Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Street
The Street
Business
Martin Baccardax

Stocks Slump on China Covid, Rate Worries, Twitter May Talk to Musk, Tesla, AT&T and Week Ahead In Focus - 5 Things To Know

Here are five things you must know for Monday, April 25:

1. -- Stock Futures  Slump On China Covid Worries, Fed Rate Bets

U.S. equity futures slumped lower Monday, while the dollar soared and oil prices retreated sharply, as investors pulled back from risk markets amid a renewal of Covid restrictions in China and concerns over the impact on consumer demand from the Federal Reserve's hawkish inflation stance. 

Officials in China ordered millions of residents in the capital of Beijing for mandatory testing over the weekend as infections spread deeply into the city of 20 million amid the country's ongoing Coivd resurgence. In Shanghai, city officials tightened their lockdown rules as restrictions headed into a fourth week in China's biggest metropolitan area.

Stocks in the region were hammered as a result, with the Shanghai Composite falling 5.15%, the biggest single-day decline in more than two years, and the region-wide MSCI ex-Japan index tumbling 2.4% into the close of trading. 

European stocks fell 1.9% in early Frankfurt trading, with markets getting very little lift from a decisive win for Emmanuel Macron in the second round of France's Presidential elections.

The moves compounded investor concerns, already evident in last week's U.S. market sell-off, which hived 5% from the S&P 500 over a two-day peak-to-trough period, that the Fed's aggressive rate signaling will hit consumer demand sharply over the second half of the year, as bets on a 50 basis point rate hike at the next three policy meetings continue to accelerate. 

To hammer home that point, last week saw the largest weekly outflow of equity market funds -- $17.5 billion -- so far this year, according to Bank of America data.

As a  result, benchmark 10-year note yields fell to 2.833% in overnight trading as investors ran for cover into risk-free markets, taking the U.S. dollar index, which tracks the greenback against a basket of six global currencies, 0.35% higher to a fresh two year high of 101.442. 

Oil prices were also on the back foot, with traders paring bets on near-term demand from China -- the world's largest energy importer -- as a result of its 'zero Covid' policy. WTI futures for June delivery were marked $4.89 lower at $97.18 per barrel while Brent contracts for the same month, the global benchmark, tumbled $5.13 to $101.50 per barrel.

On Wall Street, futures contacts tied to the Dow Jones Industrial Average are indicating a 275 point opening bell slump while those linked the S&P 500, which is down 5.7% for the month and 10.37% for the year, are priced for another 35 point opening bell decline. Futures linked to the tech-focused Nasdaq Composite, which is down 20% from its mid-November high, are looking at a 95 point slump.

2. -- Week Ahead: Earnings, Inflation and GDP in Focus

Markets are braced for the busiest slate of the first quarter earnings season this week, with nearly 180 S&P 500 companies updating on March quarter profits ahead for the first look for GDP growth in the world's largest economy on Thursday. 

Collective S&P 500 profits are expected to grow just 7.1% from last year to a share-weighted total of $440.4 billion, according to data from Refinitiv, with the pace for the three months ending in June expected to slow to around 6.6%.

Microsoft (MSFT) Google (GOOGL), Meta Platforms (FB) and Apple (AAPL), the four largest weights to the S&P 500, will report this week, starting with Microsoft after the close of trading on Tuesday, with bluechip industrials such as General Electric (GE), Boeing (BA), oil majors Chevron (CVX) and Exxon (XOM) and pharmaceutical giants Merck (MRK) and Eli Lilly (LLY) also providing March quarter updates this week.

With the Fed in its so-called 'quiet period' ahead of its early May policy meeting, investors are also likely to key on the flash estimate of first quarter GDP on Thursday, with analysts expecting a growth rate of 1.1%, and Friday's reading of the Fed's preferred inflation gauge, the PCE Price Index, which hit a four decade high of 5.4% last month. 

3. -- Twitter Shares Higher On Report of Takeover Talks With Elon Musk

Twitter (TWTR) shares were a rare pre-market gainer Monday amid reports that executives on the board of the social group are prepared to begin takeover talks with billionaire Tesla (TSLA) CEO Elon Musk. 

Musk, who made an unsolicited $43 billion offer to take the company private earlier this month, pricing the group at $54.20 per share, has lined-up $46.5 billion in financing as part of his pursuit, according to SEC filings last week, and has been wooing shareholders via this Twitter account -- which has more than 81 million followers -- for much of the past two weeks.

Reuters reported Sunday that while Twitter has not yet decided to accept Musk's bid, which both the company and some of its major shareholders have derided as too low, it is nonetheless ready to engage on both the merits of the proposed takeover and any legal entanglements from Musk's many run-ins with the SEC in his role as Tesla boss. 

Twitter shares were marked 0.2% higher in pre-market trading to indicate an opening bell price of $49.02 each.

4. -- Tesla Shares Slip As Shanghai Extends Covid Lockdown, Beijing Orders Testing

Tesla shares moved lower in pre-market trading as Shanghai extended its Covid lockdown into a fourth week, potentially limiting production even further at the carmaker's key Asia-based factory. 

Tesla said last week that quarter deliveries should be flat -- or "maybe slightly lower" -- when compared to the first three months of the year thanks in part to the multi-week shutdown of its Shanghai gigiafactory -- which made around half of the group's cars last year -- amid China's 'zero Covid' crackdown.

Shanghai reported 51 Covid deaths yesterday, the highest total of the year so far, with total new infections rising to 19.500. Officials are ordering mandatory testing for millions of residents in the country's biggest city -- as well as in the capital of Beijing -- and plan to extend tough lockdown rules into at least the next month.

Tesla shares were marked 2.2% lower in pre-market trading to indicate an opening bell price of $983.00 each.

5. --  AT&T Shares Edge Higher On Goldman 'Buy' Rating 

AT&T (T) shares edged higher in pre-market trading after analysts at Goldman Sachs following the group's better-than-expected first quarter earnings last week. 

Goldman Sachs analyst Brett Feldman reinstated A&T with a 'buy' rating and a $23 price target as it transitions into a 'pure play' telecom following the spin-off of its media assets into a merger group with Discovery (DISCA).

AT&T added 691,000 mobile customers to its service over the first quarter, noting that core wireless revenues -- including broadband -- rose 2.5% from last year to $29.7 billion. That compared favorably to a loss of 36,000 monthly phone subscribers, wireless carriers' most-valuable customers, for rival Verizon (VZ) as it bundled home broadband offerings on its expanding 5G network.

AT&T shares were marked 0.3% higher in pre-market trading to indicate an opening bell price of $19.57 each.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.