Morning Call: Equities Mostly Lower As Weakness In Technology Stocks Spreads Across The Globe

Overnight Markets And News

Jun E-mini S&Ps (ESM18 +0.29%) this morning are up +0.05% and European stocks are down -0.68% as weakness in technology stocks drags down global stock indexes. Weakness in energy stocks is another negative for the overall market with May WTI crude oil (CLK18 -0.57%) down -0.67% on concern a global supply glut may persist after API data late Tuesday showed U.S. crude stockpiles rose +5.32 million bbl last week. The slide in stocks has benefited government bond markets as flight-to-safety demand has pushed the 10-year German bund yield down to a 2-1/2 month low of 0.473% and pushed the 10-year T-note yield down to a 1-1/2 month low of 2.74%. Asian stocks settled lower: Japan -1.34%, Hong Kong -2.50%, China -1.40%, Taiwan -1.10%, Australia -0.73%, Singapore -1.64%, South Korea -1.43%, India -0.62%. Asian equity markets followed U.S. markets lower as losses in technology stocks spread across the globe.

The dollar index (DXY00 +0.10%) is up +0.16%. EUR/USD (^EURUSD -0.01%) is down -0.09%. USD/JPY (^USDJPY+0.58%) is up +0.52%, despite losses in global equity markets, as China said North Korea would be willing to give up its nuclear arsenal after North Korean leader Kim Jong Un made a surprise visit to Beijing to meet with Chinese President Xi Jinping, which reduced the safe-haven demand for the yen.

Jun 10-year T-note prices (ZNM18 +0-050) are up +7 ticks at a 1-1/2 month high.

UK Mar CBI retailing reported sales fell -16 to a 5-month low of -8, weaker than expectations of -1 to 7.

German Apr GfK consumer confidence unexpectedly rose +0.1 to 10.9, stronger than expectations of -0.1 to 10.7.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -1.1% with purchase sub-index +1.4% and refi sub-index -4.5%), (2) revised Q4 GDP (expected +2.7%, previous +2.5%), (3) Feb wholesale inventories (expected +0.5%, Jan +0.8% m/m), (4) Feb pending home sales (expected +2.0% m/m, Jan -4.7% m/m and -1.7% y/y), (5) EIA weekly Petroleum Status Report, (6) Treasury auctions $15 billion 2-year floating-rate notes and $29 billion of 7-year T-notes, (7) Atlanta Fed President Raphael Bostic (voter) speaks to the Atlanta Society of Finance and Investment Professionals.

Notable Russell 1000 earnings reports today include: Walgreens (consensus $1.55), GameStop (2.00), PVH (1.47).

U.S. IPO's scheduled to price today: IBEX Holdings (IBEX), iQIYI Inc (IQ), Unum Therapeutics (UMRX).

Equity conferences this week: Bank of America Merrill Lynch Auto Summit on Wed, Barclays, Chemical ROC Stars Conference on Wed.

Market Comments

Jun S&P 500 E-mini stock futures (ESM18 +0.29%) this morning are up +1.25 points (+0.05%). Tuesday's closes: S&P 500 -1.73%, Dow Jones -1.43%, Nasdaq -3.32%. The S&P 500 on Tuesday closed lower on the sharp decline in technology stocks as further reports emerged on the Trump administration's drive to halt Chinese investment in sensitive U.S. industries. Stocks were also undercut by the unexpected -3.1 point decline in the Conference Board's Mar U.S. consumer confidence to 127.7 (weaker than expectations of +0.2 to 131.0) and the -13 point decline in the U.S. Mar Richmond Fed manufacturing index to 15 (weaker than expectations of -6 to 22).

