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Dow Futures Fall as COVID Surge Clouds US Earnings; Apple Launch in Focus

A standout first quarter earnings season is being clouded by a worrying rise in new COVID infections as new variants, and slow vaccine rollouts, hit Asia and South America.

The Tuesday Market Minute

  • Global stocks pause amid a worrying rise in coronavirus infections that looks to offset a stellar U.S. earnings season and improving vaccine rollouts in Europe.
  • India records its highest death toll on record Tuesday as Asia becomes engulfed in a fourth wave of infections and Japan contemplates fresh lockdown orders.
  • Benchmark 10-year note yields rise past 1.6% in overnight trading while the dollar languishes at a seven-week low against a basket of its global peers.
  • CDC data shows 85.4 million Americans have now been fully vaccinated against the coronavirus, with around 211.5 million doses administered as of Monday.
  • S&P 500 earnings are set to grow 31% over the first quarter, with 79 companies, including IBM, Netflix, Johnson & Johnson, Honeywell and AT&T set to report this week.
  • Apple's 'Spring Loaded' product launch begins later today in Cupertino, California with analysts focused on new designs for the iPad and iMac.
  • U.S. equity futures suggest a modestly lower open on Wall Street following quarterly earnings from Johnson & Johnson, Procter & Gamble and Lockheed Martin and ahead of Netflix after the close of trading.

U.S. equity futures edged lower Tuesday, while the dollar extended its recent slump and Treasury yields moved higher, as investors continued to weigh the impact of accelerating COIVD infections against a standout corporate earnings season.

More than fifteen months in to a global pandemic that has killed more than 3.1 million people, new infections are on the rise in Asia and South America at a startling pace, with India recording the highest death toll on record and Brazil struggling to cope with a daily caseload of more than 3,000 new infections. 

The latest virus wave is pressuring both global growth forecasts and energy demand bets, while at the same time sapping investor optimism despite an accelerating vaccine rollout in the United States and improving distributions in Europe. It's also marking a sharp contrast to the stronger-than-expected first quarter earnings season and the run of record highs for stock benchmarks around the world. 

Several bluechips will report March quarter earnings this morning, in fact, including Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report, Procter & Gamble  (PG) - Get Procter & Gamble Company Report and Lockheed Martin  (LMT) - Get Lockheed Martin Corporation Report, with Netflix  (NFLX) - Get Netflix, Inc. Reportset to update on its performance after the close of trading as it unofficially kicks off the tech reporting season.

However, with benchmark 10-year note yields creeping past 1.62% in overnight trading and the dollar languishing at a seven-week against a basket of its global peers on foreign exchange markets, stocks are unlikely to find breakout direction heading into the opening bell.

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Futures contracts tied to the Dow Jones Industrial Average suggest a 135 point decline, while those linked to the S&P 500 are priced for a 15 point pullback. 

Kansas City Southern  (KSU) - Get Kansas City Southern Report shares were a notable pre-market mover, soaring 16% to $297.00 each after Canadian National  (CNI) - Get Canadian National Railway Company Report offered $30 billion for the network operator as it swoops in to top an agreed takeover by rival Canadian Pacific  (CP) - Get Canadian Pacific Kansas City Limited Report.

Nasdaq Composite futures suggest a 30 point dip, as well, despite a solid 2.8% upside move for IBM  (IBM) - Get International Business Machines Corporation Report after it reported stronger-than-expected March quarter revenues of $17.73 billion, powered by a 21% jump in cloud sales. 

Apple  (AAPL) - Get Apple Inc. Report shares will also be in focus Tuesday as the world's biggest tech company hosts a product launch -- Spring Loaded -- later today that is expected to focus on iPads and iMacs.

Overnight in Europe, stocks peeled away from this week's all-time highs as the euro bumped past 1.20 against a weakened greenback, and tobacco stocks such as British American Tobacco  (BTI) - Get British American Tobacco plc Report and Imperial Brands tumbled amid reports that President Joe Biden's administration is planning a crackdown on nicotine levels in cigarettes sold in the United States.

In Asia, rising infections and the threat of fresh lockdown orders from Tokyo kept stocks in check, with the Nikkei 225 falling 1.97% on the session to close at 29,100.38 points.

Oil prices were on the march, however, as a weaker dollar and the declaration of force majeure on some deliveries from Libya offset concerns for energy demand levels heading into the summer months, with WTI crude for June rising past $64 a barrel and Brent contracts for the same month jumping 65 cents to $67.70 per barrel.