The Wednesday Market Minute
- Global stocks slide as oil prices tumble and investors focus on the economic impact of the coronavirus pandemic.
- The IEA has forecast the steepest one-year fall in global oil demand on record, pulling U.S. crude below $20 a barrel.
- U.S. March retail sales data post the biggest decline on record, while earnings at home and in Europe are likely to fall by double-digit percentages this quarter and next.
- Fund mangers are holding onto the largest cash positions since 9.11 and the weakest equity allocations since 2009.
- U.S. equity futures suggest a weaker open on Wall Street ahead of earnings from Citigroup, Goldman Sachs and UnitedHealth and March retail sales data at 8:30 am Eastern time.
U.S. equity futures slumped lower Wednesday, while global oil prices plunged and the dollar added gains, as investors braced for another series of grim economic data releases and extended lockdown orders amid the coronavirus pandemic.
Oil prices, in fact, spurred the overnight declines after the Paris-based International Energy Agency forecast the biggest annual decline in global crude demand on record, with overall levels matching those last seen in 1995.
The gloomy assessment, which follows the biggest agreement on OPEC production cuts in history, hammered crude prices and energy stocks during European trading and comes just two days ahead of China GDP data that is expected to show the steepest first quarter contraction -- of around 6.5% -- for the world's second largest economy since records began.
In the U.S, March retail sales plunged a record 8.7% from last year as some 90% of the economy remains under lockdown since the outbreak escalated in the second half of last month. The Commerce Department started tracking retail sales in 1992.
In fact, the collective data from the coronavirus pandemic, which as killed more than 125,000 people and infected nearly 2 million more in just three months, has the biggest and most influential fund mangers holding ash positions at levels last seen during the terrorist attacks of 9/11. and the lowest allocations to global equities since March of 2009, according to the closely-watch monthly survey from Bank of America.
That concern was partly echoed yesterday by gloomy near-term outlooks from JPMorgan Chase (JPM) - Get Report and Wells Fargo (WFC) - Get Report, both of which missed analysts' forecasts for first quarter earnings and cautioned that "unprecedented times" lay ahead.
All that said, Wall Street has fared well over the past few weeks, with the Dow Jones Industrial Average rising around 26% from its March 23 lows as the Federal Reserve injections trillions into both the financial system and the real economy and Congress added a further $2.3 trillion in coronavirus relief.
Gains will be tough to extend Wednesday, however, with contracts tied to the Dow indicating a 500 point opening bell decline and those linked to the S&P 500 guiding to a 65 point pullback for the broader benchmark.
Citigroup (C) - Get Report, Goldman Sachs (GS) - Get Report and UnitedHealth Group (UNH) - Get Report continued the first quarter reporting season today, with analysts expecting S&P 500 earnings to decline 9% from the same period last year, according to Refinitv estimates, to a share-weighted $285.5 billion.
UnitedHealth and Citigroup both managed to beat Street forecasts, while Goldman missed on its bottom line as loan loss provisions tripled from last year.
The bottom line for America's biggest companies is then set to slump another 20.7% over the second quarter amid the bulk of stay-at-home orders and shutdowns across the world's biggest economy.
Global oil prices slumped lower, as well, after the IEA's 2020 forecast, which noted that there is "no feasible agreement that could cut supply by enough to offset such near-term demand losses" even as it described OPEC's production cut agreement as a "solid start."
Brent crude futures contracts for June delivery, the benchmark reference for around 60% of global crude purchases, slumped $1.05 from their Tuesday closing price in New York to change hands at $28.55per barrel in early European trading.
WTI crude futures for May delivery, which are more tightly connected to domestic gas prices, were marked 58 cents lower at $19.53 per barrel.
The oil price move pulled European stocks into the red, with the Stoxx 600 benchmark sliding 2.1% and Britain's FTSE 100 falling 2.35% as energy stocks retreated and tech stocks weakened following a weaker-than-expected first quarter earnings report from chipmaker ASML NV.
Overnight in Asia, the People's Bank of China cut a key interest rate to the lowest level on record, and eased funding requirements for the nation's lenders, as officials step up their attempt to support the world's second-largest economy.
The MSCI ex-Japan benchmark fell 0.45% heading into the final hours of trading while Japan's Nikkei 225 slipped 0.45% lower to end the session at 19,550.09 points.