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Dow Futures Gain As Oil Prices Jump, US Recovery Boom Tests Tech Bulls

The Tuesday Market Minute

  • Global stocks mixed as Asia holidays thin regional trading, and Europe looks for direction amid a quickening of its vaccine rollout and plans to ease travel restrictions in the coming months.
  • U.S. markets, meanwhile, are keying off the economic recovery, which the Atlanta Fed’s GDPNow forecasting tool suggests could surge 13.2% this quarter.
  • Oil prices jump as fuel demand quickens amid state re-openings, with New York, New Jersey and Connecticut unveiling plans for later this month.
  • Benchmark 10-year note yields bump higher, at 1.62%, but remain well south of the 15-month high of 1.77% recorded in mid April.
  • Around 139 S&P 500 companies will report this week, including Moderna, General Motors and PayPal. with March quarter earnings expected to rise 46.3% from last year to $396.2 billion.
  • CDC data shows 105.5 million Americans have now been fully vaccinated against the coronavirus, with around 246.7 million doses administered as of Monday.
  • U.S. equity futures suggest softer open on Wall Street ahead of earnings from Pfizer, CVS Health, T-Mobile and Under Armour and April durable goods orders at 8:30 am Eastern time.

Wall Street futures edged lower Tuesday, while the dollar rallied and tech stocks sagged, as investors looked to further signs of a booming U.S. economy that could extend the ongoing rotation into higher-yielding value stocks amid the waning months of the coronavirus pandemic.

The Atlanta Fed’s GDPNow forecasting tool suggests the U.S. economy will grow at a 13.2% clip for the three months ending in June, an astonishing pace supported by trillions in government spending and record-low interest rates from the Federal Reserve paralleled with re-opening decisions in scores of states around the country and a vaccine rate that has fully-inoculated nearly 106 million people.

That growth, which will likely lead to massive job gains in the coming months — including a potential million-plus non-farm payroll reading this Friday — is boosting commodity prices around the world, extending a rotation into so-called re-opening stocks and triggering at least some modest selling in the tech sector following last week’s blowout earnings from the Big Five. 

With today’s session likely focused on before-the-bell earnings from CVS Health  (CVS) – Get Report and Pfizer  (PFE) – Get Report, as well as a reading of April durable goods orders at 8:30 am Eastern time, U.S. equity futures are trading modestly lower heading into the opening bell.

Contracts tied to the Dow Jones Industrial Average are indicating a 130 point decline while those linked to the S&P 500, which is up 11.62% for the year and within 20 points of its all-time intra-day high, are priced for a 22 point pullback.

Nasdaq Composite futures, meanwhile, are indicating a larger 117 point retreat amid pre-market declines for Apple  (AAPL) – Get Report, Tesla  (TSLA) – Get Report and Microsoft  (MSFT) – Get Report

Oil prices were active in overnight trading, with news of state re-openings in New York, New Jersey and Connecticut taken as a signal for higher fuel demand in the coming months, although offset by the ongoing surge in coronavirus cases in India, the world’s second-largest energy market.

Brent futures contacts for July delivery were marked $1.31 higher at $68.87 per barrel while WTI futures for June jumped $1.21to $65.68 per barrel.

In Europe, higher commodity prices lifted mining stocks, while the EU’s plans to allow fully-vaccinated tourists to visit the region later this summer boosted travel stocks, although the Stoxx 600 was unable to hold onto earlier gains and slipped 0.07% in mid-morning trading. 

Overnight in Asia, spring market closures in Shanghai and Tokyo thinned regional trading for a third consecutive session, although the benchmark MSCI ex-Japan index managed a modest 0.13% gain heading into the final hours of trading.