Stocks are moving firmly higher Tuesday ahead of a key reading of April retail sales as Walmart sounds the alarm on the impact of surging inflation costs.
U.S. equity futures moved firmly higher Tuesday, while the dollar extended declines for a third consecutive session, as investors took solace from a rare bit of positive news from China’s Covid crisis and braced for a key reading of U.S. retail sales prior to the start of trading.
Early gains were tempered, however, by weaker-than-expected first quarter earnings from Walmart (WMT) – Get Walmart Inc. Report, as well as a warning on the impact of surging inflation to the bottom line of the world’s biggest retailer.
The dollar’s three-day retreat, while modest, provided a spark of investor optimism following news that Shanghai had recorded its third consecutive day with no new Covid infections, an important benchmark that could trigger the easing of restrictions on business and travel in China’s biggest city.
Regional stocks got a boost on the news, with the MSCI ex-Japan benchmark rising 2.36% on the session and helping Europe’s Stoxx 600 to an early 1.5% gain in Frankfurt.
Growth concerns remain paramount in global markets, however, with surging inflation and aggressive central bank rate signaling raising the specter of stagflation — or recession — in major economies around the world.
A path around that, at least in the United States, could come from consumer spending, which makes today’s April retail sales reading all the more influential for market direction.
Stocks remain rate-sensitive for the moment, however, moving in tandem with moves in the Treasury bond market, where falling yields suggest deeper growth concerns and rising yields hint towards near-term economic optimism.
Benchmark 10-year Treasury note yields were last seen modestly higher on the session at 2.915% while the U.S. dollar index — a broad indicator of investor caution — fell 0.46% against a basket of its global peers to trade at 103.708 in overnight dealing.
The CME Group’s FedWatch tool, meanwhile, suggests at least at 21.1% chance of a 75 basis point rate hike in July, despite assurance from Federal Reserve Chairman Jerome Powell that such a move is not being “actively considered” by his colleagues on the Open Markets Committee.
Powell will also speak at the Wall Street Journal’s ‘Future of Everything’ event at 2:00 pm Eastern time today.
On Wall Street, futures tied to the Dow Jones Industrial Average indicating a 415 point opening bell gain while those linked the S&P 500, which is down 15.9% for the year, are priced for a 63 point move to the upside. Futures linked to the Nasdaq are looking at 235 point opening bell jump.
Walmart was the most active pre-market mover, falling 7.1% after it posted weaker-than-expected first quarter earnings, and cut its full-year profit forecast, as surging costs ate into the bottom line of the world’s biggest retailer.
Home Depot (HD) – Get Home Depot, Inc. Report, however, rose 2.5% after it posted stronger-than-expected first quarter earnings and boosted its full-year profit guidance as the world’s biggest home retailer recorded record sales amid the still-elevated domestic housing market.
JD.com JD surged 9.2% on better-than-expected first quarter earnings as active users neared 600 million amid a resurgence in online retail activity following Covid-triggered lockdowns in some of China biggest cities.
Twitter (TWTR) – Get Twitter, Inc. Report shares, meanwhile, extended their slide to an eighth consecutive session as Elon Musk said the social media group must prove that spam and bot accounts comprise only a small portion of its user base for his $44 billion takeover to proceed.
