U.S. futures rise on earnings boost; bonds slide

U.S. stock-index futures rose as a strong start to the earnings-reporting season allayed fears of a recession in the world’s largest economy. A selloff in Treasuries resumed with a debate raging around whether inflation is peaking.

U.S. stock-index futures rose as a strong start to the earnings-reporting season allayed fears of a recession in the world’s largest economy. A selloff in Treasuries resumed with a debate raging around whether inflation is peaking.

June contracts on the Nasdaq 100 and S&P 500 indexes climbed at least 0.7 per cent each as early data showed four out of five companies beating forecasts. Tesla Inc. jumped 7.3 per cent in premarket New York trading after posting record profits that blew past estimates. The 10-year Treasury yield added 4 basis points. The euro and German bund yields rose after hawkish comments from European Central Bank officials. 

Bond bears have returned after Wednesday’s rally in Treasuries fueled by some investors including Bank of America Corp. and Nomura Asset Management who said the panic over inflation and rate-hike bets had gone too far. However, a Federal Reserve anecdotal survey showed inflationary pressures remained strong. Meanwhile, equities stayed resilient to higher yields with their focus on earnings. 

While the peak-inflation debate is intensifying, it’s unlikely to derail global central banks from their tightening path as commodity shortages from the war in Ukraine keep prices elevated. New Zealand inflation accelerated in the first quarter to the fastest pace in 32 years, validating the central bank’s pursuit of an aggressive tightening cycle. 

The U.S. 10-year real yield turned positive on Wednesday for the first time since March 2020 as traders added to bets on an aggressive Fed hiking cycle. However, the level failed to hold for long.