U.S. equity futures edged higher Tuesday, while oil prices fell to a two-week low and Treasury bond yields climbed, as investors navigated a series of headline risks linked to China’s Covid outbreak, an intensifying war in Ukraine and the start of the Federal Reserve’s two-day policy meeting.
Confirmed coronavirus cases in China doubled on Monday, taking the overall tally past 120,000, as officials moved to add further business and travel restrictions in the world’s second-largest economy as part of its ‘zero Covid’ policy.
The outlook clouded an otherwise solid set of industrial and consumer data and hammered domestic stocks, with the sentiment spilling over into the European session.
Russia’s intensifying war on Ukraine added to broader market concerns, with reports of explosions in and around the capital Kyiv — including four deaths confirmed by the city’s mayor — following an overnight attack on a TV tower in the country’s norther region. U.S. officials remain concerned that Moscow is seeking financial and military assistance from China, while the UK has warned the Russia may be contemplating the use of chemical weapons in the weeks ahead.
The headline risk, in fact, has global fund managers expecting a bear market for stocks this year, according to a closely-tracked survey from Bank of America, with allocations to global equities at the lowest levels since May of 2020.
Closer to home, the start of the Fed’s policy meeting, which is nearly certain to end tomorrow with a 25 basis point rate hike, has investors looking for clues as to how the central bank will manage the myriad risks linked to growth and inflation heading into the second half of the year.
Benchmark 10-year Treasury note yields rose to 2.126% in overnight trading ahead of a key reading of factory gate inflation at 8:30 am Eastern time, while WTI crude futures for April delivery fell another $8.54 per barrel to $94.56 in early New York trading.
On Wall Street, futures futures contracts linked to the Dow Jones Industrial Average, which eked out a mere 1 point gain last night, are indicating a modest 15 point opening bell gain while those linked to the S&P 500, which is down 12.44% for the year, are priced for a 5 point move to the upside.
The tech-focused Nasdaq Composite, which is just a few points shy of sliding into bear market territory, is priced for a 40 point gain as benchmark 2-year Treasury note yields hold at $1.841%.
Tesla (TSLA) – Get Tesla Inc Report shares were active in pre-market trading after the clean-energy carmaker raised prices on its best-selling models in the U.S. and China for the second time in a week.
U.S. prices for all of Tesla’s cars were bumped higher overnight, with the Model 3 cost increasing by around $3,500. Price hikes in China, meanwhile, will see the Model 3 increase by a total of 28,000 yuan, or around $4,400, compared to a week ago.
AMC Entertainment (AMC) – Get AMC Entertainment Holdings, Inc. Class A Report shares, meanwhile, got a boost after the world’s second-largest movie theatre chain, and meme stock favorite, unveiled a $28 million investment in a Nevada gold mine.
