to 4,581.00
Dow futures (YM=F): +45 points (+0.13%), to 35,304.00
Nasdaq futures (NQ=F): +40.75 points (+0.26%) to 15,246.75
Crude (CL=F): +$1.08 (+1.26%) to $86.51 a barrel
Gold (GC=F): +$5.90 (+0.33%) to $1,818.30 per ounce
10-year Treasury (^TNX): +1.1 bps to yield 1.879%
7:36 a.m. ET: Bank of America shares rise after posting solid 4Q results, led by consumer banking
Bank of America delivered fourth-quarter results that topped Wall Street’s estimates on many major metrics, including in its key consumer banking business.
Total ending loan balances grew 6% to $979 billion at the end of the fourth quarter, which Bank of America attributed to strong commercial loan growth and higher card balances. In Bank of America’s consumer banking division, net income grew 21% to $3.1 billion. The company also touted digital adoption of its consumer banking platforms, noting that it boasted 41.4 million active digital banking users for a rise of 5% over last year.
“Our fourth-quarter results were driven by strong organic growth, record levels of digital engagement, and an improving economy,” CEO Brian Moynihan said in a press statement. “We grew loans by $51 billion and added $100 billion of deposits during the quarter, further strengthening our position as the leader in retail deposits.”
Bank of America also brought in record quarterly investment banking fees of $2.4 billion. Elsewhere, however, the company also posted a drop in fixed-income trading revenue and a miss on equities trading revenue, echoing disappointing quarterly results in these business areas from other big banks including JPMorgan and Goldman Sachs from the past week.
6:01 p.m. ET Tuesday: Stock futures open slightly higher
Here’s where markets were trading Tuesday evening:
S&P 500 futures (ES=F): +7.75 points (+0.17%), to 4,579.00
Dow futures (YM=F): +55 points (+0.16%), to 35,314.00
Nasdaq futures (NQ=F): +39 points (+0.26%) to 15,245.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter