MARKET WRAPS
Watch For:
PPI for May; Canada Manufacturing Survey for April
Opening Call:
Stock futures rose early Tuesday, suggesting U.S. markets were poised for a slight recovery after Monday’s rout.
Investors are awaiting the Federal Reserve’s next interest-rate decision, due Wednesday. Market pricing shifted rapidly on Monday to imply that an increase of 0.75 percentage point was a near certainty. Futures markets previously suggested a less than one-in-four chance of such a large increase.
While many markets have come under pressure this year, rising rates have had a particularly large effect on the shares of money-losing companies that were once pandemic darlings and other speculative bets.
“I don’t think we’re going to see anything like a V-shaped recovery,” Rick Pitcairn, chief investment officer at Pennsylvania-based multifamily office Pitcairn, said of the stock market. “The way we’ll rebuild will be in a more muted way-it won’t be right back to the high-speculation stocks.”
Forex:
The dollar eased back slightly but hovered around a two-decade high against a basket of major currencies, while the yen strengthened.
The dollar’s gains this week have been driven by safe haven flows and rising Treasury yields as the market now expects the Fed to front-load tightening and lift rates even higher to tame inflation, said MUFG Bank.
Read: Fed Likely to Consider 0.75-Percentage-Point Rate Rise This Week
Bonds:
Yields on shorter-dated Treasurys briefly rose above those on longer-dated debt early Tuesday, before reversing course. More sustained periods of yield-curve inversion, where shorter-term securities have higher yields, have often preceded previous recessions.
Energy:
Crude futures posted modest gains in Europe, recovering earlier losses, as tight global supplies were countering fears that slowing economic growth would undermine oil demand.
OPEC recently pledged to increase its output but the news hasn’t offered much relief as analysts expect the cartel will be unable to meet its planned supply quotas.
Read: Supply Challenges in Focus as Market Waits for OPEC’s Monthly Report
UBS has raised its Brent forecasts because of the tightness, citing “low oil inventories, dwindling spare capacity, and the risk of supply growth lagging demand growth over the coming months.”
The bank has forecast prices of $130 a barrel by the end of third quarter.
Metals:
Copper edged up but gold remained in the red in European trading, with metals having been sold off sharply Monday after the S&P 500 moved into a bear market over macroeconomic concerns.
“Macro markets are in risk-off mode,” wrote Peak Trading Research, adding that investors are worried about out-of-control inflation and the ability of central banks to tackle this.
“The dollar is at new 20-year highs, the S&P 500 is in bear market territory, commodity currencies are weak, and metals are lower.”
TODAY’S TOP HEADLINES
Elon Musk to Participate in Twitter All-Hands Meeting Thursday
Elon Musk is set to participate in an all-hands meeting with Twitter Inc. employees on Thursday, marking the first time the billionaire will have spoken directly with the company’s workforce since he began his courtship of it in April.
Twitter Chief Executive Parag Agrawal announced the meeting in an email to staffers on Monday, saying they could submit questions for Mr. Musk in advance, a spokesman said. The company’s marketing chief, Leslie Berland, will moderate the event, he said.
Disney Loses Streaming Rights for Indian Premier League Cricket to Rival Viacom18
Viacom18 has won streaming rights to cricket’s Indian Premier League, according to people familiar with the situation, taking a valuable property away from Walt Disney Co. as competition in sports-streaming rights intensifies.
The winning bid from Viacom18, a joint venture between Paramount Global, Indian billionaire Mukesh Ambani’s Reliance Industries Ltd. and others, was $2.6 billion, one of the people said. Losing streaming rights to IPL cricket presents a major challenge to Disney’s aspirations to quickly grow its global streaming subscriber base, analysts have said.
Disney CEO Bob Chapek Supported Peter Rice. Until He Didn’t.
The decision by Walt Disney Co. Chief Executive Bob Chapek to fire top lieutenant Peter Rice from his position as head of the company’s General Entertainment Content unit last week had been under consideration for months, say people familiar with the matter.
Yet it came less than a year after Mr. Chapek had endorsed Mr. Rice’s leadership with a large bonus and a new multiyear deal that ran through 2024, people close to Mr. Rice said.
Oracle Sales Top Expectations Against Uncertain Economic Backdrop
Oracle Corp. sales rose in the latest quarter, soothing concerns about the business-software giant’s outlook against a backdrop of economic uncertainty affecting technology companies.
