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Traders on the floor of the New York Stock Exchange on Oct. 12, 2023.
Source: NYSE
Stock futures dipped Thursday evening as traders focused on a recent run higher in the 10-year Treasury yield.
Futures tied to the Dow Jones Industrial Average were down 30 points, or 0.09%. S&P 500 futures fell nearly 0.2% and Nasdaq 100 futures dropped about 0.4%.
In after-hours trading, shares of SolarEdge tumbled 20% as the company trimmed its third-quarter revenue guidance. Knight-Swift Transportation gained 13% after beating estimates in the third quarter on both the top and bottom lines.
The action follows a volatile day for stocks. The 30-stock Dow shed 250.91 points, or 0.75%, while the S&P 500 lost 0.85%. The Nasdaq Composite slid nearly 1%. The yield on the benchmark 10-year Treasury also surged as high as 4.996%, trading at levels last seen in 2007.
The 10-year yield hasn't cracked the 5% threshold in 16 years.
Stocks were rattled Thursday after Federal Reserve Chair Jerome Powell spoke in New York. He said inflation remains too high and lower economic growth will likely be needed to bring it down. Powell also said he doesn't think rates are too high now.
"While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflation down sustainably to 2 percent," he added.
Though Powell did not commit to a path forward for rates at his speaking engagement, the market seems to think the central bank will skip a hike in November.
Fed fund futures pricing reflects a 92% likelihood that the central bank will keep rates the same at the conclusion of its November meeting, according to the CME FedWatch Tool.
The major averages are on pace for losses on the week. The S&P 500 is down 1.2% through Thursday's close, while the Nasdaq is off 1.7%. The Dow is down nearly 0.8%.
On the earnings front, investors will look for results from Comerica, Regions Financial and American Express. Oilfield services company SLB is also on deck to report.
Look for opportunities if the 10-year yield hits 5%
Traders are closely watching the 10-year Treasury yield to see if it finally hits 5% — a first since 2007 — but eagle-eyed investors with a long-term perspective may find some solid bargains if they know where to look.
For starters, investors who have been parking their fixed-income portfolios in cash and near-dated Treasurys may find an opportunity to add duration. Duration is a measure of a bond's price sensitivity to changes in interest rates, and longer-dated bonds have greater duration.
"You don't have to go out 15 or 20 years when we're talking about duration," said Shannon Saccocia, chief investment officer of NB Private Wealth. "You can go more intermediate — 4 or 5 years — and start to lock in what are very attractive yields from a near-term perspective, but fairly attractive even from a longer term."
Investors can purchase these longer-dated issues over the next few months, gradually adding duration, she said.
By adding duration, investors avoid the problem of reinvestment risk — that is, running out of places to obtain competitive yields once their short-term fixed income investments mature.
Read here for more opportunities in a higher rate world.
— Darla Mercado
Bullishness among individual investors below average for fifth week in six
Individual investor bullishness about the outlook for stocks over the next six months fell to 34.1% in this week's survey by the American Association of Individual Investors, down from 40.0% last week, and the fifth week in six that optimism stood below the long-run historical average of 37.5%.
Bearishness fell in the latest week also, to 34.6% from 36.5% last week, but still above the long-term historic average of 31.0%.
Those who said they were neutral about the outlook for stocks widened to 31.3% from 23.5%, roughly in line with the historic average of 31.5%.
— Scott Schnipper
These are the stocks making the biggest moves after hours
Check out the companies making headlines in after-hours trading.
- SolarEdge — Shares plunged 20% after the solar company lowered its third-quarter revenue guidance to between $720 million and $730 million, down from prior guidance of between $880 million and $920 million. CEO Zvi Lando said the company experienced "substantial unexpected" cancellations and pushouts of existing backlog from its European distributors. Enphase Energy and First Solar lost 14% and 4.9%, respectively, on the back of SolarEdge's downbeat news.
- Intuitive Surgical — Shares dropped 7% after Intuitive Surgical missed third-quarter revenue expectations, posting $1.74 billion while analysts had forecast $1.77 billion, according to LSEG, formerly known as Refinitiv. The company reported adjusted earnings per share of $1.46, surpassing analysts' expectations of $1.41 per share.
- CSX — The transportation company's shares dipped about 1% after the company's third-quarter earnings fell short of analysts' estimates. CSX posted earnings of 42 cents per share, while analysts polled by LSEG called for 43 cents per share. Revenue came in above expectations at $3.57 billion, while analysts forecast $3.55 billion.
Read here for the full list.
— Pia Singh
English (US)