Stock Futures Rise Ahead of Powell Talk

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Technology stocks emerged as early winners in the premarket session

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US stocks have swung dramatically lately as investors have tried to assess the path for markets amid wide-ranging economic, geopolitical and Covid-19 concerns. Weighing most heavily on many investors’ minds is the outlook for the US economy as the Federal Reserve lifts interest rates. On Monday, data from the Federal Reserve Bank of New York raised concerns after it showed that factory activity in the state declined in May, with shipments falling at the fastest pace since early in the pandemic.

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On Tuesday, however, fresh data from the Commerce Department showed some signs of economic resilience, with US shoppers increasing retail spending in April for the fourth straight month. That, as well as the reopening of some stores in Shanghai this week, provided some sources of optimism.

Later Tuesday, investors will also hear from Fed Chairman Jerome Powell at Businesshala’s Future of Everything Festival. Market watchers are also continuing to assess the effects of the war in Ukraine, as well the outlook for China’s economy.

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Even with Tuesday’s premarket gains, many are still expecting more choppiness ahead. The Nasdaq Composite, for example, has swung 1% or more in either direction in all but two of May’s 11 sessions.

“I think for better or worse, this is often a pattern that we see in bear markets,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley,

“You do get these reversals that happen quite frequently…and I think that makes it hard to trade.”

Morgan Stanley currently has a year-end price target of 3900 for the S&P 500, implying that the index still has further to fall. As of Monday, the S&P 500 is down 16% from its January high, putting it close—but not quite yet—in bear market territory. A bear market is defined as a drop of at least 20% from a recent high.

Other strategists and investors also say they believe more turbulence could be ahead for stocks.

“We’re seeing the most aggressive tightening [of monetary policy] in decades against the backdrop of a very uncertain economic outlook and a squeeze on households,” said Craig Erlam, senior market analyst at Oanda. Last week’s US inflation data., which showed that pricing pressures edged down just slightly in April, was worrisome, he said.

“It’s not just that [inflation] accelerated fast on the way up. The prospect of decelerating it slowly on the way down is a major concern,” he said.

On Tuesday, gains across the market were broad-based in the premarket session in New York, though technology stocks emerged as early winners. Nvidia,

PayPal and Apple each climbed 1.4% or more.

Twitter fell 1.8% before the opening bell to $36.72 after Tesla chief executive Elon Musk said his $44 billion bid for the social-media company can’t move forward until the company is clearer about how many of its accounts are fake. Twitter has now wiped out all the gains it notched after Mr. Musk disclosed a stake in the company in April and is trading well below his deal that values ​​the company at $54.20 a share. If the stock finishes lower Tuesday, it would mark the eighth consecutive decline for Twitter.

Tesla, meanwhile, added 2.3%. Tesla shares have slipped since Mr. Musk’s proposed deal to buy Twitter and take it private, reflecting concerns that owning the social-media company could distract him from running Tesla. Mr. Musk also planned to borrow against his Tesla stake to finance the Twitter deal.

Home Depot shares added 3.7% premarket after the home-improvement retailer boosted its outlook for the year and said shoppers spent much more per shopping trip. Walmart slumped 6.1% after net income fell sharply from the same period last year as higher product, supply-chain and employee costs ate into profits.

In the bond market, the yield on the benchmark US 10-year Treasury note ticked up Tuesday to 2.942% from 2.877% Monday, on pace to reverse a downward stretch for yields. As of Monday, the yield on the 10-year note had fallen for five of the past six trading days.

The price of bitcoin stabilized, recently trading around $30,571, up 2.3% from its 5 pm ET Monday level of $29,880.45.

The relative calm in Tuesday’s markets sent the Businesshala Dollar Index falling 0.7%. The index, which measures the greenback against a basket of 16 other currencies, has been one of the few assets to notch consistent gains this year in a market that has given investors few other places to hide. Even with its decline, the haven asset is still hovering near its highest level since March 2020.

The British pound, meanwhile, rose 1.4% against the dollar after data showed the UK’s unemployment rate declined to 3.7% for the January to March period. Even with Tuesday’s gains, the pound is still down nearly 8% against the greenback for the year as worries about inflation in the region weigh heavily on the currency.

Brent crude, the international oil benchmark and another gainer this year, climbed 0.5% to $114.84 a barrel.

In Europe, the pan-continental Stoxx Europe 600 advanced 1.2%, on pace to extend its winning streak to three days. Gains across the region were broad-based, with banks, transport companies and energy giants rising.

In Asia, Hong Kong’s Hang Seng jumped 3.3%, notching its third consecutive gain. Japan’s Nikkei 225 added 0.4%, also extending its winning streak to three sessions. The Shanghai Composite gained 0.6% after falling Monday.

Write to Caitlin McCabe at [email protected]

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Credit: www.Businesshala.com /

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