Five things you need to know before the market opens on Thursday April 20:
1. -- Stock Futures Slide As Fed Rate Hike Bets Accelerate
U.S. equity futures extended declines Thursday as investors reacted to a mixed series of corporate earnings this week while tracking moves in the bond market that suggest the Federal Reserve is likely to hold rates higher well into the autumn months amid persistent inflation pressures.
The Fed's April "Beige Book" report of economic activity around the central bank's various regions suggested little change in overall conditions, but noted some modest tightening in credit access following the collapse of Silicon Valley Bank last month.
New York Fed President John Williams, a permanent voting member of the Fed's Open Markets Committee, said it was "still too early to gauge the magnitude and duration" of the banking sector stresses, adding the Fed should "closely monitoring the evolution of credit conditions and their potential effects on the economy."
His also told an event in New York last night that inflation is "too high", adding that the Fed should used its "monetary policy tools to restore price stability."
Williams comments, alongside a series of solid earnings reports from major U.S. lenders, have added upward pressure to Treasury bond yields this week, with 2-year notes rising to 4.215% in overnight trading and 10-year notes touching 3.566% as traders bet that the Fed will no longer be able to rely on the banking sector to augment its ongoing battle to bring inflation closer to its preferred 2% target.
Short-term yields are spiking, as well, with 3-month Treasury bills trading at around 5.295%, the highest since January of 2001 and more than 50 basis points higher since the beginning of the month.
The CME Group's FedWatch suggests an 80.2% chance that the Fed will raise its benchmark interest rate by 25 basis points, to a range of between 5% and 5.25%, next month in Washington, up from just 21% this time in March.
Bets that the Fed will hold that rate in place throughout the summer, as well, are also on the rise, with only a small chance of reversing the longest run of policy tightening in a generation before the central bank meets in November.
Investors will look to today's Philadelphia Fed survey of manufacturing activity, as well as weekly jobless claims data, to confirm the market's rate-hike thesis heading into the start of the trading day on Wall Street, with earnings from American Express (AXP) and homebuilder DR Horton (DHI) also in focus.
Futures contracts tied to the S&P 500 are priced for a 33 point opening bell decline while those linked to the Dow Jones Industrial Average are indicating a 175 point move to the downside. The tech-focused Nasdaq is priced for a 150 point decline.
Overnight in Europe, the region-wide Stoxx 600 was marked 0.3% lower in early Frankfurt trading following hawkish comments on rate hikes from European Central Bank policymakers, with London's FTSE 100 falling 0.16% in London.
Overnight in Asia, the MSCI ex-Japan index was marked 0.12% lower into the close of trading while the Nikkei 225 gained 0.15% in Tokyo.
2. -- Tesla Tumbles As Elon Musk Stresses Sales Growth Over Profits
Tesla (TSLA) shares slumped lower in pre-market trading after CEO Elon Musk warned investors that the clean-energy carmaker would likely focus on growing sales volumes and extending its lead in key markets over improving profitability.
Musk comments followed a mixed first quarter earnings report that showed the weakest profit margins in more than two years linked in part to a series of price cuts put in place over the course of the year. Tesla posted adjusted earnings of 85 cents per share, down 20.5% from the same period last year and essentially matching the Street consensus forecast, on revenues of $23.33 billion.
Adjusted automotive margins were 18.3%, Tesla said, a big decline from the 26.8% figure from last year's first quarter and the 22.2% tally recorded over the final three months of 2022 following a series of price cuts in its biggest global markets.
"It's better to shift a large number of cars at lower margin and harvest that margin in the future as we perfect autonomy," Musk said.
Tesla shares were marked 7.7% lower in pre-market trading to indicate an opening bell price of $166.72 each, a move that would still leave the stock with a year-to-date gain of around 35.3%.
3. -- IBM Tops Q1 Earnings Forecast, Sees Solid Software Demand
IBM (IBM) shares powered higher in pre-market trading after the software and cloud-focused tech giant posted better-than-expected first quarter earnings thanks to solid gains from its software and consulting divisions.
IBM said adjusted earnings for the three months ending in March fell 2.9% from last year to $1.36 per share, but topped Street forecasts by around 10 cents. Overall revenues were light at $14.25 billion, and essentially flat to last year, but software sales rose 2.6% to $5.9 billion and free cash flow improved to $1.3 billion.
Looking into the rest of the year, IBM held to its forecast for free cash flow in the region of $10.5 billion, with overall revenues rising between 3% and 5% on a constant currency basis.
IBM shares were marked 2.2% higher in pre-market trading to indicate an opening bell price of $129.09 each.
4. -- TSMC Cautions On Chip Sector Outlook After Topping Q1 Earnings Forecast
Taiwan Semiconductor (TSM) shares edged higher in pre-market trading after the world's biggest contract chipmaker and a lead supplier for Apple Inc. (AAPL) iPhones published better-than-expected first quarter earnings while cautioning that overall semiconductor demand would wane over the coming year.
TSMC said earnings for the three months ending in March rose 2% from last year to just under $6.8 billion, although revenues fell 4.8% to $16.72 billion and will like slump again, to between $15.2 billion and $16 billion, over the three months ending in June, the company said.
CEO C.C. Wei said a glut in global chip supplies, as well as "softening end-market demand", would likely clip overall revenues into the end of the year, a view that echoed the caution express by semiconductor equipment maker ASML NV (ASML) earlier this week.
TSMC's U.S.-listed shares were marked 0.31% higher in pre-market trading to indicate an opening bell price of $87.50 each.
5. -- AT&T Earnings On Deck With Cash Flow, Dividend Protection In Focus
AT&T (T) shares slipped lower in pre-market trading ahead of the wireless carrier's first quarter earnings prior to the opening bell.
Analysts expect AT&T to posted adjusted earnings of around 59 cents per share for the three months ending in March, with overall revenues falling by around 20.6% to $30.26 billion, reflecting the spin-off of its media assets into Warner Bros. Discovery (WBD) in April of last year..
AT&T's current full-year forecast calls for adjusted earnings in the region of $2.35 to $2.45 per share with wireless services revenue growth of "4% or higher" and broadband revenues rising by 5% or more. Key to its dividend pledge, however, is its forecast for free cash flows in the region of $16 billion, a $2 billion improvement from 2022 levels.
"We believe T has done everything right and shown strong execution in the past 12-24 months, allowing it to gain share in Wireless, and invest in its Consumer Fiber business, while keeping EBITDA growing due to cost initiatives," said KeyBanc Capital Markets analyst Brandon Nispel, who carries a 'sector weight' rating on the stock . "However, as we look out, we see a very low single digit EBITDA growth profile and a valuation that is above historical averages."
AT&T shares were marked 0.66% lower in pre-market trading to indicate an opening bell price of $19.57 each.
