Updated at 8:40AM EST
U.S. stock futures rose strongly on Tuesday, while the dollar continued to fall for a third straight session, as investors took comfort from rare positive news on China’s coronavirus crisis and prepared for a key reading of U.S. retail sales data ahead of trading.
However, early earnings were subdued as Walmart’s Q1 earnings missed expectations (WMT) – Get the Walmart Company Reportand a warning about the impact of soaring inflation on the world’s largest retailer’s bottom line.
The dollar’s three-day retreat, though modest, sparked investor optimism after news that Shanghai reported a third straight day of no new Covid infections, a key benchmark that could trigger China’s biggest city to ease restrictions on business and travel limits.
The news boosted regional stocks, with the MSCI ex-Japan benchmark up 2.36% on the day, helping the Euro Stoxx 600 gain 1.5% in morning trade in Frankfurt.
Growth concerns in global markets, however, remained paramount, with soaring inflation and aggressive central bank interest rates signaling, heightening fears of stagflation or recession in major economies around the world.
The path around this, at least in the US, is likely to come from consumer spending, making today’s April retail sales data even more influential on market direction.
Retail sales actually rose 0.9% from the previous month to $677.7 billion in April, the Commerce Department said, broadly in line with Wall Street’s consensus forecast and a fourth straight monthly increase. The Commerce Department report showed that the March total was revised up sharply to 1.4% from an initial estimate of 0.5% growth.
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However, stocks are still sensitive to interest rates for now, in line with the move in the U.S. Treasury market, with falling yields signaling deepening concerns about growth, while rising yields suggest near-term economic optimism.
The benchmark 10-year U.S. Treasury yield edged up to 2.922 percent after the retail sales data, while the U.S. dollar index, a broad gauge of investor caution, fell 0.7 percent against a basket of global peers to trade at 103.374 overnight.
Meanwhile, CME Group’s FedWatch tool put at least a 21.1% chance of a 75 basis-point rate hike in July, despite assurances from Fed Chairman Jerome Powell that his colleagues did not make the cut at the Open. The market committee is “actively considering” the move.
Powell will also speak at the Wall Street Journal’s “The Future of Everything” event today at 2:00 p.m. ET.
On Wall Street, futures tied to the Dow Jones Industrial Average opened 375 points higher, while futures tied to the S&P 500 fell 15.9% this year to gain 57 points in price. Nasdaq-related futures are looking for a 215 open.
Walmart, the most active premarket mover, fell 6% after reporting weaker-than-expected first-quarter earnings and lowering its full-year profit forecast as soaring costs eroded profits at the world’s largest retailer.
The Home Depot (HD) – Get Home Depot, Inc. ReportHowever, shares rose 3.5% after reporting stronger-than-expected first-quarter earnings and raising full-year profit guidance, as the world’s largest home furnishing retailer hit a record while the domestic housing market remained buoyant of sales.
JD.com shares surged 7.9% on better-than-expected first-quarter earnings and nearly 600 million active users, as online retail activity recovers in some major Chinese cities due to the coronavirus-induced lockdown.
Twitter (TWTR) – Get Twitter, Inc. reports Elon Musk, meanwhile, said the social media group had to prove that spam and bot accounts were only a fraction of its user base for his $44 billion acquisition to go ahead, sending shares down for an eighth straight session.