The Tuesday Market Minute
- Global stocks mixed as Asia rides a stronger U.S. dollar to a ninth consecutive session gain, while weak data in Germany and profit-taking in US stocks look to tip Wall Street into the red.
- German exports plunge 24% in April, the peak of the coronavirus pandemic, igniting concerns for second quarter growth data in Europe.
- The US National Bureau of Economic Research says the domestic economy entered recession in February amid an "unprecedented magnitude of the decline in employment and production."
- Global oil prices slide as investors take profits from yesterday's OPEC agreement and key on a 2020 forecasting report from Goldman Sachs.
- U.S. equity futures suggest a weaker open for Wall Street after the S&P 500 edged into positive territory for the year last night and the Nasdaq 100 touched the highest level on record.
U.S. equity futures slumped lower Tuesday as investors looked to book profits from an extraordinary rally for global stocks that continues to defy underlying conditions in major economies around the world.
The S&P 500 edged into positive territory for the year last night, while the Nasdaq 100 stretched to all-time highs in the strongest 50-day rally on record for Wall Street, fueled in part by trillions in central bank and government stimulus and hopes for a so-called V-shaped economic recovery from the coronavirus pandemic.
There is some investor concern, however, that markets have risen too far and too fast over the past two months, particularly when you consider that the Atlanta Fed's GDPNow forecasting tool suggests second quarter GDP could contract by as much as 53%.
In fact, the Business Cycle Dating Committee of the National Bureau of Economic Research, the group which offers the final word on the official status of the U.S. economy, confirmed last night that it entered recession in February, thanks in part to the "unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy".
The designation ends the longest expansion on record for the U.S. economy.
"In deciding whether to identify a recession, the committee weighs the depth of the contraction, its duration, and whether economic activity declined broadly across the economy," the NEBR said in a statement. "The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions."
With the Federal Reserve kicking-off its two day policy meeting today, and data from Germany showing a record 24% plunge in April exports for Europe's biggest economy, investors grew far less comfortable extending risk into the Tuesday session, even after a solid gains for markets in Asia.
Futures contracts tied to the Dow Jones Industrial Average now suggest a 340 point pullback for the 30-stock average, which has gained nearly 26% since the beginning of April, while those linked to the S&P 500 are priced for a 32 point retreat following last night's gains that tipped the broadest measure of U.S. stocks into positive territory for the year.
Chesapeake Energy Corp. (CHK) - Get Report shares were an early mover o note, plunging more than 50% to a market value of just $340 million amid reports that the shale oil and gas producer is preparing to file for Chapter 11 bankruptcy protection.
Macy's Inc. (M) - Get Report, meanwhile, surged more than 12.25% after the iconic retailer secured $4.5 billion in fresh financing and said first quarter earnings and sales would likely be stronger than market forecasts.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies and generally acts as a 'risk off' gauge in overnight trading, jumped 0.436% to 97.054 as investors retreated to safety, while benchmark 10-year U.S. Treasury note yields rallied to 0.825%, a more than 12 basis point fall from Friday's post-payroll peak.
European stocks were also on the back foot, with investors spooked by last night's high close on Wall Street and the grim April trade data from Germany, the region's economic engine.
The Stoxx 600 benchmark was last seen 1.2% lower in early Tuesday trading, lead to the downside by a 1.6% slide for Germany's DAX, while Britain's FTSE 100 slumped 1.8% by mid-day of trading in London.
Global oil prices eased, as well, following yesterday's OPEC press event which detailed the cartel's extension of production cuts into the end of July, as Goldman Sachs forecast a near-term pullback in markets even as it nudged its 2020 prices targets for Brent and WTI crude modest higher, to $40.40 per barrel and $36 per barrel respectively, by the end of the year.
WTI contracts for July delivery were marked 25 cents lower from their Monday close in New York and changing hands at $37.94 per barrel while Brent contracts for August, the global benchmark, were seen 31 cents lower at $40.49 per barrel.
Overnight in Asia, regional shares rose for the ninth consecutive session as the U.S. dollar gains eased pressure on local currencies and boosted export stocks. Gains in Hong Kong and Australia lead the region-wide MSCI ex-Japan benchmark to a 0.64% gain heading into the final hours of trading, while Japan's Nikkei 225 fell for the first session in six to close 0.38% lower at 23,091.03 points.