U.S. equity futures edged lower Tuesday, while the dollar slipped modestly lower against its global peers and oil prices bounced higher, as investors adopted a cautious stance on risk ahead of a key inflation reading later in the week.
Quiet August trading volumes are also keeping traders in check Tuesday as the earnings season draws to a close and markets remain laser-focused on Wednesday’s July inflation reading, which is expected to indicate a pullback in headline CPI from its 41-year peak of 9.1% and possibly being a series of readings that could provide the Federal Reserve with enough data to conclude that its interest rate hikes are finally having an effect.
Some, however, are worried that Friday’s blowout jobs number, which included 528,000 new hires alongside wage growth of 5.2%, will continue to power inflation readings over the months ahead.
That has bets on another jumbo Fed rate hike in September holding at around 63%, according to the CME Group’s FedWatch, with smaller hikes penciled in for November and December.
Still, others note that the U.S. Treasury curve remains steeply inverted — a condition that has preceded nearly every recession for the past 25 years — as growth remains elusive both at home and in major economies around that world.
That concern was amplified by news of fresh lockdowns in China Tuesday as Beijing continues to implement a ‘zero Covid’ policy that has threatened to turn the world’s second-largest economy into recession.
The new restrictions, centered around the tourist island of Hainan, added downward pressure to commodity prices overnight and followed data earlier in the week that indicated the weakest July crude import totals in at least for years.
Still, WTI crude futures for September delivery were marked 99 cents higher at $91.75 per barrel as the dollar moved lower, while Brent contracts for October, the global benchmark, rose $1.20 to $97.84 per barrel.
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The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.26% lower at 106.153 while benchmark 10-year Treasury notes yields rose 5 basis points to 2.807%
In overseas markets, European stocks drifted south, with the Stoxx 600 falling 0.6% in mid-day Frankfurt trading, while overnight in Asia the region-wide MCSI ex-Japan index fell 0.06%.
On Wall Street, futures tied to the S&P 500 are indicating a modest 13 point decline while those liked to the Dow Jones Industrial Average are priced for a 25 point dip. Futures linked to the tech-focused Nasdaq are indicating an 85 point retreat.
Tesla (TSLA) – Get Tesla Inc. Report shares nudged 0.5% lower in pre-market trading following data from China indicating a steep decline in July sales and exports amid planned maintenance breaks at its Shanghai gigafactory.
Bed, Bath & Beyond (BBBY) – Get Bed Bath & Beyond Inc. Report shares extended their August surge amid what could be renewed retail demand for the struggling home goods group and bets on a near-term sale of its lucrative buybuy Baby division.
Micron Technology (MU) – Get Micron Technology Inc. Report shares slumped 4.6% after the chipmaker lowered its near-term revenue guidance amid what it described as “macroeconomic factors and supply chain constraints” that have blunted global demand.
Novavax (NVAX) – Get Novavax Inc. Report shares plunged 31.6% after the drugmaker slashed its full-year revenue forecast and warned that it does not expect to sell any more of its Covid vaccines in the United States this year.
Take-Two Interactive (TTWO) – Get Take-Two Interactive Software Inc. Report shares moved 3.4% lower after the ‘Grand Theft Auto’ maker posted softer-than-expected first quarter sales and clipped its full-year revenue forecast amid emerging weakness in the video game sector.