Wall Street set to open higher despite rising U.S. yields

(Reuters) – Wall Street was set for gains on Monday as optimism about the strong earnings season helped ease concerns on rising U.S. bond yields.

The yield on 10-year U.S. Treasuries US10YT=RJR, the benchmark for global borrowing costs, hit 2.9980 percent, its highest since January 2014. The U.S. five-year inflation swap, a key market gauge of long-term U.S. inflation, hit its highest level in 3-1/2 years.

The last time 10-year Treasury yields neared 3 percent, in 2013, it rocked risk appetite and sent stocks sliding and was shortly before oil prices went on a mighty 75 percent tumble. More recently, the stock market sold off in February as inflation expectations sent treasury yields surging.

But analysts say that strong earnings could help investors overlook such concerns at least for the moment.

“Earnings are going to be the bigger factor, the increase in yields isn’t too excessive just yet and investors maybe willing to take it in stride,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“We came into the earnings season with pretty lofty expectations and the earnings have been relatively strong.”

The prospect of rising inflation comes as U.S. companies are reporting results for what is turning out to be a much stronger-than-expected first quarter.

Profits at S&P 500 companies are expected to have risen 20 percent in the quarter, according to Thomson Reuters I/B/E/S, making it the strongest quarter in seven years.

At 8:44 a.m. ET, Dow e-minis 1YMc1 were up 47 points, or 0.19 percent. S&P 500 e-minis ESc1 were up 5.75 points, or 0.22 percent. Nasdaq 100 e-minis NQc1 were up 27.75 points, or 0.42 percent.

This week, 181 S&P 500 companies are scheduled to report including some of the technology heavy-hitters like Facebook (FB.O), Microsoft (MSFT.O), Amazon (AMZN.O) and Intel (INTC.O). Alphabet (GOOGL.O) reports after markets close on Monday.

Shares of Hasbro (HAS.O) fell 5.9 percent in premarket trading after the toymaker reported a bigger-than-expected drop in quarterly revenue, blaming the liquidation of Toys ‘R’ Us.

Caterpillar (CAT.N) rose 1.4 percent Citigroup upgraded to “buy”, saying the stock could outperform over the next six to 12 months.

In a move that could ease tensions between the United States and China, U.S. Treasury Secretary Steven Mnuchin said on Saturday he may travel to China to try to resolve the differences over trade.