The Wednesday Market Minute
- Global stocks dip, following last night's record closes on Wall Street, as investors regroup for another wave of earnings on Wall Street.
- A muted outlook from chipmaker Texas Instruments holds down tech stocks in Asia, while concerns over a pause in stimulus from Beijing clips markets for a second consecutive session in China.
- European stocks drift lower amid a heavy regional earnings calendar, with auto sector weakness this morning's profit outlook cut from Nissan.
- Global oil prices ease after the IEA says markets have "comfortable" spare capacity to fill any supply gap from Iran sanctions, with Energy Department data on U.S. stockpiles reporting later today.
- U.S. equity futures suggest modest declines on Wall Street ahead of earnings from Dow components Boeing, AT&T, Caterpillar and Visa, with Microsoft, Facebook and Tesla following after the close of trading later today.
Global stocks slipped lower Tuesday, following record highs on Wall Street, as investors paused ahead of another wave of corporate profits that could cement the case for a much stronger-than-expected first quarter earnings season and further gains for domestic equity markets.
Several bluechip U.S. companies topped earnings expectations Tuesday, with many of the same names issuing improved profit guidance for the months ahead, helping lift the S&P 500 to an all-time closing high of 2,940.91 points as investors cheered both the strength of corporate America and the broader domestic economy.
That sentiment failed to bleed through into the Asia session, however, as chipmaker Texas Instruments (TXN - Get Report) cautioned after the bell that the much-anticipated second half revival in global semiconductor demand may be delayed until early 2020.
The guarded comments hit stocks in Asia, with Samsung Electronics, the world's biggest chipmaker, leading South Korea with a 2.1% decline and concerns over slowing stimulus in China clipping stocks in Shanghai for a second consecutive session. Japan's Nikkei 225 also ended the day 0.27 lower at 22,200.00 points following a downgraded profit forecast from Nissan Motor Co. (NSANY) .
U.S. stocks are also expected to open modestly lower, according to early equity futures prices, but much of the day's direction will depend on before-the-bell earnings from Dow components Boeing (BA - Get Report) , Caterpillar (CAT - Get Report) , AT&T (T - Get Report) and Visa (V - Get Report) , as well as big-ticket stocks such as Northrup Grumman (NOC) .
Prior to today's heavy earnings slate, contracts tied to the Dow Jones Industrial Average are indicating a 30 point decline while those linked to the S&P 500 are guiding for 2.68 point pullback for the broader benchmark. The Nasdaq Composite, which also closed at an all-time high of 8,120.82 points, is priced for an 8.5 point decline thanks in part to a 2% pre-market slide for Texas Instruments.
European stocks were also weaker at the start of trading Wednesday, with the Stoxx 600 falling 0.1%, with auto stocks leading to the downside following Nissan's bearish outlook, and Britain's FTSE 100 seeing a similar percentage decline.
Regional tech stocks, however, hit a near one-year high after Germany's SAP SE (SAP - Get Report) , however, surged 6.5% to a record high €103.90 each after the software group said it would expand its operating margin targets by at least 5 percentage points by 2023, a move that offset the Oracle (ORCL - Get Report) rival''s first quarter loss.
STMicroelectronics STM was also on the move, rising 2.8% in Milan after it said it would cut costs to offset slowing global chip demand.
Broader market sentiment, however, may find support from the fact that both U.S. Trade Representative Robert Lighthizer, as well as Treasury Secretary Steven Mnuchin, will return to Beijing next week to re-start talks on a trade deal that has remained elusive since the self-imposed March 2 deadline came and went without a major breakthrough.
White House Economic Adviser Larry Kudlow told reporters at the National Press Club in Washington yesterday that he was "cautiously optimistic", noting the U.S. has come "further and deeper, broader, larger-scale than anything in the history of U.S.-China trade."
Government bond markets, too, are flashing signals that should support domestic stocks, with the spread between 2-year and 10-year note yields rising to 21 basis points, the largest gap of the year so far, thanks in part to strong demand for short-dated paper amid this week's $237 billion auction schedule from the Treasury.
The Atlanta Federal Reserve's GDPNow forecasting tool, a real-time tracker of economic performance, suggests a second quarter GDP growth rate of 2.8%.
Global oil prices eased modestly overnight, pulling U.S. crude from six month highs, following a statement from the International Energy Agency that suggested world markets were "adequately supplied" with "comfortable" levels of spare capacity to fill any gap that would result from sanctions on the sale of Iranian crude.
The U.S. Energy Department will publish data on domestic crude stocks later today, after a private reading from the American Petroleum Institute showed a larger-than-expected build of 6.9 million barrels over the week ending April 19.
Brent crude contracts for June delivery, the global benchmark for oil prices, were marked 29 cents lower from their Tuesday close in New York and changing hands at $74.22 per barrel while WTI contracts for the same month were seen 34 cents lower at $65.96 per barrel.