Monday May 17th

17-05-2021

Dow futures fall 150 points, hint at more selling after Wall Street’s worst week since February

U.S. stock index futures were lower early on Monday following last week’s sell-off triggered by inflation jitters, suggesting investors may be in for more selling ahead. Futures on the Dow Jones Industrial Average pointed to an opening loss of about 150 points. S&P 500 futures were off by nearly 0.5%. Nasdaq 100 futures fell almost 0.6%. Media stocks were jumping in the premarket on merger activity. AT&T is in advanced talks to merge WarnerMedia, which includes HBO, with Discovery, the companies announced Monday morning. The new entity will trade as its own public company. Shares of Discovery were up 16% in early trading. AT&T shares were 4.9% higher. Bitcoin was taken for a wild ride overnight Sunday. Earlier, the price tumbled below $43,000 after Elon Musk implied in a Twitter exchange that Tesla may have dumped its bitcoin holdings. Last week, Tesla said it would no longer accept bitcoin for car purchases due to environmental concerns. Bitcoin then rebounded some after Musk later clarified in a tweet that the electric vehicle maker “has not sold any Bitcoin.” The price was last at $45,505. Shares of Tesla were off by 1% in premarket trading. The rest of Big Tech was mixed in premarket trading. Apple was slightly lower, but Amazon was higher. Wall Street came off one of the wildest weeks of 2021 that saw the S&P 500 fall 4% through midweek amid heightened inflation fears. The broad equity benchmark eventually rebound and ended the week down just 1.4%. The tech-heavy Nasdaq Composite, which got hit particularly hard by inflation fears, dropped 2.3% last week. The blue-chip Dow fell 1.1% in that period. All three benchmarks posted their worst week since February 26. “Not only are [last] week’s events a warning sign of how uncomfortable inflation prints can become but also a warning sign of how overbought equity markets have become,” Nikolaos Panigirtzoglou, a managing director at JPMorgan, said in a note. Data last week showed the Consumer Price Index jumped 4.2% from a year earlier in April, the fastest rate since 2008, which intensified fears that the Federal Reserve could be forced to start tapering its easy monetary policy if higher price pressures are sustained. The Fed’s minutes from its last meeting, which will be released Wednesday, could offer some clues on policymakers’ thinking on inflation. Elsewhere, the first-quarter earnings season is wrapping up with more than 90% of the S&P 500 companies having reported their results. So far, 86% of S&P 500 companies have reported a positive EPS surprise, which would mark the highest percentage of positive earnings surprise since 2008 when FactSet began tracking this metric. Walmart, Home Depot and Macy’s will deliver earnings on Tuesday. “Investor and equity analyst reactions to earnings results reveal skepticism that 1Q beats provide a reason for additional forward-looking optimism,” wrote David Kostin, Goldman Sachs’ chief U.S. equity strategist. “Firms that beat EPS estimates typically outperform the S&P 500 by 100 [basis points] the day after reporting. However, the typical stock that beat on EPS this quarter outperformed by just 51 [basis points], continuing the trend from 2020.” Shares in Asia-Pacific were mixed on Monday trade as investors reacted to the release of Chinese economic data while also monitoring the Covid situation in places such as Taiwan, which has seen a recent spike in domestic infections. The Taiex in Taiwan fell 2.99% to close at 15,353.89 on Monday, leading losses among the region’s major markets. Elsewhere, mainland Chinese stocks were higher on the day, with the Shanghai composite up 0.78% to 3,517.62 while the Shenzhen component surged 1.744% to 14,456.54. The Hang Seng index in Hong Kong rose about 0.7%, as of its final hour of trading. In Japan, the Nikkei 225 dipped 0.92% to close at 27,824.83 while the Topix index shed 0.24% to finish the trading day at 1,878.86. South Korea’s Kospi closed 0.6% lower at 3,134.52. Oil prices held firm on Monday, trading in a tight range as European economic reopenings offset gloom from surging COVID-19 cases in Asia, fresh restrictions and underwhelming Chinese manufacturing data. Brent crude rose 3 cents, or less than 0.1%, to $68.74 a barrel at 1013 GMT, and West Texas Intermediate (WTI) U.S. crude was up by 4 cents, or 0.1%, at $65.41. Both contracts have risen more than 30% since the start of the year. Gold prices hit a 3-1/2 month high on Monday as a dip in U.S. Treasury yields and persistent inflation worries in the bullion market burnished the appeal of the non-yielding metal. Spot gold was up 0.5% at $1,850 per ounce by 0930 GMT, after hitting its highest since Feb. 2 earlier in the session. U.S. gold futures jumped 0.7% to $1,851.10.