Market Snapshot: U.S. stocks trade lower as traders eye earnings from Morgan Stanley, IBM

What’s driving markets

U.S. stock traded lower Wednesday as sticky double-digit inflation in the U.K. sparked selling of government bonds.

“You’ve got sovereign yields up across the world and that generally causes a risk-off mood in the equity markets,” Tavis McCourt, managing director of institutional equity strategy at Raymond James said in a call.

The yield on the 2-year Treasury
TMUBMUSD02Y,
4.254%
note climbed 7.2 basis point to 4.28% on Tuesday, according to Dow Jones Market data.

Still, with markets seemingly more relaxed of late about the trajectory of U.S. interest rates — the chances of the Federal Reserve increasing borrowing costs by 25 basis points in two weeks time is priced at 88% — attention currently is more focused on company profits.

Results from the U.S.’s first quarter corporate earnings season are mixed so far, while major banks that have reported earnings mostly surprised the market to the upside, particularly regarding their revenue in fixed income, currency and commodity trading, noted Andy Kapyrin, co-chief investment officer at CI RegentAtlantic Private Wealth.

Investors have been paying particular attention to the banking sector after several banks, including Silicon Valley Bank, collapsed last month.

Traders are also eyeing the performances of megacap technology companies, partly due to the size of the market share they represent. Meanwhile, “I think this is the first economic cycle that some of these large tech firms have experienced where the secular trends that they are back aren’t enough to overcome some of the cyclical trends that could inhibit their growth,” according to Kapyrin.

The mixed start of earnings season has left stocks struggling to extend their recent rally. The S&P 500 remains stuck within, though near the top, of the 3,800 to 4,200 range it has inhabited for about five months.

Minimal moves and a more relaxed mood saw the CBOE VIX index
VIX,
-3.27%,
a gauge of expected stock market volatility close below 17 on Tuesday, its lowest since January 2022.

“This week we will have a better grip on earnings as the flow of corporate results makes its way on Wall Street. We note that the indices have had a solid run to the up side and could be headed for a slight pullback that we will not likely impact the longer term upward trend,” said Peter Cardillo, chief market economist at Spartan Capital.

“We therefore expect the near term trend to remain bullish, with the S&P 500 testing the 4250 area in the short term,” he added.

Investors will be expecting earnings from Tesla
TSLA,
-1.21%
and IBM
IBM,
-1.27%,
among others, after the market closes Wednesday.

The Federal Reserve’s Beige Book of economic anecdote will be published at 2 p.m. and New York Fed President Williams is due to speak at 7 p.m., all times Eastern.

Companies in focus

• Morgan Stanley
  MS,
  -0.08%
   stock fell 0.3% Wednesday morning after the investment bank reported lower net income and revenue that beat consensus estimates

• Bed Bath & Beyond Inc.
  BBBY,
  +36.71%’s
  stock jumped 34% Wednesday, as shares of the troubled home goods retailer continued their meme-like bounce. The rally was fueled by social-media speculation, according to retail trading platform Capital.com, which said that the bounce is not likely to last.

• Western Alliance Bancorp
  WAL,
  +20.04%
  ‘s stock rallied 16% Wednesday after the lender said it added $2 billion in deposits from March 31 to April 14.

• United Airlines Holdings Inc.
  UAL,
  +6.13%
  shares gained 3.7% after the company on Tuesday forecast second-quarter and full-year per-share profit that were well above expectations, buoyed by continued strong travel demand around the globe.

• Ally Financial Inc.
  ALLY,
  +1.69%
   stock went up 2.6% Wednesday morning. The auto and home lender said it expects 2023 retail auto originations to be on the lower end of its estimated low-$40 billion range because of “tightened underwriting.”