Here are five things you must know for Monday, May 9:
1. — Stock Futures Extend Slump As China Adds to Growth Concerns
U.S. equity futures slumped lower again Monday, while the dollar breached a fresh 20-year high and Treasury yields extended their recent gains, as investors sailed into a wall of worry linked to a slowdown in China, surging inflation and an aggressive Federal Reserve in the U.S. and a worrying escalation in Russia’s war on Ukraine in Europe.
Wrapped around all of those concerns, as well, is the specter of more market volatility, with the CBOE’s VIX index, also known as Wall Street’s ‘fear gauge’, rising another 6.3% in European hours to trade at 33.10 points, near to the highest levels since early March.
With last Friday’s sell-off on Wall Street, which extended the longest weekly losing streak in more than a decade for the S&P 500, bleeding into the Asia session, stocks were already fragile when investors were hit with data showing a sharp slowdown in China exports and a warning from Premier Li Keqiang about the country’s Covid-hit jobless rate.
Extended crackdowns on business and travel in both Beijing and Shanghai added to the gloom, while a expected slump in China demand for oil and energy products offset a proposed G7 ban on Russian crude exports, sending WTI futures lower in overnight trading.
“We commit to phase out our dependency on Russian energy, including by phasing out or banning the import of Russian oil. We will ensure that we do so in a timely and orderly fashion,” the G7 statement said. “We will work together and with our partners to ensure stable and sustainable global energy supplies and affordable prices for consumers.”
WTI futures for June delivery were marked $1.31 lower at $108.46 pe barrel while Brent contracts for July fell $1.10 to trade at $111.30 per barrel.
In Europe, with Russian President Vladimir Putin expected to speak at a celebration marking the end of the Second World War later today, investors are worried that the conflict could escalate quickly if the so-called ‘special operation’ is formally upgraded to a war by Russian lawmakers.
The region-wide Stoxx 600 was marked 1.2% lower in early Frankfurt trading while the FTSE 100 fell another 0.8% in London.
Save-haven trading lifted the U.S. dollar index, which tracks the greenback against a baskets of six global currencies, to a fresh 20-year high of 104.187 in overnight dealing, before easing to 104.05, while benchmark 10-year Treasury note yields were last seen at a December 2018 high of 3.193%
On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a 400 point opening bell slump while those linked the S&P 500, which is down 13.5% for the year, are priced for a 62 point retreat. Futures linked to the tech-focused Nasdaq are looking at a 233 point opening bell slide.
2. — Week Ahead: Inflation In Focus As Earnings Season Slows
Inflation data will likely take center-stage this week as investors match the hawkish turn of the Federal Reserve, and the prospect of faster rate hikes, against what could be a peak in consumer price readings heading into the summer months.
The Commerce Department will publish April inflation data on Wednesday, with analysts expecting an easing in the headline reading from a four-decade high of 8.5% to around 8.1%, with so-called core inflation, which strips out volatile components such as food and energy, also slowing by around 50 basis points to an annual rate of 6%. Factory gate inflation data will follow on Thursday.
The readings will provide and important context for last week’s assertion by Fed Chairman Jerome Powell that he and his colleagues are not “actively considering” a 75 basis point rate hike, given the fact that inflation conditions could moderate over the coming months.
The CME Group’s FedWatch tool suggests only a 20.1% chance of a 75 basis point Fed Funds increase next month.
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On the earnings front, a quiet week is expected with only 20 S&P 500 companies reporting, including Tyson Foods (TSN) – Get Tyson Foods, Inc. Class A Report, Walt Disney (DIS) – Get Walt Disney Company Report and Occidental Petroleum (OXY) – Get Occidental Petroleum Corporation Report.
With around 87% of the S&P 500 having reported March quarter earnings, collective profits are likely to rise 10.3% from last year to $450.3 billion before slowing to around $4401.9 billion over the second quarter, according to Refinitiv forecasts.
3. — Uber Shares Slide on Report of Cost-Cutting, Hiring Slowdown
Uber Technologies (UBER) – Get Uber Technologies, Inc. Report shares moved lower Monday, outpacing declines for the broader Nasdaq benchmark, following reports that the ride-sharing group will slow hiring and reduce its marketing costs.
CNBC, citing an internal memo written by CEO Dara Khosrowshahi, said Uber will treating hiring as a “privilege”, while being “deliberate about when and where we add headcount” and pare back spending on ‘the least efficient” marketing and incentive programs.
The move follows Uber’s reporting of a wider-than-expected first quarter loss of $3.04 per share, although most of that was linked to accounting changes linked to the group’s stakes in China-based ride hailing company Didi Global DIDI, and stronger-than-expected revenues of $6.9 billion.
Rising driver costs, however, linked in part to surging gasoline prices and one of the tightest labor markets on record, are eating into ride-hailing group profits, although Uber said last week that its driver base remained a a post-pandemic high. “Importantly, we expect this trend to continue without significant incremental incentive investments,” the company added.
Uber shares were marked 2.2% lower in pre-market trading to indicate an opening bell price of $25.50 each.
4. — Apple Shares Slump Amid Disruption At Key China-based Chipmaker
Apple (AAPL) – Get Apple Inc. Report shares slumped lower in pre-market trading following reports of major disruptions at a key facility in Shanghai that supplies chips for the tech giant’s MacBook computers.
Quanta Shanghai Manufacturing City, a site owned by Taiwan-based Quanta Services Inc., is reportedly beset by a jump in Covid positive cases that has disrupted the facility’s ‘closed-loop’ system — designed to house workers on-site an avoid Shanghai’s draconian Covid restrictions — last week, leading to an exodus of employees and a reported pause in production.
Quanta Services also makes circuits and components for Tesla and its Shanghai gigafactory.
Apple shares were marked 1.9% lower in pre-market trading to indicate an opening bell price of $154.30 each. Tesla shares were marked 2.7% lower at $842.00 each.
5. — Twitter Shares Stuck Under $50 Despite Musk’s Bullish Revenue Projections
Twitter TWTR shares remained stuck below $50 pre-market trading Monday, and well shy of the $54.20 level proposed by proposed by Elon Musk in his $44 billion takeover deal, despite the Tesla CEO’s vow to significantly boost annual revenues at the social media group.
Musk, who corralled a group of investors to pitch-in billions last week as part of his unsolicited effort to take Twitter private, aims to lift the micro-blogging website’s annual revenue to $26.4 billion by 2028, the New York Times has reported, through a mix of business payments and a subscriptions and a reduced reliance of ad sales.
Citing a so-called ‘pitch deck’ used to lure investors The New York Times said Musk also said he’ll boost users for the subscription-based Twitter Blue to 69 million by 2025, a move that would take the average revenue per Twitter user from its current level of $24.83 to around $30.22.
Twitter shares were marked 0.84% lower in pre-market trading to indicate an opening bell price of $49.38 each.
