MARKET WRAPS
Watch For:
New Home Sales for April
Opening Call:
Stock futures fell Tuesday, as negative sentiment returned to
global markets.
Asian indexes closed in the red, weighed down by losses among
technology stocks, while European markets also traded lower.
Snap's shares fell 28% premarket, following a profit warning
Monday. The company noted that the macroeconomic environment has
deteriorated more than anticipated.
Its losses rippled to other technology stocks, with Meta
Platforms down 6.4% before the opening bell and Google-parent
Alphabet down 4%. Advanced Micro Devices lost 2%.
Read Barrons.com: Snap Stock Falls Further, Drags Other Social
Media With It
Investors are confronting a range of signals as they try to map
out the trajectory of the U.S. economy. Many have grown worried
that the Federal Reserve's plans for monetary tightening to tamp
down inflation could tip the economy into a recession.
That has been among the catalysts for the U.S. stock market's
brutal year, which has sent the S&P 500 falling 17% from its
January high, based on Monday's close.
There have been signs of optimism, however, such as on Monday,
when JPMorgan Chase said U.S. consumers appear to be in good
financial health. But that sanguine depiction was quickly
counterbalanced by Snap's warning.
Later Tuesday, investors will receive new commentary from Jerome
Powell, who will give remarks at an economic summit in Las Vegas.
Investors will be looking for fresh clues about his outlook for
inflation, the economy and the path of interest-rate increases.
Several pieces of economic data are also due Tuesday, including
U.S. new-home sales data and gauges of U.S. manufacturing
activity.
Economic Insight:
New residential sales data for April are likely to further
evidence the current slowdown in the housing sector amid rising
mortgage rates, said Pantheon Macroeconomics, with sales seen
falling to an annual rate of 700,000 from 763,000 in March,
although the monthly data is very volatile.
"A would-be buyer of a new home today needs to be prepared to
make monthly payments about 50% higher than in September last year,
and we've never seen a housing market that can take that sort of
shock without a significant drop in activity."
Forex:
The dollar's upward momentum could ease but the currency is
unlikely to turn weaker just yet, as the Fed will continue to take
a more aggressive approach to tightening policy than other central
banks, said Swissquote Bank.
"It's just that the others will also stop turning a blind eye on
the inflation problem. And that should slow the dollar
appreciation."
---
The euro pared gains against the dollar but only marginally
after data showed growth in eurozone manufacturing and services
activity slowed by more than expected in May.
The S&P eurozone manufacturing purchasing managers' index
fell to 54.4 in May from 55.5 in April and the services PMI dropped
to 56.3 from 57.7. The euro remained buoyant, however, after
Christine Lagarde said the ECB could lift its deposit rate out of
negative territory by the end of September.
---
Sterling could weaken as U.K.-EU tensions over the Northern
Ireland protocol that forms part of the Brexit deal look set to
escalate, said MUFG Bank.
Noting that Northern Ireland Secretary Brandon Lewis has
signalled that the U.K. plans to introduce legislation to override
parts of the Brexit deal in the next three weeks, MUFG said such
action could create elevated uncertainty that will weigh on
sterling. The EU could threaten scrapping the entire Brexit trade
agreement or suspend parts of the deal.
"The pound will get hit if these options are even mentioned as
considerations by the EU."
Energy:
Oil futures extended losses in Europe as Chinese stimulus
measures have so far failed to alleviate concerns about slowing
growth.
Adding to concerns is continued Hungarian opposition to the EU's
plan to ban imports of Russian oil. "The EU is increasingly
unlikely to approve a ban," said DNB Markets.
Other News:
Ukrainian officials have descended on Davos to make sure the
world doesn't forget about the war while contending with inflation
and other challenges, said Andrii Zhupanyn, head of the
parliament's subcommittee on gas policy.
On Europe's ongoing reliance on Russian natural gas, Zhupanyn
said "something needs to be done." A full embargo on Russian gas in
the EU is off the table for now but Ukraine is suggesting
alternatives that would deprive Moscow of revenue, Zhupanyn
said.
They include a tariff on Russian fuel or a requirement that
payments go into an escrow account that cannot be accessed for
general purposes--a workaround previously used for purchases of
Iranian oil.
Metals:
Base metal prices were lower in early trading in London, as data
from Australia and Japan signaled dips in manufacturing growth.
While both readings were expansionary, the data confirmed
manufacturing took a significant hit as inflation worries, China
lockdowns and supply-chain issues added pressure to global
industry.
TODAY'S TOP HEADLINES
Samsung Group to Invest About $356 Bln in Chips,
Biopharmaceuticals, Next-Generation Technology
SEOUL --Samsung Group said Tuesday that it would invest about
$356 billion over the next five years in its semiconductor and
biopharmaceuticals businesses, as well as other next-generation
technologies, where global competition is intensifying.
