Dow Jones Industrial average futures were higher on Wednesday as equities attempt to continue their rebound from a one-day rout to start the week.
Better-than-expected earnings reports from Dow members Coca-Cola and Johnson & Johnson boosted bullish sentiment for the blue-chip average. However Netflix shares were lower after a disappointing subscriber forecast, weighing on technology shares and keeping the overall market’s gains in check.
Dow Jones Industrial average futures rose by 160 points, or 0.4%. S&P 500 futures gained 0.01%. Nasdaq 100 futures shed 0.2%.
The Dow tumbled by 725 points on Monday for its worst session in 8 months. It then rallied nearly 550 points on Tuesday. Futures are indicating a continuation of that rebound as investors again step in to buy the dip.
“Tuesday was a textbook oversold bounce following Monday’s collapse,” Thomas Essaye of Sevens Report Research said in a report Wednesday. “Beyond short-term gyrations, however, for value and cyclicals to reassert leadership, we will need to see yields bottom and economic growth beat estimates (two things we think will happen).”
The bond market — specifically the 10-year Treasury yield — is driving the volatility in the equity markets. On Wednesday, the 10-year yield was bouncing slightly, up 3 basis points to 1.23% (1 basis point equals 0.01%). The yield dropped to a new 5-month low on Monday, before stabilizing on Tuesday. The drop in rates is unnerving equity investors by signaling a possible slowing economy due to spreading Covid variants or a possible Federal Reserve mistake.
As yields came off their highs in the premarket session, Dow futures gave up some of their gains.
Stocks that would benefit most from a continued swift economic reopening were set to bounce again on Wednesday after rebounding from the Monday sell-off in the prior session. Shares of Carnival were up nearly 2 %. Las Vegas Sands was up 2%.
Energy stocks were higher as oil continued to rebound after falling below $70 a barrel on Monday. The Energy Select SPDR was up 1% in premarket trading.
Dow member Coca-Cola gave a boost to premarket sentiment after reporting quarterly revenue that topped pre-pandemic 2019 levels and raising its full-year forecast. Coca-Cola shares gained 2% in premarket trading.
Fellow Dow member Johnson & Johnson’s stock rose after the drugmaker reported better than expected second-quarter earnings and revenue and also raised its 2021 guidance. The shares gained about 1% in premarket trading.
Verizon shares are up 1.6% in early morning trading after reporting better-than-expected revenue and subscriber growth and raising its full-year outlook.
Shares of Chipotle rose 4.5% in premarket trading as the Mexican fast-food chain reported quarterly revenue that surpassed pre-pandemic levels as dine-in customers returned to its restaurants.
Netflix reported disappointing third quarter subscriber guidance after the bell on Tuesday. The streaming giant said it expects 3.5 million net subscribers in the third quarter, nearly 2 million below analysts’ estimates. The company also reported earnings that missed expectations.
Netflix shares were last down 1% in premarket trading.
About 85% of S&P 500 companies that have reported so far have beaten estimates, according to FactSet.
On Tuesday, reopening stocks rebounded sharply from Monday’s sell-off triggered by a Covid-inspired global growth scare. American Airlines rose 8.4% and Norwegian Cruise Line rose 8.3%.
Some strategists see the market heading into a volatile period, in which there could be a deeper pullback. Investors are juggling inflation concerns as well as new Covid cases are rebounding in the U.S. as the delta variant spreads.
“I think what we’ve seen here are the early warning shots of a correction that we’ll see probably… in late August, September, October,” said Matt Maley, equity strategist at Miller Tabak.
— with reporting from CNBC’s Patti Domm.
