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(Wednesday Market Open) Investors appeared to be bracing for another down day as the bond market was attracting more buyers ahead of the market open and pushing the 10-year Treasury yield (TNX) down about 20 basis points. Equity index futures are pointing to a lower open as retailers take another blow and rising lockdowns in China take a toll on the technology sector. Potential Market Movers
Suppliers for Apple (NASDAQ: AAPL) components are warning that they may struggle to deliver parts for Apple products due to renewed COVID-19 lockdowns in China. Apple has asked its suppliers to speed up iPhone development in reaction to the news. AAPL traded 1.21% lower premarket.
We’ve learned over the last few years that China’s lockdowns can affect other parts of the economy. Yesterday, Airbnb
announced plans to close its China operations to visitors, but not for Chinese tourists traveling globally. The Wall Street Journal is reporting that Starbucks , InterContinental Hotels Group , Hilton Worldwide are reporting significant declines in revenue as China’s zero-tolerance policy on COVID-19 continues.
In another blow to major retailers, Dick’s Sporting Goods
fell 16.68% in premarket trading despite beating on top- and bottom-line numbers. Like many other chains the past two weeks, DKS lowered its forward earnings guidance and reduced its same-store sales projections from 8% to 2% for 2022.
However, companies that cater to the higher-end consumer appear to be doing better. Nordstrom
was up 3.92% before the opening bell after reporting solid Q1 sales, a smaller-than-expected loss, and offering guidance at the higher end of its range. JWN cited its appeal to higher-income consumers as a reason why inflation hasn’t hurt them as much as other retailers.
After the market close on Tuesday, luxury homebuilder Toll Brothers
reported better-than-expected earnings and revenues. This was positive news for a homebuilding industry hit earlier in the day by a big drop in new home sales. However, TOL is the leading builder of luxury homes which also caters to a higher-income consumer less sensitive to rising real estate prices and mortgage rates. The stock rose 3.82% in premarket trading.
Before the market open, the durable goods report was released and showed g lower-than-expected orders in April. The numbers were dragged down by a decrease in automobile orders, but in other areas of the economy, orders appear to be relatively strong.
Later today, the Federal Reserve will release its May Federal Open Market Committee (FOMC) meeting minutes, giving investors a chance to review what discussions took place. However, Fed members have been public about their plans for another 50-basis-point hike in the June meeting. Currently, the CME FedWatch Tool is projecting 50-basis-point hikes in June and July as well as further rate increases through the rest of the year. Investors will want to watch the bond market’s reaction to the minutes for additional insights on where the Fed might be heading.
The Cboe Market Volatility Index (VIX) seems to be stuck to the 30 level, which suggests that tension among investors remains high and cautious—one more reason the bond market continues to attract attention. Reviewing the Market Minutes
Lower earnings from Snap
pulled social media companies lower Tuesday as the S&P 500 Interactive Media & Services Industry Index lost 5.69% during the session. A big miss by Abercrombie & Fitch (ANF) took the Dow Jones U.S. Apparel Retailers Index down 2.18% on the day.
Investors took in widening evidence of a slowing economy as a huge miss in April home sales helped drive the S&P Homebuilder Select Industry Index 2.62% lower.
All of these industry groups pushed major indexes lower with the S&P 500 (SPX) falling 0.81% and the Nasdaq Composite ($COMP) dropping 2.2.35%. The Dow Jones Industrial Average ($DJI) was able to close 0.15% on the positive side.
On the bright side, the most severe losses were trimmed by the end of the day. The Nasdaq was down as much as 3.8% during the session while the S&P 500 fell 2.5% before its bounce back. There seems to be a sentiment that the market is oversold which prompted some bargain-hunting by the close. However, investors seemed interested in bonds too because the 10-year Treasury yield (TNX) fell 10 basis points to 2.76% while the 2-year Treasury yield fell 11 basis points to 2.5%.It was a day for yields because the utilities sector—which commonly has some of the highest dividend yields among equities—ended the day’s top-performing sector. Investors also favored […]
source China’s Lockdowns Hurting Apple, Airbnb, Starbucks, And Many More
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