Rate Hike Talks, Surging Bond Yields Overwhelm Wall Street

The earnings season is bringing Wall Street no reprieve from the volatility that has plagued it over the last few months. That was made clear at the beginning of the week, with stocks ultimately finishing lower on Monday, after the 10-year U.S. Treasury yield surged to a three-year high, while natural gas prices jumped to their highest level since 2008. Upbeat earnings from Johnson & Johnson (JNJ) helped the Dow Jones Industrial Average (DJI) add nearly 500 points on Tuesday, and the Nasdaq Composite Index (IXIC) and S&P 500 Index (SPX) logged their best day in over one month as tech stocks rallied. The Dow's rally extended into Wednesday as more blue-chip names stepped into the earnings confessional, though the Nasdaq and S&P 500 had already started to cool.

The market took a sharp turn for the worse on Thursday, with rising bond yields adding pressure after Federal Reserve Chairman Jerome Powell suggested bigger rate hikes might be coming next month to counteract high inflation, with a 50 basis point hike now on the table. In turn, bond yields resumed their climb toward 2018 highs. Stocks were last seen eyeing losses on Friday, with the Dow pacing for its fourth-straight weekly drop, while the SPX and IXIC were on track a third consecutive week in the red. 

Busy Week of Earnings

The earnings season is in full-swing, with multiple high-profile names stepping into the spotlight. Among them was Tesla (TSLA), which posted a top- and bottom-line beat, and predicted 60% delivery growth for 2022. Pharmaceutical name JNJ drew attention, too, hitting a post-earnings record high, despite suspending sales guidance of its Covid-19 vaccine. Meanwhile, analysts and options traders alike were eyeing J.B. Hunt's (JBHT) upbeat results, and Procter & Gamble (PG) edged higher on a strong sales forecast for the year.

The talk of the town was Netflix (NFLX), though, which tumbled after posting a surprise subscriber loss. Airlines were in focus as well, with American Airlines (AAL) soaring on high travel demand, while calls popped on struggling United Airlines (UAL) ahead of its report. Another notable name on the earnings docket was AT&T (T), which landed a red-hot options pit after announcing a core wireless revenue jump. The last few names to enter the confessional were Snap (SNAP), which dipped after missing estimates on both the top- and bottom-line, and Cleveland-Cliffs (CLF), which popped on better-than-expected results.

Top Analyst Calls

Analysts made several calls, too, as they worked their way through the earnings deluge. Wendy's (WEN) kicked off the week with a downgrade to "market perform," with BMO predicting high inflation to hit the fast-food giant harder than some of its peer. Sirius XM (SIRI) was under fire as well, drawing out a downgrade to "underweight" from Morgan Stanley. Meanwhile, social media giant Snap (SNAP) scored fresh coverage ahead of its earnings report.

Elsewhere, Progressive (PGR) tumbled after Piper Sandler hit it with a downgrade and price-target cut, with the analyst in coverage noting excessive optimism around auto insurance rates. Plus, the brokerage's review of the renewable energy sector saw it slashing its price target on Enphase Energy (ENPH). In other news, options bears responded to JetBlue's (JBLU) downgrade, and Dow's (DOW) upbeat earnings attracted a flurry of bull notes.

Big Tech Earnings in Focus Next Week