The plan extends and increases a decision to invest $190 billion
through 2024, announced in August last year.
Snap Issues Profit Warning on Economic Conditions Including
Inflation
Snap Inc. issued a profit warning Monday and said it planned to
slow hiring and spending, adding to adjustments social-media
companies are making to adapt to disruptions in the digital ad
market.
The company said it is grappling with a range of issues, from
rising inflation to Apple Inc.'s privacy policy changes to the
impacts from the war in Ukraine and other factors. "There is a lot
to deal with in the macro environment today," Chief Executive Evan
Spiegel said Monday at a JP Morgan Chase & Co. conference.
Conditions have deteriorated "further and faster" than expected
since the company issued its guidance for the current quarter, he
said.
Zoom Sales Growth Slows as Pandemic Boom Wanes
Zoom Video Communications Inc. sales continued to slow as work
life returns to normal and the demand for the company's
videoconferencing services winds down.
The San Jose, Calif.-based company on Monday said that sales
rose 12% in its first quarter, the slowest growth rate on record,
and that the top line is expected to rise less than 10% in the
current period.
Airbnb to Quit China Business as Harsh Lockdowns, Competition
Weigh on Demand
Airbnb Inc. plans to close its domestic business in China after
harsh Covid-19 lockdowns compounded the pain from mounting local
competition, according to people familiar with its decision.
Bookings of stays and experiences in China typically account for
about 1% of Airbnb's overall revenue, the people said.
Broadcom in Talks to Pay About $60 Billion for VMware
Broadcom Inc. is in talks to pay around $60 billion for VMware
Inc., people familiar with the matter said, in what would be one of
the biggest takeover deals of the year.
The two technology companies are aiming to announce a
cash-and-stock deal worth about $140 a share on Thursday, assuming
the talks don't fall apart, the people said. The price wasn't yet
set and could still move around, some of the people cautioned.
Meta's Mark Zuckerberg Is Sued by Washington, D.C., Attorney
General
The attorney general for Washington, D.C., sued Facebook founder
Mark Zuckerberg on Monday, alleging that he participated in
decision-making that led to the Cambridge Analytica data
breach.
Filed in D.C. Superior Court, the suit echoes charges that the
office of Attorney General Karl Racine leveled last year, when it
sought to name Mr. Zuckerberg as a defendant in a lawsuit it filed
in 2018 against Facebook Inc., now known as Meta Platforms Inc. A
judge denied that motion earlier this year.
Fed Officials Weigh Future Rate Policy Shift
Some Federal Reserve officials are starting to talk about a
possible shift in the central bank's interest-rate policy.
Federal Reserve Bank of St. Louis President James Bullard, who
spoke Friday on the Fox Business Network, and Atlanta Fed President
Raphael Bostic, who spoke Monday, both weighed in on the path for
rates.
China Central Bank Urges Lenders to Rev Up Support for Real
Economy
China's central bank urged the nation's lenders to step up
support for the real economy and meet credit demand, as the world's
second largest economy faces increased downward pressure.
In a meeting with 24 financial institutions, the People's Bank
of China and China's banking regulator urged lenders to "go all out
to stabilize the fundamentals of the economy," the PBOC said in a
statement Tuesday.
Eurozone Growth Remains Robust in May Thanks to Booming Service
Sector, PMIs Show
Eurozone economic growth remained robust in May despite
headwinds associated with the Ukraine war, Covid-19 pandemic supply
constraints and the rising cost of living, S&P Global said.
The eurozone composite purchasing managers index edged down to
54.9 in May from 55.8 in April, according to the preliminary
reading. This figure indicates an expansion of economic activity
for the 15th successive month, with the rate of growth easing only
modestly.
German Export Sentiment Improves in May
Sentiment among German exporters has brightened despite the
climate of uncertainty due to Russia's invasion of Ukraine, the Ifo
Institute said.
The Ifo export expectations index rose to 4.5 points in May from
3.0 in April.
Biden Says His Taiwan Policy Hasn't Changed
TOKYO-President Biden said he would maintain longstanding U.S.
policy toward Taiwan, a day after triggering global confusion when
he said the U.S. would respond militarily to any effort by China to
take the island by force.
"My policy has not changed at all. I stated that when I made my
statement yesterday," he told reporters here when asked whether he
would send U.S. troops to Taiwan if China invaded.
Quad Members Have Eyes on China, No Collective Comment on
Russia
TOKYO-President Biden and the leaders of Japan, India and
Australia agreed to set up joint monitoring of ships in the
Indo-Pacific region, a move designed to deter illegal Chinese
fishing and maritime militias, but they didn't jointly condemn
Russia for its invasion of Ukraine.
