The Dow Jones Industrial average futures were higher on Wednesday as stocks seek to continue their recovery from a one-day crisis earlier in the week.
Better-than-expected earnings reports from Dow members Coca-Cola and Johnson & Johnson fueled bullish sentiment for the blue-chip average. However, Netflix stocks were lower after a disappointing subscriber forecast, which weighed on tech stocks and kept overall market gains in check.
The Dow Jones Industrial average futures rose 82 points, or 0.2%. S&P 500 futures gained 0.04%. Nasdaq 100 futures lost 0.3%.
The Dow plunged 725 points on Monday, its worst price in 8 months. On Tuesday it then rose by almost 550 points. Futures suggest this rebound will continue as investors step in again to buy the dip.
The bond market – particularly the yield on 10-year government bonds – is driving volatility in the equity markets. On Wednesday, the 10-year yield recovered slightly, increasing 3 basis points to 1.23% (1 basis point equals 0.01%). The yield fell to a new 5-month low on Monday before stabilizing on Tuesday. The decline in interest rates is unsettling equity investors by signaling a possible slowdown in the economy due to the spread of Covid variants or a possible error by the Federal Reserve.
When yields peaked in the pre-listing session, Dow futures gave up some of their gains.
Stocks, which would benefit most from a sustained rapid economic reopening, should bounce back on Wednesday after recovering from the sell-off on Monday in the previous session. The Carnival share rose by almost 2%. Las Vegas Sands was up 2%.
Energy stocks were higher as oil continued to rebound after falling below $ 70 a barrel on Monday. The Energy Select SPDR rose 1% in pre-trading.
Dow member Coca-Cola has bolstered pre-launch sentiment after reporting quarterly sales ahead of pre-pandemic 2019 levels and increasing its guidance for the full year. The Coca-Cola share gained 2% in the pre-market trading.
Shares in Dow member Johnson & Johnson rose after the drug maker reported better-than-expected earnings and revenue in the second quarter and also raised its guidance for 2021. In pre-market trading, the share gained around 1%.
Verizon stocks are up 1.6% in early morning trading after reporting better-than-expected revenue and subscriber growth and raising their full-year outlook.
Chipotle stock rose 4.5% in pre-trading hours as the Mexican fast food chain reported quarterly sales that exceeded pre-pandemic levels as diners returned to their restaurants for dinner.
Netflix reported disappointing subscriber forecasts for the third quarter after the bell on Tuesday. The streaming giant expects 3.5 million net subscribers in the third quarter, nearly 2 million below analyst estimates. The company also reported profits that fell short of expectations.
The Netflix share last lost 1% in pre-market trading.
According to FactSet, about 85% of the S&P 500 companies that have reported to date have beat estimates.
On Tuesday, reopening stocks rallied sharply from Monday’s sell-off sparked by a Covid-inspired global growth fear. American Airlines was up 8.4% and Norwegian Cruise Line was up 8.3%.
Some strategists see the market heading for a volatile phase in which there could be a deeper pullback. Investors juggle inflation concerns and new Covid cases rebound in the US as the delta variant spreads.
“I think what we’ve seen here are the early warning shots of a correction that we’re likely to see … in late August, September, October,” said Matt Maley, equity strategist at Miller Tabak.
– with reports from CNBC’s Patti Domm.