Monday, April 23, 2018
After a prolonged period of 10-year bond yields relatively stagnant in the 2.8s earlier this year — while equity markets were setting a wild roller coaster in motion — we now see the 10-year peek its head up near 3% for the first time since the end of 2013. At 2.966%, market participants are beginning to pay close attention here, with a ratcheted-up bond yield signifying things like increased economic inflation, which would likely prompt the Fed to raise interest rates higher, faster.
Also of interest, not of actual concern just yet, to the market is the tight spread between the 10-year bond yield and the 2-year, which is currently the lowest it’s been since 2007 — which is an important benchmark historically, as it came the year Bear Stearns crumbled and ahead of the economic meltdown of 2008 which led to the Great Recession. An inversion of the yield curve — when the 2-year yield pays out more than the 10-year — is a signifier to economists that another recession may be on the way.
To be clear, we’re not seeing that inversion currently. We’re not even seeing a 3% bond yield in the 10-year, which itself is still historically low. But taking into context the Goldilocks economy we’ve been enjoying the past several years — with increased traction in employment growth and a new tax windfall for corporations in 2018 — that we may be emerging into pricier territory (and, by the way, CNBC’s Steve Liesman reports this morning the odds of a fourth rate hike this year has recently blossomed to 30%) may jostle equities indexes in a manner 2018 had already begun to grow accustomed to.
Otherwise, the big news this week continues to be Q1 earnings season, which really hits the accelerator with Alphabet GOOGL reporting after the bell today, along with Caterpillar CAT, Verizon VZ, Amazon AMZN, Intel INTC and Exxon XOM, among others later this week. As Zacks Director of Research Sheraz Mian points out in his latest Earnings Preview, by the end of this week we’ll be more than halfway through the S&P 500’s quarterly earnings: Positive Revenue Surprises Lag Previous Quarter Levels
Ahead of the opening bell today, oilfield services major Halliburton HAL met estimates on its bottom line at 41 cents per share, while posting a revenue number a smidge below the Zacks consensus to 5.74 billion. Operating income for Halliburton was up big year over year, but still below what analysts had been expecting. For more on HAL’s earnings, click here.
Partly due to the bankruptcy of Toys R Us stores in the Q1 this year, toy-making giant Hasbro HAS missed earnings and sales estimates by a wide margin: 10 cents per share versus 31 cents expected, on $716 million in revenues that was far below the Zacks consensus $825 million. Hasbro shares are down another 4.5% in today’s pre-market, and precipitously off the $115+ share price from last summer. For more on HAS’s earnings, click here.
Here’s a Q1 earnings beat this morning: Zacks Rank #3 (Hold)-rated Alaska Air Group ALK, whose 14 cents per share beat consensus by 3 cents, and revenues in the quarter marginally topped expectations to $1,831 million. This top line number is also favorable from the $1,749 million in the year-ago quarter. The regional airline saw solid metrics offset somewhat by a 20% rise in jet fuel costs. For more on ALK’s earnings, click here.
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Earnings and Economic News
Key Earnings Reports For Apr 23, 2018
|(+) Existing Home Sales - Apr 23, 2018
|(+) Federal Funds Rate - Apr 23, 2018
|(+) Treasury bills (3 mth) - Apr 23, 2018
|(+) Treasury notes (10 yr) - Apr 23, 2018