The Austin, Texas-based company said companywide revenue was up 5% to $11.84 billion in its fiscal fourth quarter, while total cloud revenue grew 19% from a year earlier to $2.9 billion. Analysts polled by FactSet expected $11.61 billion in total revenue.
Bull Market’s Winners Dragged the S&P 500 Into a Bear Market
Stocks that soared during the pandemic rally have been some of the biggest losers in this year’s downturn, a reversal that signals investors’ concerns over the valuations of many risky assets and the broad outlook for inflation and growth.
After the S&P 500 took a steep dive in early 2020 following international lockdowns, large companies in the technology and consumer-discretionary sectors sent the value-weighted index on a historic rebound that culminated in a record close on Jan. 3 this year.
Fed Likely to Consider 0.75-Percentage-Point Rate Rise This Week
A string of troubling inflation reports in recent days is likely to lead Federal Reserve officials to consider surprising markets with a larger-than-expected 0.75-percentage-point interest-rate increase at their meeting this week.
Before officials began their premeeting quiet period on June 4, they had signaled they were prepared to raise interest rates by a half percentage point this week and again at their meeting in July. But they also had said their outlook depended on the economy evolving as they expected. Last week’s inflation report from the Labor Department showed a bigger jump in prices in May than officials had anticipated.
Glynn’s Take: RBA Gearing Up for a Run of Blockbuster Rate Hikes
SYDNEY-The Reserve Bank of Australia has likely already binned the inflation forecasts it published in early May and knows it will have to sharply revise up its expectations as a prelude to a string of interest-rate increases to tame prices.
In November last year, the RBA forecast sedate consumer price inflation of just 2.25% this year. That number was moved up to 3.25% in February, and to 6% in May. A number closer to or even above 7% should be expected in the next batch of forecasts due early August.
German Inflation Hits Five-Decade High, Confirming Preliminary Estimates
Inflation in Germany accelerated in May, reaching its highest level in nearly half a century on higher food and energy prices.
Consumer prices rose 7.9% on year measured by national standards and by 8.7% on year by European Union harmonized standards, unchanged from the preliminary readings published on May 30, according to data from the German statistics office Destatis released Tuesday.
Russian Forces Expand Control of Strategic City Severodonetsk
U.S., U.K. Collaborate to Spur Innovation in Tech Used to Combat Money-Laundering
The U.S. and U.K. governments are teaming up to encourage the development of new machine-learning technologies that could be used to combat money laundering.
The White House and the U.K. government on Monday said they are collaborating on a “prize challenge” program meant to spur innovation in ways to train software to combat financial crime. Prize challenge programs provide financial awards to members of the public who offer solutions to a problem posed by a government agency.
Senate Negotiators Move Cautiously to Turn Gun Framework Into Legislation
WASHINGTON-Over the weekend, a bipartisan group of senators struck a deal to reduce gun violence after a series of mass shootings. Now, the lawmakers need to stick together to sell it to colleagues with sharply different stances on gun ownership to pass any legislation into law this summer.
The 20 senators, 10 from each party, are looking to pass what could be the broadest federal legislation on guns in decades. The framework released Sunday aims to address illegal sales of guns and to fund mental-health programs and school security. It also provides incentives for states to implement and maintain red-flag laws and includes juvenile records in background checks for people buying guns who are under 21 years old.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Blackline Safety 2Q
Coveo Solutions 1Q
Fire & Flower 1Q
Flow Beverage 2Q
GURU Organic Energy 2Q
Roots 1Q
Economic Indicators (ET):
0830 Apr New motor vehicle sales
0830 Apr Monthly Survey of Manufacturing
Expected Major Events for Tuesday
04:30/JPN: Apr Revised Industrial Production
06:00/GER: May WPI
06:00/GER: May CPI
06:00/UK: May UK monthly unemployment figures
08:30/UK: 1Q Mortgage Lenders and Administrators Return (MLAR) statistics
09:00/GER: Jun ZEW Indicator of Economic Sentiment
10:00/US: May NFIB Index of Small Business Optimism
10:00/FRA: 1Q OECD Quarterly National Accounts G20 GDP growth
12:30/CAN: Apr New motor…
Read More: North American Morning Briefing: Stock Futures Rise But Fed Unease Continues