The Tuesday Market Minute
- Global stocks mixed after a Monday sell-off that wiped out more than $1.5 trillion in equity market value as investors look to pledges of support from world governments amid the coronavirus spread.
- White House says $1 billion will be directed to a fund dedicated to finding a coronavirus vaccine, while reports of pending breakthroughs in the U.S. and Japan give markets early support.
- European stocks extend slide after losing nearly $500 billion in value yesterday, with financial and healthcare stocks leading the decline.
- Bond yields continue to signal concern for global economic growth, 10-year U.S. Treasury notes rise modestly past the 1.4% mark in overnight trading.
- U.S. equity futures suggest solid opening bell gains on Wall Street , following the steepest losses in more than two years yesterday, ahead of earnings from Home Depot and Macy's before the start of trading.
U.S. equity futures edged modestly higher Tuesday as investors looked to claw back some losses from yesterday's wipe out of Wall Street, the worst in at least two years, even as fears that a spreading cornoavirus could tip the world economy into recession.
The Dow Jones Industrial Average shed more 3.56% in yesterday's rout, recording only its third 1,000-point drop in history, while stocks on the S&P 500 lost more than $920 billion in value in a session that wiped nearly all of Wall Street's year-to-date gains and pushed save-haven 30-year bond yields to a fresh record low of 1.811%.
Bond yields, in fact, continue to flash warning signals of a U.S. economic slowdown, with the difference between 3-month Treasury bills and 10-year Treasury notes trading at -19 basis points, the steepest inversion since October.
With analysts cutting forecasts for growth in both China and the broader global economy, and data showing worrying declines in both manufacturing and service sector activity in major economies around the world. flight-to-quality trades continue to favor risky investments.
The market's principal concern -- the spread of the coronavirus -- is also yet to abate, with confirmed cases around the world topping 80,000 and the death toll rising to 2,700, most of which are centered around the industrial city of Wuhan, where the outbreak was first identified in late December.
Still, the number of new infections in China has already peaked, according to official figures from the National Health Commission, and the World Health Organisation has said the disease has not evolved into a global pandemic, despite cases being found in Italy, Britain and the Untied States.
Against that optimism, and with investors keen to retrace at least some of yesterday's historic losses, Wall Street futures suggest a solid start to the Tuesday session, with contracts tied to the Dow indicating a 165 point opening bell gain -- following earlier indications of a 220 point move to the upside -- and those linked to the S&P 500 primed for a 17 point advance.
Dow futures got a solid 40 point bump from stronger-than-expected fourth quarter earnings from Home Depot (HD) - Get Home Depot Inc. (The) Report, which earned $2.28 per share on sales of $25.8 billion over the holiday period.
Benchmark 10-year Treasury note yields eased past 1.4% in overnight trading, after testing fresh record lows during the peak of yesterday's sell-off, but a renewed morning bid put the yield at 1.355% heading into the U.S. open.
CME Group futures prices are noting at least a 5% chance of an April rate cut, which would take the Fed Funds rate to a range of between 1.25% and 1.5%, with traders betting on a 72% chance the Fed will move by June.
Gold prices slipped from their highest levels since February 2013, while oil bounced modestly higher as investors snapped-up cheap crude ahead of U.S. inventory data releases later today and tomorrow.
Brent crude futures contracts for April delivery, the global benchmark for pricing, were last see seen 7 cents higher from their Monday close in New York and trading at $56.32 per barrel, while WTI contracts for the same month were seen 5 cents lower at $51.36 per barrel.
European stocks, which lost nearly $500 billion in value during the worst single-day session since the 2016 Brexit vote yesterday, edged higher in early Tuesday trading before slipping into the red, with the Stoxx 600 falling 0.5% in Frankfurt and Britain's FTSE 100 dropping another 0.7% in London.
Overnight in Asia, Japan's Nikkei 225 slumped 3.34% as investors played catch-up with the global stock sell-off following yesterday's market holiday, while the broader MSCI ex-Japan index bumped 0.24% higher thanks to solid gains for markets in South Korea and Taiwan.