Tuesday June 7th


Stock futures decline after Target’s profit warning; Dow futures drop 260 points

U.S. stock index futures fell Tuesday after Target issued a warning about its current quarter’s profits, stoking fears of a potential recession. Futures tied to the Dow Jones Industrial Average edged lower by 258 points, or 0.8%. S&P 500 futures and Nasdaq 100 futures also fell 0.9% and 1.1%, respectively. Target shares fell 9% after the retailer announced plans to work down excess inventory. The company said it will implement additional markdowns to products and cancel some orders. Target also lowered its operating margins guidance for the quarter. Walmart shares followed Target lower, sliding 4.3%. All three of the major averages finished slightly higher Monday. The Dow finished the day up about 16 points, or less than 0.1%, after jumping more than 300 points earlier in the day. The S&P 500 added 0.3%, and the tech-heavy Nasdaq Composite advanced 0.4%. The indexes on Monday gave back most of their gains from earlier in the day as the 10-year Treasury yield spiked up to 3% and hit its highest level in nearly a month. Sentiment was largely muted Monday, with no U.S. economic data releases and a quiet Federal Reserve in its blackout period. There were also no earnings reports for major companies. Investors are still assessing whether the recent bounce in stocks is a bear market rally or has the market reached a bottom from this year’s sell-off. “Since the beginning of the year we’re seeing an altitude sickness when you look at the valuation multiple,” said Ed Yardeni, president at Yardeni Research. He spoke on CNBC’s “Closing Bell: Overtime.” “To a large extent, clearly, with the benefit of hindsight, the market was overvalued,” he said. “A lot of that was in the negative cap seat, big cap names, related companies. I think we’ve seen a tremendous correction in that area. And now the question is whether the market can accept the kind of earnings expectations that analysts are delivering and whether those expectations will be correct.” Investors are still following what is a lighter week in company earnings. Shares of United Natural Foods were rising in premarket trading after the wholesale company beat expectations for its fiscal third quarter. However, food stock J.M. Smucker was under pressure after its quarterly report. In economic data, May’s consumer price index reading is the big one investors are focused on, which is due out Friday. If the reading is cooler than April’s numbers, as expected, some could interpret it as a sign that inflation has peaked. Shares in Asia-Pacific struggled for direction in Tuesday trade as the Reserve Bank of Australia announced a larger-than-expected interest rate decision. Australia’s S&P/ASX 200 declined 1.53% to close at 7,095.70. The Reserve Bank of Australia unexpectedly announced a 50 basis points increase in the cash rate to 0.85%. Analysts had been expecting a rate hike of 25 basis points or 40 basis points, according to Reuters. In other markets, mainland Chinese stocks closed mixed, with the Shanghai Composite up 0.17% to 3,241.76 while Shenzhen Component was mildly lower at 11,935.57. Hong Kong’s Hang Seng index slipped 0.38%, as of its final hour of trading. Over in South Korea, the Kospi fell 1.66% on the day to 2,626.34. The Nikkei 225 in Japan advanced 0.1% while the Topix index climbed 0.41%. Oil prices were stable on Tuesday as the market balanced risk sentiment with supply concerns and the prospect of higher demand as China relaxes its Covid curbs. Brent crude futures were down 26 cents, or 0.2%, at $119.25 barrel. U.S. West Texas Intermediate (WTI) crude futures were down 21 cents, or 0.2%, at $118.29 a barrel, having risen by over $1 per barrel earlier in the session. Gold prices climbed off one-week lows Tuesday as investors weighed tightening plans from major central banks. Spot gold rose 0.3% to $1,846.20 per ounce. Earlier in the session, bullion touched $1,836.10, its lowest since June 1. U.S. gold futures climbed 0.3% to $1,848.90.