Coffee With Greta: Stocks Are Falling Because Yields Are Popping

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DJIA Futures: -55 (-0.2%)

SPX Futures: -10 (-0.3%)

NASDAQ Futures: -49 (-0.4%)

Good morning friends!

Futures are slipping as Treasury yields pop.

Let’s get right to it!

Treasury Yields Jump On ECB Rate Hike Announcement

U.S. Treasury yields are rising this morning, pushing down stocks. 

The 10-year yield is up about 5 basis points at 3.07% while the 30-year yield is up nearly 3 basis points to over 3.2%.

The gains come after the European Central Bank announced today it will officially end quantitative easing and implement the first rate hike next month.

European Central Bank To Start Rate Hikes

The European Central Bank plans to raise rates by 25 basis points at its July meeting. 

The bank said it then expects another hike at its September meeting, but the size depends on the evolving outlook. 

In a statement, the ECB said, “Beyond September, based on its current assessment, the Governing Council anticipates that a gradual but sustained path of further increases in interest rates will be appropriate.”

Like the U.S. Federal Reserve, the ECB has a target of 2% for inflation. 

But Euro-zone inflation hit a record high of 8.1% in May.

The ECB also downgraded its growth forecast and raised inflation projections. 

The bank expects the economy to expand 2.8% in 2022 and 2.1% in 2023 and 2024. 

That’s a sharp downgrade from the previous forecast for growth of 3.7% in 2022 and 2.8% in 2023.

The ECB expects inflation to remain at 6.8% by the end of 2022, 3.5% in 2023, and 2.1% in 2024. 

That compares to its previous outlook for 5.1% in 2022, 2.1% in 2023, and 1.9% in 2024.

Weekly Jobless Claims Rise More Than Expected

Weekly jobless claims rose more than expected last week. 

The Labor Department reported today that 229,000 Americans filed initial claims for unemployment benefits. 

That was an increase of 27,000 from the previous week and higher than expectations for 210,000.

That's the highest level of weekly jobless claims since January 15.

Continuing claims fell by just 3,000 to 1.31 million in the week ending May 28, higher than expectations for 1.30 million.

Nio Tumbles On Shrinking Margins

Nio (NIO) shares are tumbling 7.3% ahead of the open despite beating Q1 expectations.

The Chinese electric vehicle maker reported an adjusted loss of $0.13 per share on $1.56 billion in revenue. 

That was better than analysts’ expectations for an adjusted loss of $0.14 per share on $1.49 billion in revenue. 

But the stock is dropping on lower margins. 

Nio’s Q1 profit margins declined to 14.6% compared to 19.5% a yaer ago.

The company blamed that drop on a “decrease of vehicle margin and the reduction in other sales margin resulting from the expanded investment in power and service network.”

The EV maker said it delivered 25,768 vehicles in the quarter, in line with expectations. 

Nio forecast Q2 revenue between $1.47 billion and $1.59 billion, missing expectations. 

The company expects to deliver 23,000 to 25,000 vehicles this quarter. 

U.S. Gas Prices Inch Closer To $5

The national average for a gallon of regular gas pushed closer to $5 overnight.

AAA shows that price rose to $4.970/gal today. 

That’s up nearly 2 cents from just yesterday and more than 25 cents from a week ago.

Prices have been surging after the U.S. officially entered “peak driving season” over Memorial Day weekend. 

The national average is on track to hit $5/gal for the first time in history this week.

Oil Prices Near 3-Month High

Oil prices are hovering near three-month highs after closing at the highest level since March 8 on Wednesday.

West Texas Intermediate crude futures are up 0.02% at $122 bbl while Brent crude futures are up 0.1% at nearly $124 bbl. 

The Energy Information Administration reported Wednesday that U.S. crude inventories fell by 2 million barrels last week while gas stockpiles fell by 800,000 barrels.

That was a smaller drop in oil inventories than expected but sharply missed expectations for gasoline inventories to rise. 

In Case You Missed It

• Twitter (TWTR) shares rose on Wednesday following a report that the company plans to share internal data with Elon Musk. The Washington Post first reported that Twitter is preparing to give Musk access to its so-called “firehose” API. That data set includes every single tweet posted on the platform. Top executives also told employees Wednesday that Twitter plans to hold a shareholder vote on the Musk buyout by early August. TWTR closed 0.8% higher Wednesday but is down 0.5% ahead of the open.

• Moderna (MRNA) shares rose 2.2% on Wednesday after the company released clinical trial results for its updated Covid booster shot. The new shot is a “bivalent” vaccine, meaning one half targets omicron variants while the other half is still based on the original Covid strain. Moderna said the 437 people treated with the new booster in its Phase 2 clinical trial had almost twice the amount of antibodies against omicron than those treated with the current booster.