Stocks are on pace for their worst quarter since the pandemic trough of 2020 as bond yields signal recession risk and inflation pressures accelerate.
U.S. equity futures traded mixed Thursday, while oil prices tumbled and Treasury bond yields retreated, as investors looked to round out the worst quarterly performance for stocks since the start of the pandemic two years ago.
With the S&P 500 down 3.44% for the year-to-date, bond traders tracking moves in the U.S. Treasury yield curve that indicate potential recession and the White House reportedly considering an historic release from the Strategic Petroleum Reserve in order to tame record-high energy prices, market fundamentals — and the broader domestic economy — appear weak heading into final trading day of the first quarter.
Reports suggest the President is set to authorize the release of 180 million barrels from the SPR, spread over several months, in order to bring down global crude prices and ease the supply hit from Russia’s war on Ukraine.
The move would mark the third release from the SPR in six months, and the largest-ever from the nation’s emergency stockpile, which sits at the lowest levels since 2002, according to Energy Department data published Wednesday.
WTI crude futures for May delivery were marked $5.69 lower from Wednesday’s close at $102.13 per barrel in overnight trading, while Brent contracts for the same month, the global pricing benchmark, fell $4.87 to trade at $108.58 per barrel.
The Atlanta Fed’s GDPNow forecasting tool suggests first quarter growth will slow to just under 1%, from its final fourth quarter pace of around 7%, as the Federal Reserve aggressively signals interest rate increases, and the reduction of its $9 trillion balance sheet, as it fights the fastest inflation in forty years.
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A key reading of the Fed’s preferred inflation gauge, as well as weekly jobless claims data, will come before the start of trading, with the gap between 2-year and 10-year Treasury bond yields holding in modestly positive territory, at 3.3 basis points, following a brief inversion earlier this week.
In Europe, stocks drifted lower on the final trading day of the quarter as reports suggest Russian troops will re-focus their invasion of Ukraine on the southeast region of Donbas, where Moscow-backed separatists have held loose control since being installed by President Vladimir Putin in 2014.
On Wall Street, futures contracts tied to the Dow Jones Industrial Average indicating a 40 point opening bell decline while those linked the S&P 500, which is up 5.922% for the month, are priced for a 1.5 point dip. Futures linked to the tech-focused Nasdaq are looking at a 25 point opening bell advance.
Walgreens Boots Alliance (WBA) – Get Walgreens Boots Alliance Inc Report posted stronger-than-expected second quarter earnings, while confirming its full-year profit guidance, thanks in part to solid U.S. pharmacy sales.
In tech, Tesla (TSLA) – Get Tesla Inc Report shares edged higher even as reports suggest the clean-energy carmaker will likely extend the closure of its Shanghai gigafactory as China’s biggest city remains on Covid lockdown.
Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report shares, however, fell 2.1% after analysts at Barclays downgraded the chipmaker, and slashed their price target on the stock, citing increasing competition in key markets.
