Market Snapshot: Dow, S&P strive to break free from first loss this year

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U.S. stock futures edged just above the flat line on Thursday, with investors staying on the sidelines after equities saw their first pullback of the year and ahead of the kickoff to earnings season.

Bond prices look likely to remain a topic of interest for investors after a Chinese official played down a report the country was considering cutting back on U.S. debt, which rattled markets.

What are stock futures doing?

Futures for the Dow Jones Industrial Average YMH8, +0.08% rose 17 points to 25,367, while those for the S&P 500 index ESH8, +0.09%  put on 1.9 points to reach 2,752.50. Futures for the Nasdaq-100 index NQH8, +0.08%  were up 3.5 points to 6,681.25.

On Wednesday, the S&P 500 index SPX, -0.11% and Nasdaq Composite Index COMP, -0.14% logged their first decline of 2018, as all three major stock indexes dropped. The S&P and Nasdaq both closed down 0.1%, while the Dow Jones Industrial Average DJIA, -0.07% shed 16.67 points to 25,369.13.

What is driving the markets?

China’s foreign-exchange regulator on Thursday dismissed a Bloomberg News report suggesting Beijing is looking to pare back on U.S. bond buys as “false news.” The yield on the 10-year benchmark note TMUBMUSD10Y, -0.39%  was trading up 2 basis points at 2.371% on Thursday, after reaching nearly 2.6% in the previous session.

Yields rising too fast or too high can weigh on equities because the bond market becomes a more attractive investment compared with stocks. When the gain comes from a low base, it can signal that investors are becoming more confident about the economy, which stirs an appetite for stocks over safe-haven bonds.

Some sidelining was seen as investors waited for Friday’s consumer-price data, which could be a test of whether the bond market’s expectation that higher prices are on the way.

Read: Why U.S. inflation data will be a litmus test for bond buyers

Stocks also took a hit Thursday from comments by St. Louis Fed President James Bullard, who reportedly said more than a decade of plus-2.5% inflation would be needed to make up for lackluster inflation readings.

Investors are also gearing up for earnings season, with kicks in Friday when JPMorgan Chase & Co. JPM, +1.10%  , BlackRock, Inc. BLK, -0.44%  and Wells Fargo & Co. WFC, +1.38%  are scheduled to report.

What are other markets doing?

Stocks in Asia mostly steadied, though Japan’s Nikkei 225 index NIK, -0.33%  bucked that trend with a loss of 0.3%.

In Europe, stocks were mostly treading water, with the Stoxx 600 index SXXP, -0.08%  trading flat.

Oil prices saw modest gains, with the West Texas Intermediate February contract CLG8, +0.61%  up 0.3%.

Gold GCG8, -0.02%  was flat, while the ICE dollar index DXY, +0.09%  rose 0.1% to 92.484.

In cryptocurrencies, the bitcoin spot price BTCUSD, -7.54%  dropped nearly 10% to $13,448.12, after a report South Korea would ban trading off all digital currencies. Bitcoin futures on the CME BTCF8, -7.89%  lost 6.5% to $13,525. Ripple coins slipped 4% to $1.81, according to CoinMarketCap.com data.

What are strategists saying?

“Markets may … be experiencing something of a hangover from Wednesday, when U.S. stocks, Treasuries and the dollar all sold off on reports that China is considering cutting purchases of Treasuries,” said Craig Erlam, senior market analyst at Oanda.

“Earnings season should provide a more positive story for markets, with investors optimistic ahead of the fourth-quarter results following some very encouraging results last time around. The question now is whether companies can live up to expectations and whether the benefits of tax reform for companies has been accurately priced in,” he said.

Which stocks are in focus?

Delta Air Lines Inc. DAL, +3.12% is scheduled to report ahead of the open.  

Shares of Eastman Kodak Co. KODK, +57.35%  fell 12% in premarket trading. The stock is up over 200% so far this week after an announcement earlier in the week that it is launching a cryptocurrency and would begin a “major blockchain initiative.”

Opinion: Kodak’s monster gains show there’s a killing to be made by trading blockchain news

What’s coming up in economic data?

Weekly jobless claims and December producer prices are due at 8:30 a.m. Eastern Time. The Federal budget is scheduled for release at 2 p.m. Eastern.

Friday will see the release of data on consumer prices and retail sales for December.