US pre-open: Stocks to rise as bond yields ease back; Alphabet in focus
US futures pointed to a positive open on Wall Street on Tuesday as bond yields eased back, with strong earnings from Google parent Alphabet helping to underpin the mood.
At 1155 BST, Dow Jones Industrial Average and S&P 500 futures were up 0.6%, while Nasdaq futures were 0.7% higher.
Stocks closed flat to slightly lower on Monday as the 10-year Treasury note traded at four-year highs, hovering just below 3% amid expectations thaT the Federal Reserve will hike interest rates four times this year rather than three.
Hussein Sayed, chief market strategist at FXTM, said US 10-year yields will be monitored closely this week as they were less than 0.3 basis points from breaking the 3% benchmark on Monday.
"The 3% by itself is just a psychological level and not a significant threat, but if a break above leads to further selling in Treasury bonds, that’s going to be a serious warning signal for equity bulls. With a current world running on AI and algorithms, a selloff may look ugly," he said.
On the corporate front, Alphabet reported an 84% jump in first-quarter profit after the close to $9.4bn versus estimates of $6.54bn, thanks to strong advertising sales. Commenting on the results, RBC Capital Markets said "growth remains robust and extraordinarily consistent".
Meanwhile, CMC Markets analyst Michael Hewson said: "There does appear to be some concern about the growth in capital spending with $7.3bn in Q1 alone, well in excess of the same period a year ago, however it is an age old adage that if you don’t invest in your infrastructure in the short term you pay the penalty eventually in the long term. Investors will tolerate higher capex if it helps keep the business sustainable in the face of higher traffic and increased resilience which seems the case here.
"The only cloud here remains about the increased threat of regulation at a time when privacy and content rules are coming under ever increasing scrutiny. A lot has been made of some of the content that gets displayed on Facebook, and it can only be a matter of time before lawmakers turn their attention to YouTube."
Pharmaceutical group Eli Lilly was likely to be in focus after it posted net income of $1.22bn or $1.16 a share for the first quarter, compared with a loss of $110.8m or 10 cents per share the year before.
Still to come before the open, earnings are due from United Technologies, Caterpillar, Coca-Cola, Verizon Communications and 3M.
On the data front, S&P/Case-Shiller house prices are at 1400 BST, while new home sales and the Richmond Fed manufacturing index are due at 1500 BST.