A brief inversion of the yield curve has stocks on the defensive Wednesday, while oil prices resumed their upward march amid bets on fresh Russia sanctions on energy exports.
U.S. equity futures edged lower Wednesday, putting a four-day rally on Wall Street at risk, as investors retreated from risk markets following worrying moves n the bond market and uncertain action from Russia in it war on Ukraine.
Deputy Defense Minister, Aleksey Krivoruchko, had said yesterday that Russia military would “fundamentally cut back activity in the direction of Kyiv and Chernihiv” following peace talks in Istanbul, but reports of attacks on cities in eastern Ukraine continued on Wednesday, even as some troops began to withdraw back towards Belarus and the Russian border.
A brief inversion of the U.S. Treasury yield curve yesterday, the first since September 2019, also sparked a reset in terms of global risk appetite as investors worried that its record in predicting recession in the world’s biggest economy remains accurate.
Stocks Edge Lower, Oil Jumps, Micron, Lululemon And Facebook – Five Things You Must Know
Benchmark 10-year note yields held their ground at 2.402% in overnight trading, while 2-year notes pulled back to 2.324%, allowing for a 8 basis point widening in this key portion of the yield curve as bets on a 50 basis point Federal Reserve rate hike in May eased to around 66.6% from 69.4% earlier this week.
Global oil prices jumped higher, pulling U.S. crude back towards the $110 per barrel mark, as traders reacted to data showing a decline in domestic crude stocks and reports of possible sanctions on Russian energy exports.
The American Petroleum Institute said late Tuesday that U.S. crude stocks fell by a bigger-than-expected 3 million barrels last week, with inventories at the key Cushing, Oklahoma delivery hub down by just over 1 million.
The Energy Department will publish official data at 10:30 am eastern time today.
WTI crude futures for May delivery were marked $2.94 higher from Tuesday’s close at $107.18 per barrel in overnight trading, while Brent contracts for the same month, the global pricing benchmark, added $2.77 to trade at $113.00 per barrel.
On Wall Street, futures contracts tied to the Dow Jones Industrial Average indicating a 70 point opening bell decline ahead of payroll processing group ADP’s National Employment report at 8:30 am eastern time, while contracts linked the S&P 500, which is up 5.9% for the month, are priced for a 15 point pullback. Futures linked to the tech-focused Nasdaq are looking at a 70 point opening bell decline.
Micron Technology (MU) – Get Micron Technology, Inc. Report shares powered 4% higher after the chipmaker posted stronger-than-expected second quarter earnings paired with a robust near-term outlook.
Lululemon Athletica (LULU) – Get Lululemon Athletica Inc Report shares were also active, rising 7.25% after it posted stronger-than-expected fourth quarter earnings and said it could offset input cost increases with ‘selective’ price hikes for its athletic and leisure apparel.
On the downside, Chewy (CHWY) – Get Chewy, Inc. Class A Report shares fell 14% after the online the pet food specialists posted a wider-than-expected fourth quarter loss as product cost inflation and shipping expenses ate into its bottom line.
In Europe, stocks retreated from a five-week high as Germany’s enacted an emergency plan to deal with the potential cut-off of Russian natural gas, a key component in the energy mix of the biggest economy, with the Stoxx 600 falling 0.6% by mid-day trading in Frankfurt.
Overnight in Asia, the region-wide MSCI ex-Japan benchmark gained 1.33% in a follow-on rally from Wall Street, while the Nikkei 225 closed 0.8% lower at 28,027.25 points.
