The S&P 500 futures have recouped overnight losses and trade eight points, or 0.2%, above fair value as oil prices fall to $95 per barrel ($95.02, -7.99, -7.9%).
Stocks in China weren’t so lucky on Tuesday, plagued by COVID-19 lockdowns, de-listing concerns, and the potential for U.S. sanctions if found to be helping Russia’s invasion. China’s Shanghai Composite dropped 5.0% (-7.4% for the week), and Hong Kong’s Hang Seng dropped 5.7% (-10.4% for the week).
The Chinese lockdowns are being cited as a factor driving oil prices lower due to reduced demand. European stocks, meanwhile, are trying to recover, but the Europe Stoxx 600 is still down 0.9% right now.
Back on the home front, the Fed will begin its two-policy meeting today while investors wait for the Producer Price Index for February (Briefing.com consensus 1.0%) at 8:30 a.m. ET. The Empire State Manufacturing Survey for March (Briefing.com consensus 9.0) will be released at the same time, followed by TIC Net Long-Term Transactions for January at 4:00 p.m. ET.
Separately, Coupa Software ( COUP 63.00, -26.82, -29.9%) is the latest growth stock that’s taken another plunge on disappointing guidance. COUP shares are down 30% in pre-market action.
U.S. Treasuries trade little changed in front of the inflation data. The 2-yr yield is down one basis point to 1.83%, and the 10-yr yield is down one basis point to 2.13%. The U.S. Dollar Index is down 0.2% amid relative strength in the euro, which is up 0.5% against the dollar to 1.0986.
In U.S. Corporate news:
- Coupa Software (COUP 63.00, -26.82): -29.9% after guiding fiscal Q1 revenue below consensus and guiding FY23 EPS and revenue below consensus. The company noted that the pandemic has required multiple years of outsized new business growth in order to recover and get back on track.
- lululemon athletica (LULU 285.14, -4.10): -1.4% after the stock was initiated with an Underperform rating at Bernstein. The same firm initiated Nike (NKE 117.5, -0.70, -0.1%) with an Outperform rating.
- Zoom Video (ZM 97.17, +2.53): +2.7% after receiving an analyst upgrade to Buy from Hold at The Benchmark Company.
- Vail Resorts (MTN 241.15, -0.85): -0.4% after missing top and bottom-line estimates and increasing the midpoint of its FY22 EBITDA guidance.
Reviewing overnight developments:
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Equity indices in the Asia-Pacific region were mostly lower on Tuesday, yet there was some significant fallout in Chinese markets. Japan’s Nikkei: +0.2% Hong Kong’s Hang Seng: -5.7% China’s Shanghai Composite: -5.0% India’s Sensex: -1.3% South Korea’s Kospi: -0.9% Australia’s ASX All Ordinaries: -0.9%.
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In economic data:
- China’s Jan-Feb Retail Sales +6.7% yr/yr (+3.0% expected; prior +1.7%); Jan-Feb Industrial Production +7.5% yr/yr (+3.9% expected; prior +4.3%); Jan-Feb Fixed Asset Investment +12.2% yr/yr (+5.0% expected; prior +4.9%); February Unemployment Rate 5.5% (+5.15 expected; prior +5.1%)
- South Korea’s revised February Exports +20.6% yr/yr (prior +20.6%) and revised Imports +25.2% (prior +25.1%)
- Australia’s Q4 House Price Index +4.7% qtr/qtr (+3.9% expected; prior +5.0%)
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In news:
- The Hang Seng plunged another 5.7% (now down 10.4% for the week) and the Shanghai Composite plunged 5.0% (now down 7.4% for the week). The thrust of the selling was driven by myriad concerns, including growth worries tied to more Chinese cities being put in lockdown mode because of rising COVID cases, worries that China could face secondary sanctions if found to be helping Russia evade U.S. sanctions, continued de-listing concerns for Chinese securities, continued crackdown concerns as Tencent reportedly faces the possibility of a record fine for allegedly violating money laundering rules, and continued troubles for the property market.
- The sell-off came in spite of much better than expected retail sales, industrial production, and fixed asset investment data, and the PBOC injecting CNY100 bln of liquidity into the financial system, demonstrating that the worries about a slowdown in growth due to COVID issues had more impact as a forward-looking market driver.
- South Korea reported record-high COVID cases.
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Major European indices are weaker but have bounced back some from lower levels. STOXX Europe 600: -0.9% Germany’s DAX: -0.9% U.K.'s FTSE 100: -0.9% France’s CAC 40: -1.0% Italy’s FTSE MIB: -0.7% Spain’s IBEX 35: -0.2%.
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In economic data:
- UK’s February Claimant Count Change -48.1K (expected -28.0K; prior -67.3K); January Unemployment Rate 3.9% (expected 4.0%; prior 4.1%)
- France’s February CPI +0.8% m/m (expected +0.7%; prior +0.3%) and 3.6% yr/yr (expected 3.6%; prior 2.9%)
- Germany’s March ZEW Economic Sentiment -39.3 (expected 10.0; prior 54.3)
- Eurozone’s January Industrial Production 0.0% m/m (expected +0.1%; prior +1.3%) and -1.3% yr/yr (expected -0.5%; prior +2.0%)
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In news:
- The weakness is being attributed in large part to growth concerns tied to rising energy prices, plunging economic sentiment, as seen in Germany’s March ZEW Economic Sentiment reading, a striking uptick in COVID cases, the ongoing uncertainty of the Russia-Ukraine situation, and potential tightening actions by central banks.
- Additionally, worries about bank exposure to a potential Russian debt default, and weakening demand from China as it battles with a COVID case surge, have acted as further drags on investor sentiment.
- A sharp drop in oil prices, which is related to the growth concerns, has provided a small measure of support but it hasn’t been enough to offset the broader concerns.
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U.S. equity futures:
- S&P 500 Futures: -1 @ 4,172
- DJIA Futures: -22 @ 32,923
- Nasdaq 100 Futures: +15 @ 13,062
Overseas:
- Europe: DAX -0.9%, FTSE -0.9%, CAC -1.0%
- Asia: Nikkei +0.2%, Hang Seng -5.7%, Shanghai Composite -5.0%
Commodities:
- Crude Oil -7.35 @ 95.66
- Nat Gas -0.129 @ 4.529
- Gold -31.90 @ 1928.90
- Silver -0.443 @ 24.855
- Copper -0.0445 @ 4.4785