Heightened Volatility Expected as US Stock Market Traders Closely Track Treasury Yields

James Hyerczyk
Updated: Oct 20, 2022, 15:16 GMT+00:00

If conditions calm and yields drop, stocks could turn positive especially on the back of the strong reports from IBM and AT&T.

Wall Street

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The major U.S. stock indices are trading mixed but mostly higher on the cash market opening based on the pre-market trade. The benchmark averages were drifting most of the overnight session before catching a bid after positive forecasts from IBM and AT&T. The news offset the negative influence from Tesla after it warned of missing its vehicle deliver target this year.

At 12:46 GMT, the blue chip Dow Jones Industrial Average futures contract is trading 30551.00, up 91.00 or +0.30%. The benchmark S&P 500 Index is at 3711.25, up 4.00 or +0.11% and the tech-weighted NASDAQ Composite is trading 11149.50, down 3.75 or -0.03%.

UK Prime Minister Resigns Fueling Some Market Volatility

There is some volatility shortly before the cash market opening after U.K. Prime Minister Liz Truss resigned Thursday following a failed tax-cutting budge that rocked financial markets and which led to a revolt with her own Conservative Party.

This is a breaking story that could influence risk sentiment throughout the trading session.

IBM Stock Up Ahead of Opening

IBM Corp rose 3.3% in premarket trading, leading the advance among Dow components after the software and IT services company beat quarterly earnings estimates on Wednesday after the close and said it expects to exceed full-year revenue growth targets as robust demand for the company’s digital services helps cushion the blow from a strong dollar.

The IT software and services provider has been focusing on the so-called “hybrid cloud” after spinning off its legacy IT-managed infrastructure business, and posted double-digit growth across all its segments and geographies on a constant-currency basis in the third quarter.

AT&T Beats Earnings Estimates, American Airlines Posts Strong Earnings

AT&T shares rose more than 2% in the pre-market after the telecommunications giant reported quarterly results that beat analyst expectations.

“Our disciplined go-to-market approach is helping drive healthy subscriber growth with high quality customers. As a result, we now expect to achieve wireless service revenue growth in the upper end of the 4.5 percent to 5 percent range,” CEO John Stankey said in a statement.

Shares of American Airlines rose more than 3% in the premarket after the airline posted quarterly results that beat analyst expectations.

“Demand remains strong, and it’s clear that customers in the U.S. and other parts of the world continue to value air travel and the ability to reconnect post-pandemic,” CEO Robert Isom said.

Short-Term Outlook

U.S. stocks could be headed for a volatile session based on the reaction to the news from the UK. The resignation of former Prime Minister Truss created uncertainty, and investors don’t like uncertainty in this fragile investing environment.

Stocks erased their pre-market gains after the news drove Treasury yields higher. If conditions calm and yields drop, stocks could turn positive especially on the back of the strong reports from IBM and AT&T.

Don’t rely too much on the headlines today, react to the direction of Treasury yields.

For a look at all of today’s economic events, check out our economic calendar.


About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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