June S&P 500 futures (ESM23) are down -0.22%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.23% this morning after three major U.S. benchmark indices finished the regular session lower as a swathe of weak U.S. economic data heightened worries that the Federal Reserve’s rate hiking campaign might trigger a deep recession.
In Tuesday’s trading session, economically sensitive industrial stocks were the biggest drag on the market, with the sector’s bellwether, Caterpillar Inc (CAT), plunging over -5%. Financials also weighed on the broader market, pressured by a drop in bank stocks after JPMorgan Chase & Co (JPM) CEO Jamie Dimon warned in a letter to shareholders that the U.S. banking crisis is not over yet and that its impact will be felt ‘for years to come.’ In addition, energy stocks retreated, giving up some of Monday's gains as investor attention shifted to the impact of slowing global economic growth on crude demand.
Data on Tuesday showed U.S. JOLTs job openings dropped to a 1-3/4 year low of 9.931M in February, weaker than expectations of 10.400M, pointing to continued cooling in the resilient labor market. Other data showed U.S. Factory Orders fell for a second straight month to -0.7% m/m in February, weaker than expectations of -0.5% m/m.
“The number of job openings has decreased, which makes people worry that hiring is going too slow, and that will be bad for the economy. That feeds into recessionary fears,” said Sal Bruno, Chief Investment Officer at IndexIQ.
Federal Reserve Bank of Cleveland President Loretta Mester said Tuesday that policymakers should move their benchmark rate above 5% as inflation remains too high and stubborn.
Meanwhile, U.S. rate futures have priced in a 56.9% chance of no hike and a 43.1% chance of a 25 basis point rate increase at the May meeting.
Today, all eyes are focused on the U.S. ISM Non-Manufacturing PMI in a couple of hours. Economists, on average, forecast that March ISM Non-Manufacturing PMI will come in at 54.5, compared to the previous value of 55.1.
Also, investors will likely focus on the U.S. ADP Nonfarm Employment Change data, which stood at 242K in February. Economists foresee the new figure to be 200K.
U.S. S&P Global Composite PMI will be reported today. Economists foresee this figure to stand at 53.3 in March, compared to February’s value of 50.1.
U.S. Trade Balance data will come in today. Economists expect February’s figure to be -69.00B, compared to the previous number of -68.30B.
U.S. Services PMI will also be closely watched today. Economists forecast Services PMI to be 53.8 in March, compared to 50.6 in February.
U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -2.329M, compared to last week’s value of -7.489M.
In the bond markets, United States 10-Year rates are at 3.365%, up +0.83%.
The Euro Stoxx 50 futures are down -0.33% this morning as investors remain uncertain about the economic outlook. Meanwhile, the region’s banking stocks fell as market participants digested UBS’ first shareholder meeting since its contentious takeover of Credit Suisse. On the positive side, the German factory orders rose +4.8% m/m in February, stronger than expectations of +0.3% m/m, driven by strong growth in the vehicle construction sector. Also, Eurozone S&P Global Composite PMI climbed to a 10-month high of 53.7 in March from 52.0 in February, mainly reflecting strong growth across the service sector. In corporate news, Sodexo (SW.FP) jumped over +10% after the French catering and food services group announced plans to spin off and list its Benefits & Rewards Services business in 2024.
Spain’s Services PMI, Italy’s Services PMI, France’s S&P Global Composite PMI, France’s Services PMI, Germany’s Composite PMI, Germany’s Services PMI, Eurozone’s S&P Global Composite PMI, Eurozone’s Services PMI, U.K’s Composite PMI, and U.K’s Services PMI were also released today.
The Spanish March Services PMI came in at 59.4, stronger than expectations of 57.5.
The Italian March Services PMI was at 55.7, stronger than expectations of 53.2.
The French March S&P Global Composite PMI stood at 52.7, weaker than expectations of 54.0.
The French March Services PMI was at 53.9, weaker than expectations of 55.5.
The German March Composite PMI has been reported at 52.6, in line with expectations.
The German March Services PMI came in at 53.7, weaker than expectations of 53.9.
Eurozone March S&P Global Composite PMI stood at 53.7, weaker than expectations of 54.1.
Eurozone March Services PMI was at 55.0, weaker than expectations of 55.6.
U.K. March Composite PMI has been reported at 52.2, in line with expectations.
U.K. March Services PMI came in at 52.9, stronger than expectations of 52.8.
Asian stock markets today settled in the red. Japan’s Nikkei 225 Stock Index (NIK) closed down -1.68%, while the Chinese market was closed for a holiday.
Japan’s Nikkei 225 Stock Index today closed sharply lower, snapping a three-day winning streak and slipping below the psychological 28,000 mark for the first time this month as worries of a U.S. recession hit energy stocks. Also, the strengthening yen weighed on export-oriented stocks as the Japanese currency saw increased safe-haven demand amid growing fears of a global economic slowdown. On the economic front, data on Wednesday showed that Japanese services activity grew at its fastest pace in more than nine years in March. Meanwhile, Panasonic Holdings Corp rose about +2% after the Wall Street Journal reported that it was in talks with Stellantis and BMW over new electric-vehicle battery plants. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 3.10% to 16.55.
The Japanese March Services PMI stood at 55.0, stronger than expectations of 54.2.
Pre-Market U.S. Stock Movers
Kura Sushi USA Inc (KRUS) soared over +7% in pre-market trading after the company reported better-than-expected Q2 results and backed its FY23 revenue guidance.
InflaRx N.V. (IFRX) climbed more than +10% in pre-market trading, extending yesterday’s gains after the company received an FDA EUA approval for its COVID-19 treatment for critically ill patients.
Johnson & Johnson (JNJ) rose about +3% in pre-market trading after the company announced that its subsidiary LTL Management LLC had re-filed for voluntary Chapter 11 bankruptcy protection to obtain approval for a reorganization plan. In addition, LTL said it would pay $8.9B over 25 years to resolve all current and future talc claims.
Smart Global Holdings Inc (SGH) fell about -2% in pre-market trading after the company reported mixed Q2 results and posted weaker-than-expected Q3 revenue guidance.
Bloom Energy Corp (BE) dropped over -2% in pre-market trading after Raymond James downgraded the stock to outperform from strong buy.
Cigna Corp (CI) gained about +1% in pre-market trading after Raymond James upgraded the stock to strong buy from outperform.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - April 5th
ConAgra Foods (CAG), Sodexo PK (SDXAY), Simply Good Foods (SMPL), Ermenegildo Zegna NV (ZGN), Seadrill Ltd (SDRL), Tilray (TLRY), Chase (CCF), Simulations Plus (SLP), Schnitzer (SCHN), Richardson Electronics (RELL).
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