The Tuesday Market Minute
- Global stocks extend declines, as bond yields rise and commodity prices jump, as growth and inflation prospects improve.
- Johns Hopkins professor sees U.S. herd immunity in April, while Britain eases lockdown restrictions and plots its exit from the pandemic.
- Copper prices hit fresh 9.5 year high, while Brent closes in on $60 per barrel as demand prospects improve and Texas output delays boost prices.
- Benchmark 10-year Treasury note yields test 1.40% in overnight trading as Fed Chair Powell prepares for his Senate Banking Committee testimony later today.
- Tesla shares slide to the lowest levels since Christmas as rival Lucid Motors gears up for new listing.
- U.S. equity futures suggest a weaker open on Wall Street ahead of fourth quarter earnings from Home Depot and Macy’s and Federal Reserve Chairman Jerome Powell’s testimony at 10:00 am Eastern time.
U.S. equity futures were mixed Tuesday, with tech stocks leading the decline, as market interest rates around the world continued to climb amid improving recovery hopes and a near-term end to the global pandemic.
Commodity prices continue to suggest a big rebound in global demand over the second half of the year, with three-month copper futures in London rising to a nine-and-a-half year high of $9,305 per ton in London trading and Brent crude testing the $66 per barrel market in early European dealing.
Bank of America raised its US GDP forecasts for this year and next, predicting a 6.5% advance for 2021 as cities pare back business restrictions amid a sharp slowdown in infections and steady advances in vaccination rates.
Johns Hopkins professor Martin Makaray, in fact, has suggested the U.S. will reach so-called ‘herd immunity’, in terms of natural infections and vaccinations, sometime in April.
Prior to that, however, President Joe Biden is likely to have signed a $1.9 trillion coronavirus stimulus bill, currently working its way through Congress, that will both see $1,400 checks mailed to American households while adding trillions more to the nation’s already-staggering debt load.
The corresponding moves in bond yields suggest investors are way of the inflationary impact of both the new stimulus and the pace of the recovery, with benchmark 10-year notes hitting a fresh 13 month high of 1.396% in overnight trading.
Investors are likely to key on Federal Reserve Chairman Jerome Powell’s testimony to the Senate Banking Committee at 10:00 am Eastern time — the first of his two appearances before lawmakers this week — for clues as to how long the central bank is prepared to tolerate faster inflation as it waits for a fuller economic recovery.
Stock futures, meanwhile, look set for another opening bell pullback, with the Nasdaq Composite index — the most sensitive to interest rate increases — priced for a 230 point decline.
S&P 500 futures are primed for a 15 point dip while contracts tied to the Dow Jones Industrial Average suggest a modest 15 point pullback.
Home Depot (HD) – Get Report shares, meanwhile, slipped 2.8% after the home improvement retailer posted stronger-than-expected fourth quarter earnings but held back its 2021 profit guidance amid the ongoing pandemic uncertainty.
The retreat could be linked to volatility in bitcoin, which tumbled to as low as $46.940 each in overnight trading, taking its pullback from last week’s all-time highs to around 19.2%. Tesla said earlier this month that it has around $1.5 billion invested in the crypto currency.
Overnight in Europe, stocks extended declines into a second consecutive session as interest rates edged higher, with the Stoxx 600 falling 1.16% in Frankfurt and Britain’s FTSE 100 sliding 0.4% in London.
In Asia, the Nikkei 225 in Tokyo was closed for the traditional Emperor’s Birthday holiday, while the region-wide MSCI ex-Japan benchmark edged 0.26% higher heading into the final hours of trading.