Stock market bounces around as investors wrestle with rising bond yields

Stock SectorApril 23, 201815min4
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U.S. stocks were under pressure in early trade Monday, as rising bond yields weighed on Wall Street sentiment.

The closely watched yield on the 10-year Treasury note climbed, approaching a psychologically important 3% level.

Investors grappled with a mixed bag of earnings reports on the day, including weaker-than-expected results from Halliburton Co. and Hasbro Inc.

Read more:Hopes are high for this earnings season—and that could prove dangerous

What are the main benchmarks doing?

The Dow Jones Industrial Average

DJIA, -0.13%

most recently was up about 4 points, or less than 0.1%, at 24,474, with the blue-chip gauge flipping between small gains and losses in early action.

The S&P 500

SPX, +0.16%

was up 4 points, or 0.1%, at 2,674, as gains in telecoms and utilities were countered losses in energy and materials sectors.

The Nasdaq Composite Index

COMP, +0.39%

advanced 10 points, or 0.1%, to 7,156.

What’s driving markets?

Bond yields, which are reflecting a rise in inflation expectations, were on the march higher Monday, a continuation of gains logged last week. The 10-year Treasury note yield TMUBMUSD10Y, +0.41%TMUBMUSD10Y, +0.41%TMUBMUSD10Y, +0.41%TMUBMUSD10Y, +0.41%hovered around 2.982% on Monday, but had moved above 2.995% at one point. The yield rose to 2.956% on Friday, the highest level since January 2014.

The advance in U.S. interest rates has come as traders increasingly start to price in four interest-rate hikes in 2018 from the Federal Reserve, rather than the three signaled by policy makers. On Friday, traders on the fed-fund futures market saw a 38% chance of four hikes this year, compared with 24.5% on April. 11.

Read:Stock-market investors are freaking out about the bond market—but should they be?

Easing geopolitical risks were in focus after North Korean leader Kim Jong Un said Saturday that his country would shut down its nuclear test site and suspend testing of long-range missiles. Still, U.S. President Trump is expected to insist on the dismantling of the country’s nuclear weapons before any sanctions are lifted.

What are strategists saying?

“The fact that we backed off the 3% level on the 10-year has probably giving stocks a slight reprieve, but we are watching these levels closely,” said Mark Kepner, managing director of sales and trading at Themis Trading.

While strong earnings results should keep stocks underpinned in the short term, investors should not “drop their guard” given the charge higher for U.S. bond yields, said Konstantinos Anthis, head of research at ADS Securities.

“Even a small deterioration in sentiment could trigger a selloff for global equities as yields threaten the upside potential,” he said in a note to clients.

What stocks are in focus?

Hasbro Inc.HAS, +1.97%

shares slid 5.8% after the toymaker’s adjusted profit and sales missed expectations. Halliburton Co. HAL, -1.19%HAL, -1.19%

shares fell 3% even after swinging to a profit in the first quarter.

HAL, -1.19%Kimberly Clark Corp.KMB, -0.88%

 shares rose 1.5% after the company’s earnings beat expectations, even as it plans restructuring.

Google-parent Alphabet Inc.GOOGL, +0.28%TD Ameritrade Holding Corp.AMTD, +0.28%

 and Whirlpool Corp.

WHR, -0.13%

 are all expected to report after the close.

Alphabet earnings:Google will offer a gander at its Uber investment

Shares of Akorn Inc.AKRX, -28.65%

slumped 31%after German health-care group Fresenius SEFRE, -1.19%

 said Sunday that it is terminating its $4.3 billion agreement to buy the generic-drug maker.

Vectren Corp.VVC, +5.78%

 rose around 6% on news that CenterPoint Energy Inc.CNP, -2.27%

 will acquire the energy holding company for $72 a share.

Shares of Henry Schein Inc.HSIC, +5.82%

 jumped 4.2% after the company said it plans to spin off its animal health business for an expected $1 billion to $1.25 billion in tax-free cash.

Facebook earnings:The numbers to watch for an advertiser revolt

Twitter earnings:Will product changes pay off as stock soars?

What are the economic data?

The Chicago Fed national activity index for March declined to 0.10 from 0.98 in February.

Preliminary readings of the manufacturing and services purchasing managers’ indexes for April showed that IHS markit flash manufacturing PMI rises to 56.5 in April from 55.6, while the flash reading for services showed a climb to 54.4 in April from 54.0.

Meanwhile, existing-home sales increased 1.1% in March from the previous month to a seasonally annual rate of 5.60 million, the National Association of Realtors said Monday. Economists surveyed by The Wall Street Journal had expected a sales rate of 5.55 million last month.

Read:U.S. economy hits brakes in early 2018, but it is gassed up and ready to go for the spring

Check out: MarketWatch’s Economic Calendar.

What are other markets doing?

European stocks

SXXP, +0.20%SXXP, +0.20%

were struggling after a fresh batch of data. Asian markets

US:CLK8largely fell across the board, with continued losses for Taiwan Semiconductor Manufacturing Co.TSM, -0.04%2330, -1.09%

 .

Gold futuresGCM8, -0.93%

fell 0.9% to $1,326.70 an ounce, while the ICE U.S. Dollar Index

DXY, +0.41%

jumped to a three-month high of 90.691 as bond yields climbed.

Crude-oil pricesCLM8, -1.01%

 were down 1.4% at $67.43 a barrel.

Read:Why Trump is tweeting about OPEC—and what he can do about oil prices

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