MARKET WRAPS

Watch For:

Retail Sales for April; Industrial Production & Capacity Utilization for April; earnings from Home Depot, Walmart; Federal Reserve Bank of St. Louis President James Bullard speaks at Energy Infrastructure Council Investor Conference; Federal Reserve Bank of Chicago President Charles Evans speaks at Money Marketeers event

Opening Call:

Stock futures rose early Tuesday, although investors continued to grapple with concerns about the economic outlook amid high inflation.

Stocks have swung dramatically lately as investors have tried to assess the path for markets amid wide-ranging economic, geopolitical and Covid-19 concerns. Weighing most heavily on many investors' minds is the outlook for the U.S. economy as the Federal Reserve raises interest rates.

Later Tuesday, investors will get another look at the economy when retail sales are reported. They will also hear from Jerome Powell at The Wall Street Journal's Future of Everything Festival. Market watchers are also continuing to assess the effects of the war in Ukraine, as well the outlook for China's economy as lockdowns drag on.

The reopening of some stores in Shanghai this week and a decline in Covid-19 cases in China has provided some sources of optimism. Still, many are expecting more choppiness ahead.

On Tuesday, premarket gains were broad-based, though technology stocks emerged as early winners. Nvidia, PayPal and Apple each climbed 1.9% or more.

Walmart and Home Depot are among the companies that will report earnings Tuesday.

In Europe, the pan-continental Stoxx Europe 600 advanced 1.6%, on pace to extend its winning streak to three days, while most major benchmarks in Asia also gained.

Read Barrons.com: The Experts Are Getting More Defensive on Stocks

Stocks to Watch:

Elon Musk said his $44 billion bid for Twitter can't move forward until the company is clearer about how many of its accounts are fake.

In a tweet early Tuesday, Musk said, "yesterday, Twitter's CEO publicly refused to show proof of 5%." "This deal cannot move forward until he does," he said.

He added: "20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher." He said his offer "was based on Twitter's SEC filings being accurate."

Read more here.

Economic Insight:

BBVA said bringing inflation back down to target will likely cause some pain, yet markets are still pricing in a soft landing for the U.S. economy.

With the Fed set to raise interest rates by 50 basis points in June and July, the tightening pace is set to be the fastest since the 1994-1995 hiking cycle, BBVA said. If a soft landing is still priced in over the coming months, 10-year Treasury yields would also rise further, it added.

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Investors need to get comfortable with significant uncertainty and volatility, said Pimco.

The war in Ukraine is worsening supply-side pressures and pushing commodity prices higher, and if the war escalates in Europe, "we would expect even more volatility and potentially higher inflation."

Pimco expects a meaningful risk of recession in the next couple of years as central banks are forced to tighten monetary policy aggressively to check inflation, but it isn't currently its base case.

Forex:

The dollar edged lower in Europe as currency markets calmed a little after a riotous month but this may be brief, said ING, and traders may switch focus back to likely aggressive Fed rate rises as retail sales and industrial production data are expected to be strong. The Fed's Jerome Powell and James Bullare also speak later.

"It seems too early in the tightening cycle for the Fed to be fighting market expectations of tightening and the dollar could in fact be a little stronger tomorrow after Powell's remarks," said ING.

Bonds:

Volatility in eurozone government bond markets on Monday, coupled with fairly low trading volumes, seem to indicate that fixed-income investors are currently in a wait-and-see mood and market liquidity is not particularly high, said UniCredit.

It doesn't think that eurozone and Treasury yields can rise significantly from their current levels, especially in the near future, as markets are already pricing in fairly aggressive trajectories for both the European Central Bank and the Fed. However, it doubts that strong appetite will emerge for government bonds again.

Energy:

A multiday rally in oil prices paused after EU foreign ministers failed to convince Hungary to drop its opposition to a ban on Russian crude imports.

The embargo requires unanimous approval from all EU states and Hungary, which imports significant amounts of its energy supplies from Russia, remains the lone holdout.

Metals:

Copper rose 0.2% on the LME after Shanghai laid out plans to end its Covid-19 lockdown which has weighed on demand expectations.

Officials in the city of 25 million said restrictions would be relaxed in stages beginning June 1, though the easing would be dependent on preventing new outbreaks. The strict lockdown in Shanghai has weighed heavily on Chinese economic activity and, with it, dampened hopes for metals demand.

