Stock futures nudge higher as dollar retreats; oil prices steady as OPEC report, demand bets unsettle markets; GameStop edges higher after reports of Carl Icahn short; Zoom slumps after cutting sales outlook in ‘challenging’ environment and Dell Technologies slips lower as profit outlook clouds solid Q3 earnings.
Five things you need to know before the market opens on Tuesday November 22:
1. — Stock Futures Nudge Higher As Dollar Retreats
U.S. equity futures nudged higher Tuesday, while the dollar retreated from its recent ten-day highs and Treasury bond yields retreated, as investors crept back into risk markets amid some dovish commentary on rates from Federal Reserve officials that offset concerns over China’s deepening Covid crisis.
Cleveland Fed President Loretta Mester said Monday during an interview with CNBC that she favors a smaller 50 basis point rate hike for the central bank’s next meeting in December, but noted that “I do think we’re going to have to let the economy tell us going forward” about the pace of future increases.
San Francisco President Mary Daly, meanwhile, said there were signs of cooling inflation in the world’s biggest economy even as she cautioned that it was premature to “taking anything off the table” in terms of a December hike.
The CME Group’s FedWatch pegs the chances of a 50 basis point move next month at 71.1%, down from 85.4% last week, while the U.S. dollar index fell 0.38% against a basket of its global peers to trade at 107.438 in overnight dealing.
Benchmark 2-year note yields eased to 4.491% following a stronger-than-expected auction of $42 billion in new paper yesterday, while 10-year notes backed up to 3.791%.
The gap between 2-year and 10-year notes still signals recession, however, while yields on one-month Treasury bills again topped those for 30-year bonds — by around 1 basis point — for only the second time since late 2019.
Each of the two times this has happened — the other was in 2007 — the U.S. fell into recession within six months.
China’s Covid challenges continue to test the market’s nascent risk appetite in the holiday-shortened week, as well, with infections rising to just over 28,200 — the highest since April — and the capital city of Beijing instituting stricter measures on testing, travel, schools and businesses.
Heading into the start of the trading day on Wall Street, Futures contracts tied to the S&P 500 are priced for a 7 point opening bell gain while those linked to the Dow Jones Industrial Average are indicating a 50 point bump. The tech-heavy Nasdaq is priced for a 17 point gain.
Overnight in Asia, stocks in China mere mixed amid the newly-unveiled Covid restrictions in China, while the MSCI ex-Japan index slipped 0.07% into the close of trading. Japan’s Nikkei 225 closed 0.61% higher in Tokyo.
In Europe the region-wide Stoxx 600 was marked 0.42% higher in the opening hours of trading in Frankfurt, with London’s FTSE 100 up 0.77% in London.
2. — Oil Prices Steady As OPEC Report, Demand Bets Unsettle Markets
Global oil prices steadied Tuesday following a whipsaw session on Monday that saw prices tumble to the lowest level in more than ten months on reports of a production boost from OPEC, only to come roaring back by the end of the session following denial of the plan by Saudi Arabia’s Energy Minister.
China’s Covid crisis is keeping a lid on demand in the world’s biggest energy market, but conflicting reports of OPEC’s production plans heading into next month’s regular meeting in Vienna, as well as a looming price cap on Russian crude that forms part of sanctions agreed by G7 member states are adding to the market’s recent volatility.
“It would be an odd move from OPEC+ to increase supply when there is still so much demand uncertainty, and while there is still so little clarity on what the full impact of the EU ban on Russian oil will be,” said ING analysts.
WTI crude futures for January delivery, which are tightly linked to U.S. gasoline prices, were marked 21 cents higher Tuesday at $80.25 per barrel. Brent crude contracts for the same month, the global benchmark, were up 20 cents at $87.65 per barrel.
3. — GameStop Edges Higher After Reports of Carl Icahn Short
GameStop (GME) – Get Free Report shares edged higher in pre-market trading after reported indicated billionaire activist investor Carl Icahn has established a big bet against the meme-stock video game retailer.
Bloomberg reported late Monday that Icahn began shorting GameStop shares at the peak of the meme-stock frenzy, which lifted the stock to as high as $81.25 each (on a split-adjusted basis) in late January of 2021.
GameStop, which unveiled a partnership with bankrupt crypto exchange FTX in September, as part of a plan to “introduce more GameStop customers to FTX’s community and its marketplaces for digital assets”, posted its sixth consecutive quarterly loss as sales fell 4% to $1.136 billion.
Recent data from S3 Partners suggests short interest in GameStop shares represents around 17.8% of the group’s outstanding float, a figure that amounts to bets of around $1.26 billion.
GameStop shares were marked 0.68% higher in pre-market trading to indicate an opening bell price of $25.33 each.
4. — Zoom Slumps After Cutting Sales Outlook In ‘Challenging’ Environment
Zoom Video Communications (ZM) – Get Free Report shares slumped lower in pre-market trading after the video conferencing specialists forecast softer-than-expected near-term revenues that clouded a solid third quarter earnings report.
Zoom said adjusted profits for the three months ending in October were pegged at $1.17 per share, firmly ahead of Street forecasts, as revenues rose 5% to a Street-beating 1.09 billion.
Looking into the final months of 2022, however, Zoom said it sees revenues in the region of $1.095 billion and $1.105 billion, just shy of Refinitiv estimates, with a lower-than-expected tally of between $4.37 billion and $4.38 billion for the coming fiscal year.
“We still face the backdrop of a challenging macroeconomic environment,” CEO Eric Yuan told investors on a conference call late Monday. “We continue to see FX pressure and heightened deal scrutiny for new business but remain focused on delivering happiness to our customers by innovating our platform and expanding our go-to-market capabilities.”
Zoom shares were marked 9% lower in pre-market trading to indicate an opening bell price of $73.05 each.
5. — Dell Technologies Slips Lower As Profit Outlook Clouds Solid Q3 Earnings
Dell Technologies (DELL) – Get Free Report shares moved lower in pre-market trading after the PC and laptop maker posted stronger-than-expected third quarter earnings but noted that weakening demand and strong U.S dollar would linger as headwinds into the final three months of the year and beyond.
Dell earned an adjusted $2.30 per share over the three months ending in October, smashing Street forecasts by around 60 cents per share, even as sales fell 6% to $247billion, a tally that also came in ahead of analysts’ forecasts.
Softer PC demand and a surging U.S. dollar, however, will keep fourth quarter sales in the region of $23 billion to $24 billion, Dell said, with earnings forecast between $1.50 to $1.80 per share.
Dell shares were marked 2.1% lower in pre-market trading to indicate an opening bell price of $40.21 each.