U.S. equity futures slumped Monday and oil prices collapsed to 20-year lows as investors prepped for a busy slate of corporate earnings and lawmakers debated the ways in which the U.S. economy could be reopened in the coming weeks.
Around 90 S&P 500 companies are expected to report quarterly earnings this week, with Refinitiv estimates suggesting first-quarter profits for the benchmark will fall 13% from the same period last year and another 27.3% over the three months ending in June.
With the coronavirus crisis claiming more than 21 million U.S. jobs over the past four weeks alone, and industrial output data, retail sales and housing starts all falling to multi-year and all-time lows, investors have been running the grim calculus of the pandemic’s economic cost heading into this week’s trading session, and perhaps securing some profits given the 15.5% gain the S&P 500 has booked over the past two weeks - and the first back-to-back weekly gains since February.
That calculation, however, has largely fallen on prices in global oil markets, where U.S. crude has plunged more than 20% in the overnight session to just $14.12 per barrel, the lowest in at least 20 years and a move that marks a staggering 77.5% collapse since the start of the year.
Morning Bell With Jim Cramer: Spotting Market Rotation
TheStreet Founder Jim Cramer shares his thoughts about market rotations, the CPI, and Cathie Wood's ARK Innovation ETF.
U.S. equity futures, however, are also set to start the week with a bearish tone, although speculation that U.S. lawmakers are close to a deal that would provide an extra $500 billion in small business support put a floor under the overnight declines.
"A lot of good work has been going on,” President Donald Trump told reporters in Washington Sunday. “We could have an answer tomorrow."
Futures contracts tied to the Dow Jones Industrial Average indicated a 315-point opening bell decline and those linked to the S&P 500, which has gained 11.22% for the month to date, suggest a 33-point decline for the broader benchmark.
Fewer answers, however, are expected with regards to the reopening of the U.S. economy, which remains almost entirely under "stay-at-home" orders from state governors as infections rise past the 750,000 mark and deaths top 40,000.
Weekend protests against the orders in Colorado and Washington state followed similar demonstrations in Texas, Michigan and Wisconsin and have raised the stakes of the debate as to when - and how - Americans can safely return to work following broad guidelines from President Trump last week.
"These orders actually are the law of these states," said Washington Gov. Jay Inslee. "To have an American president encourage people to violate the law, I can't remember any time during my time in America where we have seen such a thing."
As the U.S. debate on reopening rages, Germany is gingerly allowing some small businesses to resume trading after a month-long lockdown, while Britain is likely to keep its extended restrictions in place for at least another month, with Culture Secretary Oliver Dowden noting that "the worst thing we could possibly do would be to prematurely ease the restrictions, and then find a second peak and have to go right back to square one again, potentially with even more draconian measures.”
European stocks were mostly mixed, however, at the start of the weekly session with the Stoxx 600 rising 0.18% in Frankfurt and the FTSE 100 falling 0.08% in London as oil and energy stocks held down benchmarks around the region.
Overnight in Asia, yet another interest rate cut from the People’s Bank of China boosted stocks in the world’s second-largest economy, with the Shanghai Composite rising 0.5%, but larger declines around the region pulled the MSCI ex-Japan benchmark 0.5% lower heading into the close of trading. Japan’s Nikkei 225 fell 1.15% to close at 19,669.12 points as risk-averse traders lifted the yen to 107.73 against a modestly weaker U.S. dollar.