Stock futures bump higher amid Russia-Ukraine peace talk optimism; U.S. treasury curve nears inversion as Fed rate bets gather pace; FedEx jumps as CEO Fred Smith steps aside after nearly five decades; Micron gains as data center chips look to drive Q2 earnings and Dave & Buster’s slumps on holiday quarter profit miss.
Here are five things you must know for Tuesday, March 29:
1. — Stock Futures Bump Higher Amid Russia-Ukraine Peace Talk Optimism
U.S. equity futures bumped higher Tuesday, while the dollar held firm against its global peers as Treasury yields continued to gain, as global markets focused on the first face-to-face peace talks between Russia and Ukraine in more than three weeks.
Turkish President Tayyip Erdogan welcomed officials from both sides of the month-long conflict to Istanbul Tuesday, and while few expect a breakthrough agreement as Russian shells continue to rain down on cities in eastern Ukraine, the sit-down does mark an important step in brokering a near-term ceasefire.
At the time time, Deputy U.S. Treasury Secretary Wally Adeyemo will lead a delegation of U.S. officials for another meeting with European officials Tuesday to discuss deeper sanctions on Moscow, including those focused on its export supply chain, although none are likely to directly impact its main energy exports.
Russia, meanwhile is demanding that payments made for its natural gas exports to European markets be made in rubles, and has threated to shut-off supplies to countries unwilling to do so over the coming weeks.
That has helped keep oil prices elevated, even amid demand concerns linked to the ongoing lockdown in Shanghai and China’s broader struggle to control its Covid outbreak, with WTI crude futures for May delivery rising $1.04 in European trading to change hands at $107.00 per barrel.
On Wall Street, futures contracts tied to the Dow Jones Industrial Average indicating a 150 point opening bell gain while contracts linked the S&P 500, which is down 4% for the year, but up 4.6% for the month, are priced for a 20 point advance. Futures linked to the tech-focused Nasdaq are looking at a 50 point opening bell gain.
2. — U.S. Treasury Curve Nears Inversion As Fed Rate Bets Gather Pace
U.S. Treasury bond yields continued to probe higher Tuesday, with 10-year notes breaching the 2.5% level in overnight trading, with investors now eyeing a key inversion of the yield curve and its implications for growth prospects in the world’s largest economy.
Benchmark 2-year note yields climbed to as high as 2.435% in overnight trading, before paring that advance slightly and pegging the difference between 2-year and 10-year paper at just 8 basis points.
A move higher in 2-year yields, usually linked to bets on higher Fed rates, could trigger the first ‘inversion’ of the U.S. yield curve since 2019. If the inversion holds, it’s a move that has signaled each of the last eight recessions.
The CME Group’s FedWatch tool, meanwhile, continues to price in faster Fed rate hikes, and now suggests a 72.2% chance of a 50 basis point move higher at next month’s meeting, with odds of a 50 basis point follow-on hike in June now sitting at 60.1%.
3. — FedEx Jumps As CEO Fred Smith Steps Aside After Nearly Five Decades
FedEx FDX shares jumped higher in pre-market trading after the world’s biggest package delivery group said its chief operating officer, Raj Subramaniam, would replace longtime boss and company founder Fred Smith as CEO later this year.
Smith, 77, a former officer in the U.S. Marine Corps who served in Vietnam, founded FedEx in 1973, establishing a base in Memphis, Tennessee with around 14 plane and less than 400 employees. He leaves the group with the world’s biggest air cargo fleet, at 650 planes, and a staff of more than 600,000 but will serve as executive chairman.
Subramaniam, a long-time FedEx executive who has toiled in the group’s complicated supply chain, will assume CEO duties on June 1.
“FedEx has changed the world by connecting people and possibilities for the last 50 years,” Smith said. “As we look toward what’s next, I have a great sense of satisfaction that a leader of the caliber of Raj Subramaniam will take FedEx into a very successful future.”
FedEx shares were marked 2.05% higher in pre-market trading to indicate an opening bell price of $234.75 each.
4. — Micron Gains As Data Center Chips Look To Drive Q2 Earnings
Micron Technology (MU) – Get Micron Technology, Inc. Report shares moved higher in pre-market trading ahead of the chipmaker’s second quarter earnings after the closing bell, with investors looking to data center demand to offset weakness in handset and PC markets.
Analysts are looking for a bottom line of $1.97 per share for the group’s fiscal second quarter, which ended in early March, more than double the 98 cents per share it earned over the same period last year. Revenues are forecast to rise 20.5% to $7.52 billion.
Micron, which makes chips across an array of sectors, including PCs, mobile phones, data centers and autos, may have benefited from the Covid-linked shutdown of a Samsung Electronics’ memory chip manufacturing facility in Xi’an, China, earlier this year.
The group’s NAND memory chips are sold to the data storage market, while its DRAM semiconductors — the bulk of its overall sales — are used in PCs, handsets and data centers.
Micron shares were marked 1% higher in pre-market trading to indicate an opening bell price of $80.60 each.
5. — Dave & Buster’s Shares Slump On Holiday Quarter Earnings Miss
Dave & Buster’s Entertainment (PLAY) – Get Dave & Buster’s Entertainment, Inc. Report shares slumped lower in pre-market trading after the restaurant group posted weaker-than-expected fourth quarter earnings and declined to provide near-term sales guidance.
Dave & Buster’s swung back into profit for the three months ending in January, but its bottom line of 52 cents per share was around 9 cents shy of the Street consensus forecast. Group revenues fell 1.2% to $343.1 million, even as Covid restrictions on indoor gatherings eased, and comparable sales to pre-pandemic levels were still down 6.8%.
“Despite continuing headwinds from Covid (including vaccine requirements in certain markets) we saw strong sales across our stores in fiscal 2021,” said interim CEO Kevin Sheehan. “This company has significant upside potential and with our continued focus on innovation, growth and value creation, we are driving toward unlocking that value.”
Dave & Buster’s shares were marked 7.2% lower in pre-market trading to indicate an opening bell price of $40.02 each, a move that would wipe out nearly all of the stock’s gains for the year.
