Stock futures are flat ahead of more earnings and jobs data

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Traders on the floor of the New York Stock Exchange.

Source: NYSE

Dow Jones Industrial average futures fell amid concerns about the pace of global economic growth with bond yields falling.

The move was muted as traders waited for key developments coming later in the session including:

  • More second-quarter earnings reports including results from Morgan Stanley
  • Day two of Congressional testimony from Federal Reserve Chief Jerome Powell
  • Weekly jobless claims data at 8:30 a.m. ET

Dow futures fell 140 points, or 0.4%. S&P 500 futures lost 0.2%. Nasdaq 100 futures were higher by 0.2% as investors huddled in tech stocks less reliant on economic growth.

Futures fell as investors focused on the continuing rollover in bond yields, which raised questions about whether the global economic recovery will live up to expectations, especially with variants of Covid-19 spreading. The 10-year Treasury yield shed 3 basis points to 1.33%. It ended June at 1.45% and was above 1.70% back in March.

The move lower in yields dampened enthusiasm for the cyclical trade a bit in the premarket with shares of Caterpillar, General Electric and Boeing lower. Cyclical stocks are those closely linked to a recovering economy. Bank shares including Wells Fargo and Bank of America were lower in premarket, despite posting better-than-expected results earlier in the week, as the falling yields pinch their profitability.

Delta shares bucked the trend however, gaining 1% in premarket trading after an upgrade from Raymond James.

Netflix shares rose 2% in premarket trading after it hired a veteran video-game executive as it pushes deeper into gaming. Other large tech shares were higher in premarket trading, continuing a trend this week. Apple and Alphabet gained in premarket trading.

On Wednesday, the Dow rose 44 points, helped by a 2.4% gain in Apple’s stock. The S&P 500 climbed 0.12% after hitting an intraday record earlier in the session. The Nasdaq Composite was the relative underperformer, dipping 0.2%. However, the Nasdaq 100 closed at an all-time high.

The small-cap benchmark Russell 2000 lost 1.7% on Thursday, bringing its week-to-date losses to more than 3.4%.

Fed Chair Powell — in testimony to the House Committee on Financial Services — quelled investors fears about a rollback of the central bank’s easy policies anytime soon, even in the face of inflation. The producer prices from June showed higher than expected inflation on Thursday.

“At our June meeting, the Committee discussed the economy’s progress toward our goals since we adopted our asset purchase guidance last December. While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue,” Powell said.

Powell is scheduled to testify again before a Senate committee on Thursday at 9:30 a.m. ET.

“Fed chair Powell helped calm fears by again suggesting these bad inflation reports were merely transitory,” said Jim Paulsen, chief investment strategist at the Leuthold Group, noting the drop in bond yields following the hot inflation report. “Evidently, bond investors are buying the Fed’s inflation narrative.”

Earnings season continued on Wednesday with strong results of banks like Bank of America and other corporations; however, stock reactions remained tempered. All 12 of the S&P 500 companies that have posted quarterly fiscal results this week up to Wednesday morning have beaten earnings-per-share estimates, but the group is averaging a 0.56% decline following the results.

Reports will continue to roll in on Thursday with Morgan Stanley, U.S. Bancorp., UnitedHealth, Cintas and Progressive all releasing results.

Investors will also get a glimpse at the recovery in the labor picture in the U.S. on Thursday.

Last week’s initial filings for unemployment insurance are due to be released at 8:30 a.m. on Thursday. Economists polled by Dow Jones are expecting first-time jobless claims of 360,000, compared to 373,000 for the week ended July 3.

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