MARKET WRAPS
Watch For:
U.S. International Trade for October; Canada Trade Balance for October
Opening Call:
Today's Headlines/Must Reads
- Investors Yank Money From Commercial-Property Funds, Pressuring Real-Estate Values
- Facebook Threatens to Pull News From Platform if Bill Passes Congress
- Oil Prices and Energy Stocks Are Headed in Different Directions. What Gives?
- China's Covid Easing Fuels Stock-Market Hopes-and Fans Fears
- California Lawmakers to Consider Penalties on Oil Companies to Fight High Gas Prices
- TSMC Raises Arizona Chip Investment to $40 Billion as Biden Visits
Follow WSJ markets coverage here .
Stock futures struggled for momentum on Tuesday, suggesting Wall Street would find it difficult to rebound from a poor start to the week, after stronger-than-expected economic data in recent days raised fears about further rate rises by the Federal Reserve.
"Ultimately it matters more where the Fed ends up and not how fast they get there, and the tighter-than-expected labor market combined with the boisterous business sentiment index gives more clout to the +5% terminal camp," SPI Asset Management said.
Technical analysts noted that the market's latest relapse came after it failed once again to break above an established downtrend.
Pointing to a chart of the S&P 500, commentators at the MarketEar.com suggested that much of the recent rally off the mid-October low was powered by those investors who short the market scrambling to cover their positions rather than any fundamental bullishness.
"The crowd did it again, covering shorts in panic. We are once again below that 200 day [moving average on the S&P 500] that got so many people excited and we saw some bears throw in the towel," MarketEar said.
"A close [on Monday] here or lower and things could get 'dynamic' to the downside. Don't forget the market will become less and less liquid as we approach Christmas."
Overseas indexes were mostly weaker, tracking Monday's losses on Wall Street. The Hang Seng dropped 0.4%, although shares in China and Japan made modest gains. In Europe, the Stoxx Europe 600 eased back 0.1% in early trading.
Stocks to Watch
Herbalife Nutrition said it would offer a $250 million aggregate principal amount of convertible senior notes in a private offering. Its common shares fell 11% in after-hours trading.
GitLab reported better-than-expected revenue in the latest quarter and lifted its 2023 guidance. Its shares rose 20% premarket.
MEI Pharma said it would discontinue development of cancer treatment zandelisib outside of Japan, after recent guidance from the FDA. MEI also said it planned a staggered reduction of about 30% of its workforce. MEI shares fell 31% after hours.
Powell Industries said fourth-quarter revenue increased 26%, boosted by $259 million in new orders. Net income rose to $8.7 million. Its shares rose 19% in after-hours trading.
Salesforce was up 0.7% in premarket trading following a slump of 7% after it was announced on Monday that Slack founder and CEO Stewart Butterfield was resigning from the company, effective Jan. 31.
Sumo Logic raised its fiscal-year sales outlook and the company forecast an adjusted loss of 35 cents to 36 cents a share, narrower than Wall Street expectations. The stock gained 11.5% after hours.
Textron was awarded a contract to build aircraft for the U.S. Army's Future Long-Range Assault Aircraft program. The award was based on Bell Textron's V-280 Valor tiltrotor, the company said. Textron didn't disclose terms of the contract though Bloomberg reported the contract was worth up to $1.3 billion. The stock gained 8% in after-hours trading.
Economic Insight
China may undergo some forms of a disorderly exit from its zero-Covid policy over the next three to four months, Loomis Sayles Investments said. Local Covid-19 infections will spike and overwhelm the country's healthcare system, but that period should be relatively short, it said.
Chinese equities have been rallying as investors look past near-term prospects to China's economic activity normalizing by mid-2023, Loomis Sayles said. Another factor to consider is that an accelerated China reopening may be an inflationary driver for the rest of the world from second half of next year.
Forex:
The dollar continued to edge higher in Europe after the stronger-than-expected ISM non-manufacturing report dampened expectations the Fed could pivot on its aggressive interest rate rise cycle.
"The longer U.S. data surprises on the upside and the longer the U.S. economy is robust the more doubts are probably going to increase as to whether the U.S. will actually face a recession next year and whether the U.S. central bank will actually cut its key rate at that stage," Commerzbank said.
