Here are five things you must know for Monday, May 2:
1. — Stock Futures Nudge Higher Ahead of Fed Meeting, Jobs Data
U.S. equity futures bumped higher Monday, following-on from the largest single-session decline in more than two years Friday, as investors looked to add some beaten down tech names heading into an active week on Wall Street highlighted by the Federal Reserve’s interest rate decision on Wednesday.
U.S. stocks, in fact, are off to their worst four-month start to any year since 1939, with the S&P 500 down 13.3%. The tech-focused Nasdaq, meanwhile, suffered its biggest monthly decline since the global financial crisis of 2008, largely on the back of a surge in bond yields linked to the Fed’s hawkish policy turn.
Economic activity data from around the world, however, continues to indicate a pullback as central banks tighten policy amid surging inflation pressures, supply chains remain snarled by Covid disruptions and China struggles to manage its recent pandemic resurgence.
Manufacturing activity in China, in fact, fell to a two-year low last month, according to a private survey, while in Europe, an key output index was pegged at the lowest levels in 15 months as raw materials prices and labor costs move relentlessly higher.
Those readings, as well as a surging U.S. dollar, added overnight pressure to oil markets, with WTI futures for June delivery marked $2.75 lower at $101.94 per barrel and Brent contracts for July falling $2.52 to $104.62 per barrel.
In Europe, the Stoxx 600 was marked 1.3% lower in early Frankfurt trading, with many regional markets closed for the traditional May Day workers holiday, while overnight in Asia, a rebound in China stocks failed to provide a broader session gain for the region-wide MSCI ex-Japan index, which was marked 0.6% lower heading into the close of trading,
In the U.S., last week’s initial estimate of GDP growth, which showed a 1.4% contraction over the first three months of the year, added to concerns that the Fed’s tightening efforts will snuff-out growth in the world’s biggest economy, but hasn’t, as yet, altered bets on either this week’s decision nor the prospect of even higher rates heading into the summer months.
The CME Group’s FedWatch is pricing in a 99.8% chance of a 50 basis point hike on Wednesday, as well as a 95.6% chance of a 75 basis point move at the Fed’s following meeting in June.
On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a 140 point opening bell gain while those linked the S&P 500 priced for a 15 point advance. Futures linked to the tech-focused Nasdaq are looking at a firmer 55 point opening bell gain.
2. — Week Ahead: Fed Meeting, Earnings, Jobs Data In Focus
The Fed’s Wednesday rate decision will highlight an active week for data and earnings amid what now looks to be a crucial spring turn for U.S. stocks, which are off to their worst start to the year in more than eight decades.
While rate hikes for this month, as well as in June, are essentially set in terms of market forecasts, investors will be looking for signals from Jerome Powell and his colleagues as to how far, and how fast, the Fed is willing to go on rate hikes before damaging U.S. growth prospects and triggering recession.
That prospect became real last week with the first quarterly GDP contraction since the pandemic, as well as a muted first quarter earnings season that suggests collective S&P 500 profits will only grow 4.4% from last year — once the energy sector is stripped-out) and 0.6% over the second quarter.
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Around 160 companies will report this week, including Clorox (CLX) – Get Clorox Company Report, Pfizer (PFE) – Get Pfizer Inc. Report, Starbucks (SBUX) – Get Starbucks Corporation Report and CVS Health (CVS) – Get CVS Health Corporation Report, with markets also focused on jobs data with the JOLTS survey on Tuesday, ADP’s National Employment report Wednesday and the April non-farm payroll report on Friday.
3. — Warren Buffett Details First Quarter Spending Spree, Wins Key Votes
Warren Buffet and Berkshire Hathaway held their first in-person annual meeting since the pandemic over the weekend, with the billionaire investor taking questions on his recent stakes in Occidental Petroleum (OXY) – Get Occidental Petroleum Corporation Report and Alleghany Corp (Y) – Get Alleghany Corporation Report.
Buffet, who has run the group since 1965, said his $51 billion April spending spree, one of the most active in years, was largely motivated by value, adding that “markets do crazy things, and occasionally Berkshire gets a chance to do something.” Buffett also boosted his stakes in Chevron (CVX) – Get Chevron Corporation Report and Apple (AAPL) – Get Apple Inc. Report, Berkshire’s largest holding.
The 91-year old was also comfortably re-elected as group Chairman and CEO following a move by some investors, including the powerful California Public Employees Retirement System, to split the roles.
Investors also rejected a proposal that would have required Berkshire’s board to disclose more information about its views on climate change and how they inform the company’s stock purchases.
4. — Activision Shares Leap As Buffett Reveals 9.5% Stake
Activision Blizzard (ATVI) – Get Activision Blizzard, Inc. Report shares moved higher in pre-market trading after Warren Buffett’s Berkshire Hathaway told investors it has built a 9.5% stake in the video-game maker ahead of its planned $69 billion takeover by Microsoft (MSFT) – Get Microsoft Corporation Report.
Buffett’s increased stake, now worth around $5.6 billion, suggests he thinks the deal will receive regulatory and antitrust approval, although he told attendees at the Berkshire AGM on Saturday that he “doesn’t know what the Justice Department will do.”
Some investors are betting that Microsoft’s $95 per share deal won’t be completed, with concerns linked to the takeover increasing following last week’s weaker-than-expected first quarter earnings, which showed a 14.5% decline in monthly active users to 372 million, taking in-game billings down 24.6% to $1.01 billion amid weaker-than-expected demand for its Call of Duty: Vanguard release.
Activision shares were marked 3.15% higher in pre-market trading to indicate an opening bell price of $77.98 each.
5. — Moderna Shares Edge Higher On Under 6 Vaccine Approval Hopes
Moderna (MRNA) – Get Moderna, Inc. Report shares edged higher in pre-market trading after the drugmaker said data to support its coronavirus vaccine for children under the age of 6 will be ready for review by the Food & Drug Administration next month.
Moderna, which filed for Emergency Use Authorization from the FDA last week, is also looking for approval for its vaccine to be used in children between the ages of 6 and 17, following nods from regulators on Europe, Canada and Australia.
“I think the FDA now have all of the core fundamental data they need to be able to begin an application review,” said Moderna’s chief medical officer, Paul Burton, during an interview with ‘Face the Nation’ on CBS. “
“The safety profile we’ve seen in this vaccine in these very youngest kids is very reassuring – actual rates of safety events even lower than we’ve seen in the 6-year-olds to 12-year-olds and that’s great,” Burton said. “So yes, we’re very confident,”
Moderna shares were marked 0.66% higher in pre-market trading to indicate an opening bell price of $135.30 each.