Aurelia Butler

(Reuters) -Wall Street was set to open lower on Thursday as disappointing results from Tesla (NASDAQ:TSLA), AT&T and some regional banks dented investor sentiment already soured by prospects of further U.S. interest rate hikes.The main U.S. stock indexes have remained steady this week as mixed earnings from U.S. banks allayed concerns of a contagion from the banking crisis in March, but rapidly rising rates and recession worries have dimmed their outlook.Tesla Inc slid 8.0% in premarket trading after its first-quarter gross margin missed expectations on aggressive price cuts for its vehicles and CEO Elon Musk said the company would put sales growth ahead of profit.”Tesla is and has been struggling. They’ve been cutting prices pretty regularly and that’s not something that you do if the market is strong for your product,” said Paul Nolte, market strategist at Murphy & Sylvest Wealth Management.Among other companies that reported earnings, AT&T Inc (NYSE:T) fell 5.4% as the wireless carrier missed Wall Street estimates for first-quarter revenue, while American Express Co (NYSE:AXP) slipped 1.3% after downbeat results. Traders are reassessing the path for interest rates after data indicated that a slowdown in the U.S. economy was not enough to push the Federal Reserve to start cutting rates as early as this year. Comments from Fed policymakers this week have also supported bets on further policy tightening. The Fed will deliver a final 25-basis-point rate hike in May and then hold rates steady for the rest of the year, according to economists in a Reuters poll, which also showed a likely short and shallow recession in 2023.The two-year Treasury yield, which typically moves in tandem with near-term rate expectations, slipped from one-month highs hit on Wednesday. [US/]Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, suggesting that the labor market was gradually slowing. Another set showed business activity in the U.S. Mid-Atlantic region slumped more than expected in April.”The market is anticipating anywhere between 50 and 100 basis points cut by the end of the year, they are expecting something that the Fed is not talking about at this point,” added Nolte. Adding to worries, the cost of insuring exposure to U.S. sovereign debt rose to the highest level since 2011, over market jitters that the government could hit its debt ceiling sooner than expected.Republican U.S. House Speaker Kevin McCarthy on Wednesday unveiled a plan to raise the nation’s debt ceiling by $1.5 trillion and cut federal spending by three times that amount.At 8:38 a.m. ET, Dow e-minis were down 197 points, or 0.58%, S&P 500 e-minis were down 33 points, or 0.79%, and Nasdaq 100 e-minis were down 127.5 points, or 0.97%. IBM (NYSE:IBM) Corp gained 1.1% after the software company beat estimates for first-quarter profit. Las Vegas Sands (NYSE:LVS) Corp climbed 5.3% after the casino operator reported better-than-expected quarterly revenue, while Alaska Air (NYSE:ALK) Group Inc fell 1.5% on wider-than-expected first-quarter loss.Among regional banks, Zions Bancorp, Truist Financial (NYSE:TFC) Corp and KeyCorp (NYSE:KEY) dropped between 1.6% and 5.2% after their quarterly profits missed estimates. More

(Reuters) -Investments in the U.S. space industry dropped 53% to $2.2 billion in the three months ending March, a report said, with high interest rates and challenging market conditions making it the lowest-funded quarter the sector has seen since 2015. The steep drop in fresh capital has left many companies in a vulnerable state, while the failure of Silicon Valley Bank, a leading provider of venture debt, has added to the challenge, a report by venture capital (VC) firm Space Capital said on Thursday. Space Capital’s report, coming on the heels of a Chapter 11 filing from Richard Branson’s Virgin Orbit Holdings Inc, tracked 89 companies active in the sector.”Of the 100+ launch companies that collectively raised $27 billion over the last decade, there are currently only two that are operational: SpaceX and Rocket Lab,” the report said, adding that there was a visible “dichotomy between the winners and everyone else” in the rocket manufacturing sector.The risk threshold to invest in space companies was much higher earlier, but given recent market uncertainty, investors may not be as risk-loving and space being a nascent sector, many are dialing back, Deutsche Bank (ETR:DBKGn) analyst Edison Yu told Reuters separately. However, Space Capital added that companies in emerging industries, like those associated with the National Aeronautics and Space Administration’s Artemis mission to the Moon are seeing an increased interest.”From the public institutional investment side, there is not really much interest in the lunar economy…… that said, personally based on my conversations with companies, I believe there is actually a lot of potential in the lunar economy,” Yu said. More

Investor expectations for UK interest rate rises have shot up this week following stronger than expected jobs and inflation data, putting the markets increasingly at odds with the Bank of England’s own messaging that it is close to the end of its hiking cycle. Traders are now pricing in three more rate increases to a peak of about 5 per cent in September, a sharp increase from last week’s expectations of 4.6 per cent, before figures showing stubbornly high inflation took the market by surprise this week. Annual consumer price rises in the UK failed to dip below double digits in March at 10.1 per cent, and core inflation — which excludes volatile food and energy prices — remained unchanged at 6.2 per cent. “Inflation is higher than the market was expecting and when you look at the labour market in particular, which is not a source of inflation now but it will be in the future, it also seems to be stronger than previously anticipated,” said Peter Schaffrik, economist at RBC Capital Markets, which increased its forecast for BoE rate increases this week. On top of high inflation, average earnings excluding bonuses rose 6.6 per cent year on year, according to figures from the Office for National Statistics this week, ahead of a 6.2 per cent increase forecast by economists. RBC had expected the central bank to hold rates at its next meeting, but has increased its forecast to a 0.25 percentage-point increase in May. Schaffrik said a terminal rate of 5 per cent was “not impossible” as employment data had also been strong in the US and Europe, and banking concerns had faded. The yield on 10-year government debt has also surged in recent weeks, from 3.4 per cent at the beginning of the month to 3.8 per cent on Thursday, reflecting expectations of higher rates. Price moves have come despite recent suggestions from BoE policymakers that they are nearing the end of their monetary tightening now that interest rates are 4.25 per cent. In a speech in early March, bank governor Andrew Bailey signalled he thought financial markets were wrong to believe there was a pressing need for many more rate rises, cautioning markets not to take a firm stance and saying the BoE was now in wait-and-see mode. It had shifted from a previous stance that “further increases in the [benchmark] bank rate would be needed”.Huw Pill, the bank’s chief economist, said the BoE now needed to exercise “judgment” and should not consider stronger activity to be necessarily inflationary because the reversal of natural gas price rises meant better economic data was not “something inherently inflationary”. 

While he indicated that there was still a need to demonstrate the BoE had done enough to defeat inflation, none of his comments suggested an inclination to raise rates to 5 per cent.While market expectations for rate increases heightened this week, the timing of expected rate cuts hasn’t shifted much, with markets pricing drops around the end of this year.But Imogen Bachra, head of UK rates strategy at NatWest, said it was “unlikely” the BoE would cut rates as soon as the market expected given “more evidence of stronger underlying inflationary pressures, relatively muted risks so far in the financial system compared to other countries and the fact that the hurdle to easing is higher than it has been in previous cycles”. More