It said the dollar may stabilize over coming weeks following the pronounced depreciation over past weeks.
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The euro looks vulnerable to a potential renewed rise in energy prices as the eurozone's supply issues persist, ING said.
"The freshly imposed EU embargo on Russian seaborne crude and the $60 per barrel price cap may start to show their effects on the energy market soon. When adding an expected drop in temperatures in Europe from this week, the risks of a new rally in energy prices are non-negligible, and the euro is highly exposed to such risks."
EUR/USD is "mostly facing downside risks," ING said.
Energy:
Crude futures held solid gains in European trading, after Beijing relaxed rules on Covid-19 testing, helping sentiment in the oil market.
"China's reopening sentiment should provide a plank for the crude price to springboard off," said SPI Asset Management.
Metals:
Base metals were mixed early in the London session, with gold little changed, as traders remained uncertain on whether the Fed will keep hiking rates into next year.
Positive economic data on Monday "lifted interest rate expectations and helped propped the dollar higher," weighing on metals, Marex said.
Elsewhere, Bloomberg reported that the EU and U.S. are considering tariffs on Chinese aluminum and steel, citing unnamed sources.
TODAY'S TOP HEADLINES
Facebook Threatens to Pull News From Platform if Congress Passes Bill Helping Publishers
Meta Platforms Inc. is threatening to remove news from Facebook in the U.S. if Congress passes legislation meant to help publishers team up to negotiate payments from tech companies, echoing similar warnings that the company has lobbed at various governments around the world.
"If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions," Meta tweeted on Monday as part of a longer statement condemning the bill, known as the Journalism Competition and Preservation Act.
Uber Reaches Settlement with Chicago Over Fees and Restaurant Listings
Uber Technologies Inc. agreed to a multimillion-dollar settlement with the city of Chicago over what authorities there called deceptive practices at UberEats and Postmates.
Restaurants were listed without their consent and were charged excessive fees, according to a two-year investigation by the city.
California Lawmakers to Consider Penalties on Oil Companies to Fight High Gas Prices
California legislators opened a special session Monday to explore the possibility of levying penalties on the oil industry for what Democratic Gov. Gavin Newsom has called price-gouging of consumers.
A draft of the legislative proposal released Monday by Mr. Newsom laid out a framework that would set an annual maximum profit margin for oil refiners and create a tiered system of penalties based on how much a company's margin deviates from the state-set maximum. Mr. Newsom declined to provide specific thresholds, saying the details were yet to be worked out with lawmakers.
TSMC Raises Arizona Chip Investment to $40 Billion as Biden Visits
Taiwan Semiconductor Manufacturing Co. plans to build a second semiconductor factory in Arizona and increase its investment there to $40 billion, the White House said ahead of a visit by President Biden.
TSMC, the world's largest contract chip maker, is stepping up its plans for U.S. manufacturing with encouragement from the Biden administration and likely financial support from U.S. taxpayers, reflecting Washington's concerns about reliance on Asia for critical chip making.
PepsiCo to Lay Off Hundreds of Workers in Headquarters Roles
PepsiCo Inc. is laying off workers at the headquarters of its North American snacks and beverages divisions, a signal that corporate belt-tightening is extending beyond tech and media, according to people familiar with the matter and documents reviewed by The Wall Street Journal.
Hundreds of jobs will be eliminated, one of the people said. The cuts affect the company's North America beverage business, which is based in Purchase, N.Y., and its North America snacks and packaged-foods business, which has headquarters in Chicago and Plano, Texas, the people said.
Citi on verge of agreement to get back what it accidentally paid to Revlon's lenders, court filing shows
Finders keepers, losers weepers is not always the law of the land.
Hedge funds are on the verge of reluctantly returning some $500 million that Citigroup C accidentally gave to them three years ago, a court filing shows.
Lovell Minnick Seeks $1.5 Billion for Newest Buyout Fund
Lovell Minnick Partners is seeking a modest increase in size for its newest buyout fund.
(MORE TO FOLLOW) Dow Jones Newswires
12-06-22 0619ET
