Monday April 12th

12-04-2021

Stock futures slip after Dow, S&P 500 hit fresh records

U.S. stock index futures ticked lower early Monday, suggesting Wall Street could see muted trading after reaching fresh records last week. Dow futures implied an opening loss of about 70 points, while contracts tied to the S&P 500 shed 0.2%. Nasdaq-100 futures lost 0.3%. Reopening plays fell slightly in early trading Monday with shares of Carnival, United Airlines and Gap off about 1% in the premarket. Tesla gained 1.5% to $687.01 in early trading after Canaccord Genuity upgraded the stock to buy and raised its price target to $1,071, citing its battery innovations. Shares of Nuance Communications jumped 21% in early trading after Microsoft announced it will buy the speech recognition company in a $16 billion deal. The Nuance acquisition represents Microsoft’s largest acquisition since it bought LinkedIn for more than $26 billion in 2016. United Airlines fell about 1% after the carrier said its first-quarter revenue is expected to fall 66% compared with the same period in 2019. The new guidance fells near the top of the range between 65% and 70% that the company had previously forecast. The movement in the futures market followed yet another record close for the Dow Jones Industrial Average on Friday, when it jumped nearly 300 points to end at 33,800.60. The S&P 500 gained 0.8% and hit its third straight record close. Stocks linked to the recovering economy led many of last week’s gains as vaccination efforts throughout the U.S. accelerated. Both the Dow and the S&P 500 climbed at least 2% last week. The Nasdaq rallied 3.1% over the same period as some traders snapped up big tech names. The first-quarter earnings reporting season begins this week, with expectations set for broadly positive news and an uptrend for U.S. equities thanks to a recovering economy. Many of the nation’s largest banks, including Goldman Sachs and JPMorgan Chase will this week report results for the three months ended March 31. The coming week is also packed with Federal Reserve speeches and key economic data including a hotly anticipated inflation reading Tuesday, when the U.S. consumer price index is released. The central bank’s chairman, Jerome Powell, kicked off the week of multiple Fed appearances with an interview that aired Sunday evening on CBS News’ “60 Minutes.” During the interview, Powell reiterated that the Fed wants to see inflation rise above its 2% for an extended period before officials move to raise interest rates. “We want to see inflation move up to 2% — and we mean that on a sustainable basis, we don’t mean just tap the base once,” he said. “But then we’d also like to see it on track to move moderately above 2% for some time.” He added that amid an accelerated Covid-19 vaccine rollout and strong fiscal support, the U.S. economy appears to be at a turning point. “What we’re seeing now is really an economy that seems to be at an inflection point,” he said. Powell will also speak Wednesday at an Economic Club of Washington event. Investors will also keep an eye on President Joe Biden’s effort to advance a major infrastructure proposal known as the American Jobs Plan. Biden, who with other Democrats promised significant an infrastructure overhaul in the 2020 elections, will meet with a bipartisan group of lawmakers on Monday to try to persuade Capitol Hill to back the $2 trillion package. Congress will return to Washington this week and be in session for the first time since Biden debuted his proposal, which earmarks hundreds of billions of dollars for roads, bridges, airports, broadband, electric vehicles, housing and job training. “A positive fiscal shock, strong housing tailwinds, a large stock of savings, and the Fed letting inflation run above 2% mark a fundamentally different economic backdrop,” Evercore ISI equity strategist Dennis DeBusschere wrote in an email. “US data is expected to be strong this week and US vaccinations are increasing. Real rates are still too negative and are headed higher,  supporting risk-on factor outperformance.” The president’s plan would also increase the corporate tax rate to 28% and crack down on other overseas tax avoidance strategies. Asia-Pacific stocks mostly declined on Monday, with shares in India and China seeing sizable losses. Both the Nifty 50 and BSE Sensex in India dropped more than 3% each, as of 1:45 p.m. local time. The losses came as the Covid-19 situation in the country remains severe, with Reuters reporting the hardest-hit state of Maharashtra is considering a lockdown. Meanwhile, mainland Chinese stocks also fell on the day. The Shanghai composite declined 1.09% to 3,412.95 while the Shenzhen component dropped 2.299% to 13,495.72. Hong Kong’s Hang Seng index slipped nearly 1%, as of its final hour of trading. In Japan, the Nikkei 225 fell 0.77% to close at 29,538.73 while the Topix index finished its trading day 0.25% lower at 1,954.59. South Korea’s Kospi bucked the regional trend to close 0.12% higher at 3,135.59. Oil prices edged higher in rangebound trade on Monday on optimism about a rebound in the U.S. economy as vaccinations accelerate, but rising COVID-19 cases in other parts of the world kept a lid on prices. Brent was up 22 cents, or 0.4%, at $63.17 a barrel by 0843 GMT. West Texas Intermediate (WTI) U.S. crude rose 12 cents, or 0.2%, to $59.44 a barrel. The prices have remained rangebound in the last three weeks, with Brent between $60 and $65 per barrel and WTI at $57 to $62. Gold prices eased on Monday as U.S. Treasury yields remained elevated, denting the appeal of bullion, while investors waited for this week’s key U.S. inflation and retail sales data. Spot gold was 0.1% down at $1,741.80 an ounce by 1147 GMT. U.S. gold futures eased 0.1% to $1,743.50.