The leaders of the group of democratic countries called the
Quadrilateral Security Dialogue, also known as the Quad, met in
Tokyo to discuss the war in Ukraine, responses to the Covid-19
pandemic and ways to counter China by deepening their ties and
relations with other democracies.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
None scheduled
Economic Indicators:
None scheduled
Expected Major Events for Tuesday
00:30/JPN: May Japan Flash Manufacturing PMI
05:00/JPN: Apr Supermarket sales
05:30/JPN: Apr Tokyo area department store sales
05:30/JPN: Apr Nationwide department store sales
06:00/UK: Apr Public sector finances
06:45/FRA: May Monthly business survey (goods-producing
industries)
07:15/FRA: May France Flash PMI
07:30/GER: May Germany Flash PMI
08:30/UK: May Flash UK PMI
08:59/JPN: Mar Final Labour Survey - Earnings, Employment &
Hours Worked
10:00/UK: May CBI Distributive Trades Survey
10:00/FRA: 1Q OECD trade statistics release
12:55/US: 05/21 Johnson Redbook Retail Sales Index
13:45/US: May US Flash Manufacturing PMI
13:45/US: May US Flash Services PMI
14:00/US: Apr New Residential Sales
14:00/US: May Richmond Fed Business Activity Survey
17:00/US: Apr Money Stock Measures
20:30/US: 05/20 API Weekly Statistical Bulletin
22:59/US: ISM Semiannual Report On Business Economic
Forecast
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Tuesday
Abercrombie & Fitch Co (ANF) is expected to report $0.08 for
1Q.
Agilent Technologies (A) is expected to report $0.94 for 2Q.
AutoZone Inc (AZO) is expected to report $26.19 for 3Q.
Best Buy Co Inc (BBY) is expected to report $1.64 for 1Q.
Caleres Inc (CAL) is expected to report $0.85 for 1Q.
California First Leasing Corp (CFNB) is expected to report for
3Q.
Canadian Solar (CSIQ) is expected to report $-0.07 for 1Q.
Citi Trends Inc (CTRN) is expected to report $0.43 for 1Q.
Clearday Inc (CLRD) is expected to report for 1Q.
FTI Consulting (FCN) is expected to report $1.74 for 4Q.
Genesis Healthcare Inc (GENN) is expected to report $-0.33 for
4Q.
Intuit Inc (INTU) is expected to report $6.23 for 3Q.
Ituran Location (ITRN,ITRN-TV) is expected to report for 1Q.
LiveRamp Holdings Inc (RAMP) is expected to report $-0.40 for
4Q.
NetEase Inc - ADR (K3MD.SG,NTES) is expected to report $1.51 for
1Q.
Nordstrom Inc (JWN) is expected to report $-0.06 for 1Q.
Ooma Inc (OOMA) is expected to report $-0.05 for 1Q.
Petco Health & Wellness Co Inc (WOOF) is expected to report
for 1Q.
Ralph Lauren Corp (RL) is expected to report $0.37 for 4Q.
Toll Brothers (TOL) is expected to report $1.50 for 2Q.
Trip.com Group Ltd (K3RD.SG,TCOM) is expected to report for
1Q.
Urban Outfitters (URBN) is expected to report $0.43 for 1Q.
iMedia Brands Inc (IMBI) is expected to report for 1Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
Abercrombie & Fitch Cut to Neutral From Buy by Citigroup
American Eagle Outfitters Cut to Neutral From Buy by
Citigroup
Asbury Automotive Cut to Underweight From Equal-Weight by Morgan
Stanley
Axon Enterprise Cut to Equal-Weight From Overweight by Morgan
Stanley
Carter's Cut to Sell From Buy by Citigroup
Children's Place Cut to Sell From Neutral by Citigroup
Dow Cut to Neutral From Overweight by Piper Sandler
DTE Energy Raised to Outperform From Neutral by Credit
Suisse
frontdoor Cut to Hold From Buy by Truist Securities
Gap Inc Cut to Sell From Neutral by Citigroup
Group 1 Auto Cut to Underweight From Equal-Weight by Morgan
Stanley
HP Cut to Neutral From Buy by Citigroup
Luna Innovations Raised to Outperform From Market Perform by
Northland Capital Markets
Motorola Solutions Raised to Overweight From Equal-Weight by
Morgan Stanley
Nike Cut to Neutral From Outperform by KGI Securities
Ralph Lauren Cut to Neutral From Buy by Citigroup
Trimble Raised to Equal-Weight From Underweight by Morgan
Stanley
Under Armour Cut to Neutral From Buy by Citigroup
Zebra Raised to Equal-Weight From Underweight by Morgan
Stanley
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
May 24, 2022 05:55 ET (09:55 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.