The Thursday Market Minute

  • Wall Street futures extend declines after sharp downgrades for European and UK growth forecasts and weakening U.S. profit outlooks.
  • SunTrust and BB&T unveiled a $66 billion all-stock merger that creates the sixth largest U.S. bank.
  • Prime Minister Theresa May met with EU leaders in Brussels for one last attempt to save her defeated Brexit agreement, while the Bank of England held rates steady at 0.75%.
  • Oil prices retreat as rising U.S. supplies and record production offset OPEC supply cuts and the impact of sanctions on the sale of Venezuelan crude.
  • U.S. corporate profits are expected to grow by only 0.3% in the first quarter of 2019, raising the prospect of a so-called earnings recession as the impact of tax cuts fades and global growth stalls.
  • U.S. equity futures suggest a 150 point pullback on Wall Street following earnings from T-Mobile U.S., Twitter and Yum! Brands.

Market Snapshot

Wall Street futures extended declines Thursday after the European Commission and the Bank of England slashed their 2019 growth forecasts and investors focused on weakening profit forecasts in the United States as the earnings season draws to a close.

U.S. stocks look set to open weaker, despite a $66 billion merger between regional banks SunTrust (STI) and BB&T (BBT) ,  with contracts tied to the Dow Jones Industrial Average indicating a 152 point pullback and those linked to the broader S&P 500 suggesting an 18 point decline ahead of weekly jobless data and following December quarter earnings from T-Mobile U.S. (MUS)  and Yum! Brands (YUM)  .

Twitter Inc. (TWTR) posted stronger-than-expected fourth quarter earnings Thursday as the micro-blogging website held user growth but said expenses would rise notably this year as it moved to protect the integrity of its platform.

Twitter shares were marked 7.5% lower in pre-market trading following the earnings release, indicating an opening bell price of $31.60 each, a move that extends the stock's three month decline to around 9.7%.

SunTrust and BB&T Corp unveiled a $66 billion all-stock merger Thursday that would create the sixth biggest bank in the United States. SunTrust said the deal would create a company with $442 billion in assets, as well as $324 billion in deposits with a customer base of around 10 million American household.

The all-stock deal will seen SunTrust investors receiving 1.295 shares of BB&T for each stock they own, as well as a 5% increased in their dividend, with BB&T owning 57% of the combined group's $28.24 billion in equity to 43% for SunTrust.

The fourth quarter earnings season has largely surprised to the upside, with profits expected to rise by around 15.8%, according to Refiniitv data, with around 75% of the S&P 500 reporting so far. However, with 2019 forecasts coming in weaker-than-expected, thanks in part to slowing economic growth and the still-to-be-agreed trade deal with China, first quarter earnings growth is currently pegged at just 0.3%, suggesting the prospect of so-called earnings recession -- where profits shrink for two consecutive quarters -- could now be in the market's cross-hairs.

The declines on Wall Street, however, were more linked to downbeat assessments in Europe, where Germany's industrial production fell 0.4% over the final month of the year and the European Commission said it sees broader Eurozone growth to slow to 1.3% in 2019, down from a prior forecast of 1.9% as currency area inflation eases to 1.4%, well shy of the European Central Bank's 'just below 2%' price stability target.

The Bank of England followed suit, cutting its 2019 forecast to 1.2% as it held rates steady at 0.75% amid the conflicting dynamics of slowing domestic and global growth but rising wage and inflation pressures.

Global oil prices were also drifting into the red in overnight trading, as a stronger U.S. dollar and yesterday's reading from the Energy Information Administration, which showed a 1.2 million barrel increase in domestic crude stocks and a record production rate of 11.9 million barrels per day, offset concerns over OPEC supply cuts and sanctions on the sale of Venezuelan crude.

Brent crude contracts for April delivery, the global benchmark, were marked 45 cents lower from their Tuesday close in New York and changing hands at $62.24 per barrel while WTI contracts for March were seen 64 cents lower at $53.37 per barrel.

Overnight in Asia, with no new headline drivers to push stocks in either direction overnight, apart from confirmation that Treasury Secretary Steven Mnuchin will travel to Beijing next week to re-start trade talks with China, and many markets closed for Lunar New Year celebrations, the region-wide MSCI ex-Japan index slipped 0.09% from its four month high in quiet trading.

Japan's Nikkei fell 0.6% in Tokyo to close at 20,751.28 points despite strong gains for SoftBank Corp. (SFTBY) following yesterday's after-the-bell earnings.