The Tuesday Market Minute
- Global stocks mixed following the strongest rally on Wall Street in more than seven months, with Asia lower and Europe posting modest early gains.
- Bond yields hold steady, while oil and commodity prices dip, as the dollar trades at the highest level in a month against its global currency peers.
- Core Eurozone inflation for February surprisingly slows to 1.1%, while headline prices remain unchanged, adding downward pressure to regional bond yields.
- CDC data shows 76.9 million vaccine doses administered as of March 1 as states around the country re-open schools and non-essential businesses.
- U.S. equity futures suggest modestly softer open on Wall Street ahead of fourth-quarter earnings from Target and Kohl's.
U.S. equity futures slipped lower Tuesday, while the dollar added to recent gains and commodity prices retreated, as Wall Street paused following its strongest rally in more than seven months.
A milder-than-expected reading for European inflation, which held at an annual rate of just 0.9% last month, could add downward pressure to government bond yields in the region, but with commodity prices falling on the back of uncertain China demand and Thursday's OPEC meeting that could boost crude production, U.S. stocks are poised for a modest retreat from yesterday's surprisingly strong surge.
Bonds are likely to remain the catalyst for equity market direction, however, as the underlying strength of the domestic economy continues to improve.
The ISM index of manufacturing activity hit a three-year high last month, January retail sales roared on the back of $600 stimulus checks and the nation's accelerating vaccine rollout plans -- which now includes a third candidate after Johnson & Johnson JNJ received emergency use approval from the FDA over the weekend -- has to lead to state re-openings in Virginia, Massachusetts and the Carolinas.
Corporate profits are set to improve as a result, as well, with S&P 500 earnings expected to rise 21.2% to $331.3 billion over the first three months of the year.
The final three months of 2020, meanwhile, will also top Street forecasts, and with around 96% of the S&P 500 having reported, collective profits are forecast to rise 4.2% from the same period in 2019 to a share-weighted $359.2 billion.
Tuesday's opening bell, however, is likely to be modestly softer, with futures contracts tied to the Dow Jones Industrial Average indicating a 52 point decline and those linked to the S&P 500, which gained 2.38% yesterday, the price for an 8 point pullback following fourth-quarter earnings from retailers Target Corp. (TGT) and Kohl's Corp. (KSS) .
Target shares, in fact, jumped 1% after the retailer topped Street forecasts for profits and sales thanks in part to a 120% in traffic from its digital channels.
Nasdaq Composite futures are also in the red, and priced for a 30 point decline, although Zoom Video Communications (ZM) shares are primed for an 8.2% gain after the video conferencing group topped fourth-quarter earnings forecasts and gave investors a robust near-term outlook.
The U.S. dollar index was marked 0.26% and trading at a one-month high of 91.273 against a basket of its global currency peers following the weaker-than-expected European inflation data, which increased the attractiveness of higher-yielding U.S. Treasury bonds. Benchmark 10-year notes were little changed at 1.436%.
European stocks were modestly higher in the early hours of trading, with the Stoxx 600 rising 0.3% and Britain's FTSE 100 adding 0.5% despite weaker commodity prices and pullback in crude.
Thursday's meeting of OPEC members, as well as non-cartel allies such as Russia, could result in the easing of some of their agreed production cuts now that oil prices are trading near 13-month highs and near-term demand is expected to rebound now that vaccine programs are gaining traction in major economies around the world.
WTI contracts for April delivery were marked 4 cents higher from their Monday close at $60.68 per barrel while Brent contracts for May delivery, the benchmark for global prices, edged 3 cents higher to $63.72 per barrel.
Overnight in Asia, cautious comments on asset bubbles and market over-reach from a key China bank regulator kept regional stocks in the red, with the MSCI ex-Japan index heading into the close of the session with a 0.1% decline. Japan's Nikkei 225, meanwhile, closed 0.86% lower at 29,408.17 points.