Futures mixed as frayed nerves rekindle bond bid

Bloomberg

US equity futures were mixed while European stocks fall as investors assessed shaky company earnings and the prospect of higher US borrowing costs. Bond yields dropped a second day.
The Stoxx Europe 600 Index touched the lowest level in a month weighed by miners, travel and leisure and automakers. Nasdaq 100 contracts underperformed after the tech-heavy gauge entered a correction. Those for the S&P 500 pared an earlier loss to trade little changed.
Investors are grappling with the prospect of reduced stimulus in the Fed’s effort to quell high inflation. Company developments also soured the mood, with Netflix Inc. plunging on a disappointing subscriber outlook. A report that Washington is allowing some Baltic states to send US-made weapons to Ukraine stoked concerns about a standoff with Russia.
Demand for havens pushed the 10-year US Treasury yield below 1.80%. Oil was lower on a surprise climb in US crude stockpiles. The White House also said it can work to accelerate the release of strategic reserves.
Receding pandemic-era stimulus is whipsawing a range of assets. Markets face a one-two punch of Fed rate hikes starting as soon as March and the possible reduction of its $8.8 trillion balance sheet to fight price pressures.
“The 2022 outlook for risky assets is likely to be more challenging as central bank accommodation is withdrawn,” said Mohit Kumar, managing director at Jefferies International. “We would wait for more clarity from the Fed before shifting our stance on equities.”
The US company reporting season so far has been uneven, highlighting the risk that it may fail to enliven animal spirits in the stock market. Peloton Interactive Inc., the onetime darling of the stay-at-home trade, plummeted in regular trading on a report of temporary production halts.
“Valuations are finally — after quite a long period of time — going to start to matter, and cash generation and balance sheets are going to be very important as we navigate what is no longer a very easy Fed policy going forward,” Sarah Hunt, portfolio manager at Alpine Woods Capital Investors, said on Bloomberg Television.
Elsewhere, Bitcoin weakened, falling below the $40,000 level.
Futures on the S&P 500 were little changed as of 5 am New York time and futures on the Nasdaq 100 fall 0.4%. While futures on the Dow Jones Industrial Average rise 0.1%, the Stoxx Europe 600 falls 1.3% and the MSCI World index also drops 0.4%.
The Bloomberg Dollar Spot Index falls 0.1% and the euro rises 0.2% to $1.1338. The British pound falls 0.2% to $1.3570 and the Japanese yen rises as much as 0.1% to 113.97 per dollar.
While the yield on 10-year Treasuries declined one basis point to 1.79%, Germany’s 10-year yield declined three basis points to -0.06% and Britain’s 10-year yield declined three basis points to 1.19%.
West Texas Intermediate crude falls as much as 1.9% to $83.92 a barrel.