Here are five things you must know for Thursday, March 17:
1. -- Stock Futures Move Lower As Market Retrench From Hawkish Fed
U.S. equity futures edged lower Thursday, while the dollar gave away ground to its global currency peers and a key market volatility gauge slipped further into the red, as investors retrenched following yesterday's hawkish Federal Reserve rate decision while tracking developments in the war on Ukraine.
Progress in peace talks remains hopeful on paper, but elusive on the ground following the shelling of a theatre sheltering civilians in the city of Mariupol overnight, as well as reports of further casualties in the northern city of Chernihiv by Russian forces as fighting enters its fourth week.
Ukraine’s president Volodymyr Zelenskiy addressed Germany's Bundedstag Thursday, following a speech to a joint session of Congress yesterday, and repeated his call for a halt to the assault of Mariupol, comparing it to the blockade of Leningrad during the Second World War.
Still, with the Fed hike behind it, a pledge from Chinese authorities to prop-up its Covid hit economy with extraordinary stimulus and a stalled Russian advance hopefully leading to a peaceful conclusion of the conflict, markets appear more calm heading into the start of trading Thursday
Benchmark 10-year Treasury note yields, which spiked to 2.215% in the wake of yesterday's Fed move, eased to 2.13% in overnight trading while the dollar index, which tracks the greenback against a basket of six global currencies, fell 0.35% to 98.282.
Oil prices leaped higher, however, following a warning from the International Energy Agency, a Paris-based think-tank, that global markets could see a 3 million barrel per day shortfall from sanctions on Russian crude.
WTI futures for April delivery rose $3.75 to $98.76 in overnight trading while Brent contracts for May were last seen $3.78 higher at $101.81 per barrel.
Futures futures contracts linked to the Dow Jones Industrial Average are indicating a 155 point opening bell dip while those linked to the S&P 500 are priced for a 22 point move to the downside.
The tech-focused Nasdaq Composite is called 85 points lower as benchmark 2-year Treasury note yields hold at $1.935% in overnight trading.
2. -- Fed Kicks-Off Tightening Cycle With First Hike Since 2018
The Federal Reserve unveiled its first rate hike since 2018 Wednesday, and said the economy was strong enough to withstand another six more as it vowed to tame the hottest domestic inflation in more than four decades.
The Fed's so-called 'dot plots', a term used to describe the interest rate projections of the Fed's Open Markets Committee, suggest a Fed Funds rate of around 1.9% by the of this year, suggesting consecutive rate hikes until December, and 2.8% in 2023 and 2024, even as they expect inflation to moderate heading into the start of next year.
The Fed also punted on winding down its $8.9 trillion balance sheet, but said its should have a plan finalized by its next meeting in May.
"The Fed’s policy statement and dot plot were relatively hawkish," said Bill Adams, chief economist at Comerica Bank in Toledo, Ohio. "The Fed statement removed language about the pandemic determining the course of the recovery, replacing it with a paragraph about the impact of the Russia-Ukraine war on the U.S. economy; the Fed sees the war as likely to increase inflation and slow economic growth."
However, the Fed's clear emphasis on fighting inflation over protecting growth has a key recession indicator -- the yield gap between 2-year and 10-year Treasury note yields -- flashing red, with only a 20 basis point difference between the two benchmarks. Should 2 year yields rise above 10-year yields, investors will begin to seriously worry about a near-term contraction in the world's largest economy.
3. -- Occidental Shares Extend Gains As Buffett Builds Bigger Stake
Occidental Petroleum (OXY) shares were a rare standout gainer in pre-market trading after billionaire investor Warren Buffett added to his stake in the oil major following the exit of activist Carl Icahn.
Buffett's Berkshire Hathaway investment group filed papers with the Securities and Exchange Commission indicating it owed 136.37 million shares of Occidental as of March 16, following purchases of around $985 million worth of stock between March 14 and March 16.
The move should boost Buffett's overall stake in Occidental to around 13.4%, following purchases earlier this month in the wake of Icahn's exit following three years of investment in the group.
Occidental shares were marked 2.9% higher in pre-market trading to indicate an opening bell price of $54.37 each.
4. -- FedEx Shares Edge Higher Ahead of Q3 Earnings Report
FedEx (FDX) shares edged higher in pre-market trading ahead of the package delivery giant's third quarter earnings report after the close of trading.
FedEx is expected to post a 9% increase in overall revenues for the three months ending in February, the group's fiscal third quarter, with an overall top line of $23.44 billion. Earnings are also expected to rise by more than a third to around $4.64 per share, as package volumes increase amid the easing of Covid restrictions in key markets around the world.
Higher fuel and wage costs, however, are likely to pressure both third quarter margins and the group's near-term outlook, although pricing power remains strong. Staff shortages in FedEx's Express segment, linked to Covid-related absences, may also come through in the group's third quarter bottom line.
FedEx shares were marked 0.5% higher in pre-market trading to indicate an opening bell price of $226.96 each.
5. -- GameStop Earnings On Deck, Retail At The Ready
GameStop (GME) shares edged lower ahead of its fourth quarter earnings after the close of trading, with investors looking for long-awaited details underpinning the video game retailer's turnaround plan.
GameStop, one of the original 'meme stock' stars that was once valued at $23 billion during last year's retail-driven frenzy, closed with a market cap of $6.6 billion last night and continues to post money-losing quarters.
Despite raising $1.7 billion from new stock sales, generating $1.3 billion in revenues over the three months ending in October, hiring a new executive team -- and putting a star digital company chairman, Ryan Cohen, in place -- GameStop is still on pace to lose between $1.00 and $1.54 per share over its 2021 financial year, which ends in January. Analysts are expecting a 4.4% increase in overall revenues, taking the total to $2.215 billion.
As a result, short interest in GameStop remains notably elevated, according to recent data from Ortex, with combined bets against the group representing around 21% of the stock's outstanding float.
GameStop shares were marked 0.65% lower in pre-market trading to indicate an opening bell price of $86.30 each.
