Five things you need to know before the market opens on Tuesday May 9:
1. -- Stock Futures Lower With Inflation Data In Focus
U.S. equity futures slipped lower Tuesday, while the dollar held gains against its global peers and Treasury yields bumped higher, as investors looked to a crucial reading on domestic inflation later in the week while continuing to track weakness in the banking sector.
Stagflation concerns continue to linger, however, as price pressures remain elevated in a robust job market while broader economic trends suggest near-term weakness.
Overnight data from China, in fact, showed a deeper decline in imports into the world's biggest economy over the month of April, with export growth easing to 8.5% from last year, pegging its normally swollen trade surplus at just $90 billion.
In the U.S. the Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices, published late Monday, showed a tightening in credit standards, a slowdown in new loan growth and the weakest credit demand since 2009, suggesting the early March collapse of Silicon Valley Bank, as well as the sale of First Republic to JPMorgan (JPM), continues to affect the U.S. financial system.
"The Fed’s April Senior Loan Officer Survey shows that banks continue to tighten credit conditions and charge higher spreads, in the wake of the huge increase in the funds rate and the regional bank failures," said Ian Shepherdson of Pantheon Macroeconomics. "Today’s NFIB small business survey is likely to echo these findings."
Regional bank stocks traded mixed yesterday, with PacWest (PACW) ending the session modestly higher, but many look set to resume their recent slide Tuesday as Treasury yields tick higher and broader sector confidence remains elusive.
Benchmark 2-year Treasury note yields were marked 3 basis points higher in overnight trading at 3.991%, with today's $40 billion auction of new 3-year notes in focus, while 10-year paper nudged higher, to 3.496%, ahead of tomorrow's April inflation data and $35 billion 10-year auction.
Analysts expect headline inflation to have held at 5% over the month of April, with only modestly easing pressures in the closely-tracked core reading, when the data is published at 8:30 am Eastern time.
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 were priced for a 14 point opening bell decline while those linked to the Dow Jones Industrial Average are set for a 105 point pullback. The tech-focused Nasdaq was marked 55 points lower.
In Europe, the region-wide Stoxx 600 was marked 0.46% lower in early Frankfurt trading while London's FTSE 100 fell 0.22% in London.
Overnight in Asia, the region-side MSCI ex-Japan index was marked 0.87% lower into the close of trading while the Nikkei 225 hit a fresh eight-month high after rising 1.01% to close at 29,242.82 points.
2. -- PayPal Slides As Margin Concerns Offset Earnings Beat
PayPal (PYPL) shares slumped lower in pre-market trading after the payments group posted better-than-expected first quarter earnings and boosted its full-year profit forecast but noted weakening margins over the coming months.
PayPal said adjusted earnings for the three months ending in March rose 44.4% from last year to $1.17 per share, well ahead of Street forecasts, with revenues up 8.6% to $7.04 billion and payments volumes up 12% to $354.5 billion..
PayPal has taken out millions in costs this year, including a 7% reduction of its workforce, but forecast June quarter earnings of between $1.15 and $1.17 per share, just shy of Refinitiv forecasts, suggesting the austerity measures will have limited impact on margins over the second half of the year.
"We're delivering the vast majority of the margin expansion on the year from an operating margin standpoint in the first half of the year." said PayPal's corporate finance VP Gabrielle Rabinovitch. "The back half, we actually have some lapping dynamics and some nuances that will result in much more modest operating margin expansion for 2H overall."
PayPal shares were marked 4.6% lower in pre-market trading to indicate an opening bell price of $72.05 each.
3. -- Fox Shares Edge Higher Ahead of Q3 Earnings Report
Fox Corp. (FOXA) shares nudged higher in pre-market trading ahead of the broadcast media and movie studio group's third quarter earnings prior to the opening bell.
Fox, which is facing a host of both industry-wide and company-specific pressures heading into the summer months, is expected to see earnings rise 7.4% from last year to 87 cents per share on revenues of just $4 billion.
Management's commentary on the fallout from its $787.5 million settlement with Dominion Voting Systems, which alleged the broadcaster had deliberately spread misinformation that linked the voting machines and technology company to false election-rigging claims made by prominent Republican lawmakers, including President Donald Trump.
Remarks related to the firing of star host Tucker Carlson will be closely tacked by investors as media stocks come under increasing pressures over fading ad sales, declining viewership and increased competition from streaming.
An ongoing strike by film and television writers', now entering its second week, is also holding back production and could impact Fox Studio release times heading into the summer and autumn months.
Fox Corp shares were marked 0.9% higher in pre-market trading to indicate an opening bell price of $32.46 each.
4. -- Sam Bankman-Fried Asks Judge to Dismiss Bulk of Changes in FTX Collapse
Sam Bankman-Fried, the indicted former CEO of collapsed crypto trading platform FTX, urged a judge late Monday to dismiss the bulk of charges against him, arguing prosecutors 'rushed to judgement' following the firm's spiral into bankruptcy late last year.
Bankman-Fried, 31, faces 13 criminal counts related to the FTX collapse, including fraud and conspiracy charges to which he has pleaded 'not guilty'. His trial in set for October 2 in Manhattan.
However, lawyers for the former FTX boss asked judge Lewis Kaplan to dismiss 10 of the 13 charges, arguing that government prosecutors "jumped in with both feet, improperly seeking to turn these civil and regulatory issues into federal crimes". Judge Kaplan will hear oral arguments on the dismissal request in mid-June.
Bankman-Fried, meanwhile, remains under house arrest at his parents' home in Palo Alto, California under a $250 million bond.
5. -- President Biden Set For 'Big Four' Meeting As Debt Ceiling Deadline Looms
President Joe Biden will meet with Republican House Speaker Kevin McCarthy, Republican Senate Minority Leader Mitch McConnell and House Minority Leader Hakeem Jeffries later today in Washington for the first -- and what could be a final -- attempt to solve a months-long deadlock over the debt ceiling.
The meeting between President Biden and the so-called 'Big Four' Congressional lawmakers comes amid increasing concern that the U.S. risks passing a June 1 deadline that could trigger a sovereign debt default.
Republican lawmakers have refused to agree an increase in the $31.4 debt ceiling, which the U.S. breached earlier this year, unless its tied to significant spending cuts, a view echoed by 43 Senate Republicans in a letter to Majority Leader Chuck Schumer over the weekend.
President Biden, meanwhile, has refused to negotiate any changes to his budget, accusing his Republican rivals of playing "chicken" with the nation's credit rating.
“It’s Congress’ constitutional duty to act to prevent default,” said White House Press Secretary Karine Jean-Pierre about the Tuesday meeting. “That’s what the president is going to be very clear about.”
