Earnings Remain The Focus As Stocks Slip

In the wake of the latest corporate earnings report, stocks dipped Wednesday.

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S&P 500 fell 0.2%, while Nasdaq Composite declined 0.3%. Dow Jones Industrial Average lost 88 points or 0.3%.

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A disappointing outlook from Netflix (ticker: NFLX) for its second quarter continued to draw investors’ attention during earnings season. The share price of Morgan Stanley (MS) fell after financial results showed a decline in earnings and revenue.

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After the closing bell, Tesla (TSLA) is scheduled to report its first-quarter earnings.

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The Sevens Report's Tom Essaye wrote, "If earnings do not meet expectations and yields continue to rise during the session, it is likely that the selling pressure on equities will continue and likely accelerate."

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Treasury yields on the 10-year note rose to 3.63% and on the two-year note rose to 4.276% on Wednesday.

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In an interview with Reuters on Tuesday, St. Louis Federal Reserve President James Bullard reiterated a call for higher interest rates in the future of monetary policy. It was also stronger than expected in the U.K., staying above double digits despite the Bank of England's hikes for more than a year.

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Hargreaves Lansdown's head of money and markets Susanna Streeter said financial markets are concerned about the possibility of continued rate hikes. According to traders, further tightening increases the likelihood of a recession and may have ripple effects around the world.

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CME FedWatch Tool shows that traders are now seeing a strong 83% likelihood that the Fed will increase rates by a quarter-point next month, up from 70% last week and 21% this time last month.

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The Citi economist Andrew Hollenhorst predicted a 25 basis point rate hike in May, June, and July, according to a Wednesday article.

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“The view is based on the remaining containment of banking-sector stress, a continued economic expansion, and stubbornly high core inflation,” Hollenhorst explained. “The markets should slowly price back in the hikes that were priced out in March as long as the data flow does not contradict these views—and it hasn’t in recent weeks.”

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