Futures slip as U.S. yield holds above 3 percent

[April 25, 2018]   By Sruthi Shankar

(Reuters) - U.S. equity futures pointed to a fifth day of losses for the main indexes on Wednesday, spooked by a rise in bond yields and nerves ahead of earnings from scandal-hit Facebook.

Yield on the benchmark 10-year Treasury notes <US10YT=RR> held above 3 percent after crossing the level for the first time in four years on Tuesday, stoking concerns about higher borrowing rates for companies already facing rising costs.

The Dow Jones Industrial Average <.DJI> closed down 1.7 percent after Caterpillar <CAT.N> said first-quarter earnings would be the "high water mark" for the year and warned of higher material costs, especially steel, which surged after the U.S. President announced tariffs on the metal.

Boeing <BA.N>, the single largest U.S. exporter to China, rose 2.4 percent after it reported a 57 percent rise in profit, while also raising its full-year forecast for earnings per share and cash flow.

Reuters data shows that analysts are now estimating 21.1 percent growth in profits in the first quarter among the S&P 500 companies, compared with 18.6 percent growth rate at the start of the earnings season.

"The markets are reacting to yields moving higher," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "The new trading range will continue to cap equities from positively responding to good earnings news."

Investors are not enthused by just strong quarterly reports, but are looking for signs the strength could sustain as inflation is picking up and the Federal Reserve is in no mood to put the brakes on its own rate-hike program.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., April 18, 2018. REUTERS/Brendan McDermid

At 7:45 a.m. ET, Dow e-minis <1YMc1> were down 25 points, or 0.1 percent, with 46,158 contracts changing hands. S&P 500 e-minis <ESc1> were down 11 points, or 0.42 percent, with 169,535 contracts traded. Nasdaq 100 e-minis <NQc1> were down 33.5 points, or 0.51 percent, on volume of 58,191 contracts.

The CBOE Volatility index <.VIX>, a gauge of short-term stock market volatility jumped to more than 1-week high to 18.61 points.

Comcast <CMCSA.O> fell 2.6 percent after the U.S. cable company submitted a $31 billion offer for pay-TV group Sky <SKYB.L>, challenging an already agreed but lower takeover bid from Rupert Murdoch's Fox <FOXA.O>.

Twitter jumped 3.64 percent after reporting its second profitable quarter and topping Wall Street estimates for revenue and monthly active users.

Facebook <FB.O> which is set to report after market closes on Wednesday, was down 0.12 percent.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta)

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