Five things you need to know before the market opens on Tuesday March 7:
1. -- Stock Futures Edge Higher With Fed In Focus
U.S. equity futures edged modestly higher Tuesday, while the dollar built gains against its global peers and Treasury bond yields steadied, as investors held firm ahead of Federal Reserve Chairman Jerome Powell's first of two appearances on Capitol Hill this week.
Stocks are looking to extend a three-day winning streak from Powell's testimony to the Senate Banking Committee as investors continue to bet that markets will remain resilient, powered in part by consumer spending, through the tail-end of the Fed's tightening cycle.
Morgan Stanley's Michael Wilson, who recently warned that the S&P 500 could face a 26% drawdown into the month of March as the Fed consolidates its interest rate tightening and corporate earnings slide into recession, now suggests stocks could rally for at least a few more weeks.
At present, the CME Group's FedWatch sees rates topping out at between 5.5% and 5.75% by late June, a level that suggests at least four more 25 basis point rate hikes, and holding there until at least early next year.
Markets were largely sanguine in overnight trading, with the U.S. dollar index bumping 0.05% higher against a basket of its global peers to around 104.44 while benchmark 10-year Treasury note yields held at 3.936%.
Global oil prices edged lower, but only slightly, following trade data from China showing a 1.3% year-on-year decline in crude imports. WTI crude futures for April delivery fell 16 cents to $80.30 per barrel when Brent contracts for May slipped 18 cents to $86.00 per barell.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 were indicating an 8 point opening bell gain ahead of Redbook retail sales figures at 8:55 am Eastern time while those linked to the Dow Jones Industrial Average were indicating a 40 point gain. The tech-focused Nasdaq is looking at a 46 point bump.
In overseas markets, Europe's Stoxx 600 rose 0.17% in early Frankfurt trading while Britain's FTSE 100 was marked 0.22% higher in London.
Overnight in Asia, the region-wide MSCI ex-Japan index fell 0.29% following softer-than-expected China trade data for the months of January and February while the Nikkei 225 ended 0.25% higher in Tokyo.
2. -- Mr. Powell Goes To Washington
Federal Reserve Chairman Jerome Powell will face lawmakers on the Senate Banking Committee Tuesday in the first of two appearances on Capitol Hill this week focus on the effect of the central bank's monetary policies on the domestic economy.
Powell, who is set to deliver the Fed's 'Semiannual Monetary Policy Report’ before the Senate Banking Committee at 10:00 am Eastern time, is likely to face questions regarding his comments earlier this year that the process of "disinflation" had already begun, thanks in part to the Fed's aggressive 2022 rate hike cycle, and would continue despite a robust job market and resilient economy.
Markets, however, are expected to key on any comments from the Fed Chair regarding the central bank's policy path, which at present calls for at least three more rates between now and June, and could include an acceleration of bond sales from the Fed's $8 trillion balance sheet if inflation pressures remain elevated over the coming months. "He may try to elaborate on remarks made on 1 February that the broad disinflation process has started, but with inflation proving sticky (not just in the US, but around the world), consumption and employment trends staying firm and risk assets supported, it would seem unlikely he chooses to push the 'all-clear' inflation narrative today," said ING markets strategist Chris Turner.
Powell is also set to appear before the House Financial Services Committee on Tuesday.
3. -- Meta Making More Job Cuts
Meta Platforms (META) shares jumped higher in pre-market trading following a Bloomberg report that the tech and social media group is planning a fresh round of layoffs that could begin as early as this week.
Bloomberg said the reductions will add to the 11,000 job cuts unveiled by Meta late last year as part of a major effort on cost controls and "flattening" management structures from CEO Mark Zuckerberg.
The current round of job cuts, Bloomberg said, would this time be driven by the group's financial targets, some of which were unveiled on February 1, when it posted softer-than-expected fourth quarter earnings of $1.76 per share thanks in part to a $4.2 billion charge linked to last year's layoffs and office closures.
Meta also pledged to lower operating expenses by around $6.5 billion -- still expected at between $89 billion and $95 billion -- amid what CEO Mark Zuckerberg called a 'year of efficiency'.
Capital spending, as well, is expected to fall $4.5 billion from last year to between $30 billion and $33 billion as Meta looks to redesign some of its data centers to become more efficient as Zuckerberg transitions from a company leader focused on growth -- at times at any cost -- to one seeking to instill cost discipline and maturity across the whole of its business.
Meta shares were marked 1.6% higher in pre-market trading to indicate an opening bell price of $187.83 each.
4. -- Time's Up For TikTok?
Lawmakers are slated to unveil new legislation Tuesday that would seek to ban China's ByteDance, the owner of the world's most popular social media app TikTok, from operating in the United States.
Republican Senator John Thune, as well as Democrat Mark Warner, are set to present the "Restricting the Emergence of Security Threats that Risk Information and Communications Technology Act", which they call RESTRICT, to lawmakers on Capitol Hill as scrutiny of the app, which is used by around 100 million Americans, continues to intensify.
ByteDance was told to divest TikTok's U.S. operations in 2020 following a ruling from the U.S. government's Committee on Foreign Investment in the United States, better known as CFIUS, but has been locked in negotiations on data protection ever since.
“China is investing in economic areas, they have $500 billion in intellectual property theft, and we are in a competition not just on a national security basis, [but] on a technology basis,” Senator Warner told Fox News Monday. “We’ve got to make the kind of investments to stay ahead, and I think we’re starting that in a bipartisan way.”.
5. -- Tokyo, We Have A Problem
Japan's fledgling space program took a big hit Tuesday when its new medium-lift rocket, the first in three decades, failed to fully ignite during its much-hyped space flight and was destroyed by engineers only minutes after its launch.
The H3 rocket, designed to compete with Elon Musk's SpaceX, was launched by the Japan Aerospace Exploration Agency (JAXA) early Tuesday at the Tanegashima space port , following an aborted attempt last month, with a payload that included satellite technology used to monitor North Korean ballistic missile launches.
However, when a second-stage engine failed to fire upon breaching the earth's atmosphere, the mission was abandoned.
“This is extremely regrettable, and we apologize for not meeting the expectations of the public,” Science and Technology Minister Nagaoka said in a statement following the mission's failure. “We’ll work with the relevant organizations to promptly determine the cause and take steps.”
