Tuesday May 24th


Stock futures indicate the sell-off resuming on Wall Street after Monday’s brief rebound

U.S. stock index futures fell early Tuesday morning as the markets struggled to sustain a comeback rally following weeks of losses. Futures on the Dow Jones Industrial Average fell 202 points, or 0.6%. S&P 500 futures dipped 1%, and Nasdaq 100 futures dropped 1.7%. Snap shares plummeted more than 31% after the company said it’s bracing to miss earnings and revenue targets in the current quarter and warned of a hiring slowdown. Shares of Meta Platforms followed Snap lower, falling 7% in the premarket, while Pinterest lost 14%. “Stocks are getting hit hard this morning and the main culprit is the Snap warning from Monday evening,” wrote Adam Crisafulli of Vital Knowledge. “Some are a bit incredulous that a relatively small and perennially unprofitable ephemeral social media firm can take down the whole tape, but given how sensitive this tape is, SNAP is able to punch above its weight.” “Tech still dominates the market, both numerically (it remains the biggest weighting) and psychologically, and despite aggressive liquidation in the last couple of months, people still own a lot of it,” he added. Shares of major tech companies reliant on advertising spend followed Snap lower. Alphabet slid 4%. Amazon fell 2% and Apple and Netflix were each down more than 1%. “We expect all online ad platforms to feel some impact of a significant consumer pullback,” wrote Morgan Stanley analysts after the Snap warning. “Advertising is cyclical.” Meanwhile, Zoom Video shares popped 6% after the company issued strong guidance for the second quarter. Retail earnings continue this week and investors are eager to see how high inflation is affecting consumer demand, and if last week’s disappointments from big box retailers were company specific or reflections of the whole sector. On Tuesday shares of apparel maker Abercrombie & Fitch dropped 10% premarket after reporting that freight and product costs weighed on sales for the fiscal first quarter. Best Buy shares initially popped after the company reported a mixed quarter, but reversed, and last traded 2% lower. Retailers were among the top gainers in the S&P 500 Monday. The moves came a day after the market staged a rebound from last week’s steep market sell-off, which saw the Dow hit its first eight-week losing streak since 1923, and the S&P 500 briefly fall into bear market territory on an intraday basis. Stocks rallied during Monday’s regular trading session as the Dow jumped 618 points, or nearly 2%, following a week of sharp losses. The S&P 500 rose 1.9%, and the Nasdaq Composite gained 1.6%. The moves left investors wondering whether the bounce can hold or if it was yet another minor relief rally amid the relentless sell-off that has yet to reach a bottom. “This kind of environment where you’ve got the whipsaw and ups and downs that are so big is a trading environment where it can feel on any given day like you were wrong yesterday and that is ripe for mistakes,” Sofi’s head of investment strategy Liz Young told CNBC’s “Closing Bell: Overtime.” Investors are looking ahead to new home sales and a speech from Fed Chair Jerome Powell at the National Center for American Indian Enterprise Development summit on Tuesday. Nordstrom and Ralph Lauren are also slated to report earnings. Chinese stocks fell sharply Tuesday afternoon, as investors weighed a possible thawing of U.S.-China trade relations after U.S. President Joe Biden floated the idea of tariff cuts on Chinese goods. Hong Kong’s Hang Seng index pared earlier losses to close 1.75% down to 20,112.1, while the Hang Seng Tech index fell more than 3%. The Shanghai Composite fell 2.41% to close at 3,070.93, while the Shenzhen Component declined 3.34% to 11,065.92. In Japan, the Nikkei 225 declined 0.94% to close at 26,748.14, while the Topix closed 0.86% down to 1,878.26. South Korea’s Kospi was down 1.57% to finish at 2,605.87. Oil reversed early losses and traded in positive territory Tuesday despite concerns over a possible recession and China’s Covid-19 curbs. Investment banks including UBS and Goldman Sachs have cut their 2022 China growth outlooks. The head of the International Monetary Fund, meanwhile, said she does not expect a recession for major economies but cannot rule it out. “Downgraded China GDP growth forecasts and increasing worries about wider virus restrictions in Beijing have pushed oil prices lower,” said Jeffrey Halley, analyst at brokerage OANDA. Brent crude advanced 0.3% to $113.79. U.S. West Texas Intermediate (WTI) crude added 34 cents to trade at $110.63. Gold prices firmed on Tuesday, as the U.S. dollar weakened to a one-month low for a second consecutive session, making greenback-priced bullion less expensive for overseas buyers. Spot gold was up 0.2% at $1,856.39 per ounce after rising to its highest since May 9 of $1,865.29 on Monday. U.S. gold futures rose 0.4% to $1,855.30. The dollar, a rival safe-haven asset to gold, has been falling broadly alongside a decline in Treasury yields from multi-year peaks, with aggressive easing by the Federal Reserve already priced in.