Stocks futures drift as traders await Fed

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U.S. stock futures hugged the flat line Tuesday morning after a whipsaw session in markets a day earlier, as investors appraised the next moves by the Federal Reserve and a fresh batch of quarterly earnings results.

Contracts on the S&P 500 were little changed. On Monday, technology stocks had outperformed, leading the S&P 500 higher by 0.6%, and the Nasdaq up by 1.6%. And these moves in tech shares came even as the benchmark 10-year Treasury yield topped 3%, or its highest level since December 2018. In recent months, a rise in yields has coincided with a drop in tech shares, which are considered more vulnerable to higher rates that would weigh on growth stocks’ valuations.

The market moves at the start of this week extended the streak of volatile trading investors have endured over the past several weeks. The S&P 500 posted an 8.8% decline in April for its worst month since March 2020.

“Volatility skews in both directions. In this period when we expect heightened volatility because of all of the confluence of factors that we see from geopolitics to earnings to the Fed to inflation, you’re going to have big swings like this,” Ross Mayfield, Baird investment strategy analyst, told Yahoo Finance Live. “I think at a certain point, buyers do see some value in there. If you’re of the opinion that we’re not going to enter a recession … I think you start to see some value investors start to take some bites.”

Still, given the variety of concerns still present for the market outlook, many strategists have struck a more cautious tone on U.S. stocks for the near-term. In a note published Friday, Bank of America strategists led by Savita Subramanian slashed their price target on the S&P 500 by 100 points to 4,500.

“This year’s market does not appear to be dominated by one factor, be it fundamentals or positioning, cost of capital or corporate outlooks, but has been reacting to all of the above in big swings,” the analysts wrote.

And this week, investors are bracing for the Federal Reserve’s latest monetary policy decision, which is set to include measures intended to accelerate the central bank’s fight to bring down elevated inflation, even at the expense of some economic growth. Investors are looking for the Fed to raise rates by 50 basis points for the first time since 2000, and to officially announce the timing of the start of quantitative tightening, or the rolling of assets off the Fed’s $9 trillion balance sheet.

“There’s no doubt that there’s some anticipation out there of [Fed officials’] comments and their action,” Katie Stockton, Fairlead Strategies founder, told Yahoo Finance Live. “We’re seeing that in the marketplace. It’s very, very skittish, and probably reasonably so.”

“I think we all kind of know what’s coming. And yet sometimes that doesn’t matter. Sometimes the market comes into it and it can be deeply oversold,” she added. “I think it’s a pretty risky assumption to make in this kind of environment … I mean there’s hardly any stocks that have been unturned by the recent weakness. So I think we have to keep those risks in mind as we come into the numbers.”

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8:37 a.m. ET: Clorox shares fall after company lowers full-year outlook on rising prices

Shares of Clorox (CLX) dipped in early trading Tuesday morning after the consumer staples company lowered its full-year profit guidance, which overshadowed otherwise upbeat results from its latest quarter.

For the fiscal third quarter, Clorox posted adjusted earnings of $1.31 on revenue of $1.81 billion. Both metrics topped consensus expectations, with Wall Street looking for adjusted earnings of 93 cents per share on revenue of $1.79 billion, according to Bloomberg data. However, Clorox’s gross margins contracted over last year, reaching 35.9% from 43.5%, “due mainly to higher manufacturing and logistics and commodity costs, partially offset by the benefits of pricing and cost savings initiatives,” according to Clorox’s press statement.

And these cost pressures are expected to linger for the rest of this year. Clorox said it expects full-year gross margins to decrease by up to 800 basis points, or 8 percentage points, due to “higher than previously anticipated commodity and manufacturing and logistics costs.” Full-year adjusted earnings per share are expected to between $4.05 and $4.30, down from a previous guidance range of between $4.25 and $4.50.

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