Here are five things you must know for Monday, April 11:
1. — Stock Futures Edge Lower, Oil Prices Slide
U.S. equity futures edged lower Monday, while Treasury bond yields and the dollar continued to test multi-year highs, as investors shift focus from the ongoing war in Ukraine to a busy slate of earnings and data releases in a holiday-shortened trading week.
Inflation remains the key driver in terms of bond market performance Monday, and with crucial readings for both producer prices and consumers prices due this week, each of which are expected to accelerate to multi-decade highs, traders are pricing-in faster and deeper rate hikes from the Federal Reserve, which in turn is boosting day-to-day rates in the market for U.S. Treasuries.
The CME Group’s FedWatch tool pegs a 79.4% chance of a 50 basis point rate hike from the Fed in May, followed by a 52.1% chance of a follow-on move in May and 23.3% chance of a third 50 basis point hike in July.
Benchmark 10-year Treasury note yields, meanwhile, touched 2.784% in overnight trading, the highest since January of 2019, following data from China showing factory gate inflation surged 8.3% from last year in March, indicating the country’s struggle to overcome its recent Covid surge will continue to affect global supply chains and the upward prices pressures that come with it.
Some relief on the energy front, however, was provided by sliding oil prices, which extended their Friday declines as investors prepare for the release of 240 million barrels of crude — or more than a million barrels each day between now and the end of the year — as part of coordinated plan between the U.S. and its allies to mitigate the impact of supply disruptions and sanctions on Russian energy exports.
WTI crude futures for May delivery were marked $2.56 lower on the session at $100.21 per barrel while Brent contracts for June fell $2.49 to $100.29 per barrel.
On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a modest 10 point opening bell decline while those linked the S&P 500, which is down 5.83% for the year, are priced for an 11 point slide. Futures linked to the tech-focused Nasdaq are looking at a 95 point opening bell slump.
Investors will navigate a packed calendar of top-tier data releases over the Easter-shortened week, highlighted by Tuesday’s key reading of March inflation that is expected to produce the fastest headline rate in more than forty years.
With rents, used car prices and healthcare costs — which make up a massive portion of the underlying core CPE reading — continuing to rise, and energy and food prices holding onto to their recent multi-year increases — boosting headline readings — analysts are looking for a year-on-year inflation rate of 8.4% when the Commerce Department publishes its formal estimate at 8:30 am Eastern time.
Factory gate readings will follow on Wednesday, while Thursday brings jobless claims as well as a look at the strength of the U.S. consumer in the form of March retail sales data.
Collectively, the releases could indicate just how long the Fed is expecting to see inflation hold past its 2% target — with some projections now indicating as long as late 2023 — and what sort of second-round effects the surge is having on both consumer spending and confidence.
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3. — Earnings Preview: JPMorgan Leads Bank Sector Kick-Off As Profit Growth Slows
The first quarter corporate reporting season also kicks-off in earnest this week, as well, with updates from the country’s biggest banks that could set the tone for a notable decline in the pace of profit growth.
S&P 500 companies are expected to see collective profits grow 6.1% from last year to a share-weighted total of $432.2 billion, a pace that would be down sharply from the 32.1% clip recoded over the final three months of last year.
JPMorgan Chase & Co. (JPM) – Get JPMorgan Chase & Co. Report, Goldman Sachs Group (GS) – Get Goldman Sachs Group, Inc. Report, Wells Fargo (WFC.PRN) , Citigroup (C) – Get Citigroup Inc. Report, Morgan Stanley (MS) – Get Morgan Stanley Report, UnitedHealth Group UNH will start publishing March quarter earnings on Wednesday, with around 14 S&P 500 companies set to update over the four-day period.
Near-term projections will prove crucial in terms of forecasting profit growth for the second quarter — as well as proving clues as to the strength of the broader economy — with analysts currently estimating June quarter earnings of around $470 billion, a 6.7% increase from 2021.
4. — AT&T Shares Slump As Traders Adjust For Warner Bros. Discovery Trading Debut
AT&T (T) – Get AT&T Inc. Report shares were marked sharply lower in pre-market trading as investors adjusted for the completion of its $43 billon media merge with Discovery (DISCA) – Get Discovery, Inc. Class A Report that will begin trading today.
Warner Bros Discovery Inc. will trade on the Nasdaq under the ticker symbol ‘WBD’ today, with CEO David Zaslav CEO at the helm, following A&T’s decision to spin-off its interest in WarnerMedia earlier this year. AT&T shareholders will own 71% of the combined group, with the remaining 29% taken-up by Discovery shareholders.
The move leaves the newly-created group with a fleet of media assets including the Discovery Channel, Warner Bros. Entertainment, CNN, HBO and the Cartoon Network as well as lucrative streaming services such as HBO Max and Discovery+.
AT&T shares were marked 23% lower in pre-market trading to indicate an opening bell price of $18.58 each while Discovery was marked 0.1% lower at $24.41 each.
5. — Twitter Scraps Deal to Offer Musk Board Seat, Shares Slide
Twitter (TWTR) – Get Twitter, Inc. Report shares slumped lower in pre-market trading after the social media group scrapped an agreement to bring Tesla CEO and billionaire investor Elon Musk onto its board of directors.
Musk, who unveiled a 9.1% stake in the micro-blogging website last week, was dur to assume his seat on the board Saturday and had spoken publicly of his desire to bring ‘significant’ changes to the company.
CEO Parag Agrawal, however, said late Sunday that Musk has “declined to join our board” following what he called “many discussions”, but declined to elaborate.
The move could mean Musk, whose stake in Twitter could have only risen to 14.9% were to he take a board seat, can either use some of his vast $300 billion fortune to take Twitter, currently valued at $37 billion, private or simply press from changes as the group’s single-largest shareholder.
Twitter shares were marked 3.4% lower in pre-market trading to indicate an opening bell price of $44.65 each.