"We are seeing the light at the end of the lockdown tunnel," SPI Asset Management said.


TODAY'S TOP HEADLINES


Elon Musk Says Twitter Bid Can't Move Forward Without More Clarity on Fake Accounts

Elon Musk said his $44 billion bid for Twitter Inc. can't move forward until the company is clearer about how many of its accounts are fake.

In a tweet early Tuesday, Mr. Musk said, "yesterday, Twitter's CEO publicly refused to show proof of


Carlyle's $4.2 Billion ManTech Deal Shows Private Equity's Defense Appetite

Carlyle Group Inc.'s acquisition of software company ManTech International Corp. suggests that private equity might be getting more bullish on defense and national-security contractors, research analysts said.

Carlyle agreed to buy ManTech for $96 a share in a transaction that values the company at about $4.2 billion. ManTech shareholders would receive a 32% premium to the stock's unaffected closing share price of $72.82 on Feb. 2, the last trading day before Reuters reported that a majority stake might be put up for sale.


CVC Capital Decides Against Brambles Takeover Due to Market Volatility

SYDNEY-Brambles Ltd. said that CVC Capital Partners decided against making a formal takeover proposal for the pallet supplier due to what the private-equity firm called external market volatility.

Brambles on Tuesday said that CVC wouldn't seek detailed due diligence and that talks between the parties had concluded.


ContourGlobal Receives $2.1 Bln Takeover Bid From KKR; Shares Jump

Shares in ContourGlobal PLC jumped Tuesday in early trading after it agreed to be acquired by U.S. private equity firm KKR & Co. for $2.14 billion.

Under the terms of the deal, the owners of the FTSE 250 power generation group will receive 263.6 pence in cash per share, representing a 36% premium to the 193.4 pence closing price on Monday.


Lordstown Motors' Ability to Stay in Business Hinges on Raising Capital, Valuation, CFO Says

Lordstown Motors Corp.'s ability to stay in business for at least another year remains in doubt until it secures more funding and its market value rises, its finance chief said after the electric-truck maker sold its factory to raise cash.

Lordstown, which aims to launch its first vehicle this year and doesn't generate any revenue yet, issued a going-concern warning in June 2021, flagging worries about its financial health.


FDA Eases Baby-Formula Import Rules to Boost Supplies

U.S. health regulators took steps to allow more foreign baby formula on American shelves, easing rules that had effectively prevented shipments from many overseas manufacturers.

The Food and Drug Administration on Monday said it encouraged the overseas manufacturers to apply to ship their formula to the U.S.


Microsoft Boosts Pay in Fight for Talent

Microsoft Corp.'s chief executive is promising to boost employee compensation amid continued low unemployment across the U.S. and high inflation.

Satya Nadella told Microsoft employees Monday that the software giant plans to nearly double its global budget for merit-based salary raises, a person familiar with the announcement said. Mr. Nadella also said the company would increase annual stock compensation by at least 25%, the person said.


China Auto Stocks Jump on Hopes That Worst Is Over for Sector

Chinese auto stocks jumped in early trade in Hong Kong amid a growing hope that the sector may have hit bottom and begin to rebound as disruptions related to supply chains and the pandemic begin to ease.

Shares of Great Wall Motor Co. gained as much as 11%, while Geely Automobile Holdings Ltd. rose by up to 8.5%. Electric car makers also soared, with BYD Co. up 6.5%, NIO Inc. surging 8.1% and Li Auto Inc. advancing 6.2%.


Cryptocurrency TerraUSD Falls to 11 Cents, Creator Announces Rescue Plan

The price of the stablecoin TerraUSD was down sharply on Monday as the cryptocurrency's creator announced a plan to attempt to rescue the project.

The price of TerraUSD, created to maintain a value equal to a dollar, was down 36% at 11 cents, according to CoinMarketCap. Trading volume over the past 24 hours was less than $400 million, down from the more than $5 billion in volume it saw last week.


Eurozone Economy Grew in 1Q Despite Omicron, Russia's Invasion of Ukraine

The eurozone economy grew in the first quarter but only modestly, as the spread of the Omicron coronavirus variant and Russia's invasion of Ukraine weighed on economic performance, according to a second estimate.

(MORE TO FOLLOW) Dow Jones Newswires

05-17-22 0537ET