Jun 10-year T-note prices (ZNM18 +0-050) this morning are up +7 ticks at a 1-1/2 month high. Tuesday's closes: TYM8 +14.00, FVM8 +9.00. Jun 10-year T-notes on Tuesday rallied to a 1-1/2 month high and closed higher on the sharp sell-off in stocks and on the weaker-than-expected Mar Richmond Fed manufacturing index and Conference Board Mar U.S. consumer confidence reports. T-notes were also supported by carryover support from a rally in German 10-year bunds to a 2-1/2 month high.

The dollar index (DXY00 +0.10%) this morning is up +0.147 (+0.16%). EUR/USD (^EURUSD -0.01%) is down -0.11 (-0.09%) and USD/JPY (^USDJPY +0.58%) is up +0.55 (+0.52%). Tuesday's closes: Dollar Index +0.345 (+0.39%), EUR/USD -0.0041 (-0.33%), USD/JPY -0.07 (-0.07%). The dollar index on Tuesday closed higher on weakness in EUR/USD after the 10-year German bund yield slid to a 2-1/2 month low, which weakened the euro's interest rate differentials against the dollar. EUR/USD was also undercut by the -1.6 point decline in Eurozone Mar economic confidence to a 6-month low of 112.6, which was dovish for ECB policy.

May crude oil (CLK18 -0.57%) this morning is down -44 cents (-0.67%) and May gasoline (RBK18 +0.18%) is +0.0024 (+0.12%). Tuesday's closes: May crude -0.30 (-0.46%), May gasoline +0.0007 (+0.03%). May crude oil and gasoline on Tuesday settled mixed. Crude oil prices were undercut by a stronger dollar and by expectations for Wednesday's weekly EIA crude inventories to climb +850,000 bbl. Gasoline eked out a small gain on expectations for Wednesday's EIA gasoline inventories report to fall -2.0 million bbl.

Metals prices this morning are weaker with Apr gold (GCJ18 -0.43%) -5.9 (-0.44%), May silver (SIK18 -0.58%) -0.106 (-0.64%), and May copper (HGK18 -0.32%) -0.014 (-0.45%). Tuesday's closes: Apr gold -13.0 (-0.96%), May silver -0.143 (-0.86%), May copper +0.0305 (+1.03%). Metals on Tuesday settled mixed. Metals prices were undercut by a stronger dollar and by the surge in LME copper inventories by +31,225 MT to a 4-1/4 year high of 383,975 MT. Copper prices were supported by the U.S. Jan S&P CoreLogic composite-20 home price index report of +6.4% y/y, the biggest year-on-year increase in 3-1/2 years.

Overnight U.S. Stock Movers

General Electric (GE +4.27%) was downgraded to 'Sell' from 'Hold' at DZ Bank AG with a price target of $11.20.

Intel (INTC -2.46%) was downgraded to 'Hold' from 'Buy' at DZ Bank AG.

AT&T (T +0.61%) was upgraded to 'Buy' from 'Hold' at HSBC with a price target of $41.

Verizon (VZ +0.51%) was upgraded to 'Buy' from 'Hold' at HSBC with a price target of $55.

Mastercard (MA -2.62%) was rated a new 'Outperform' at Bernstein with a price target of $207.

Air Products (APD -1.44%) was rated a new 'Outperform' at BMO Capital Markets with a price target of $195.

Red Hat (RH -4.14%) jumped over 11% in after-hours trading after it forecast full-year adjusted EPS of $5.45 to $6.20, the midpoint higher than consensus of $5.76.

Dominion Energy (D +1.64%) lost more than 1% in after-hours trading after it announced that it had commenced a registered public offering of 20 million shares of its common stock in connection with forward sale agreements.

Celanese (CE  +0.28%) was rated a new 'Outperform' at BMO Capital Markets with a price target of $131.

Nike (NKE +0.41%) climbed more than 3% in after-hours trading after it announced a long-term extension of their on-field apparel partnership with the NFL.

Lululemon Athletica (LULU -2.03%) rallied 6% in after-hours trading after it reported Q4 total comparable sales up +11%, better than consensus of +8.6%, and then forecast Q1 net revenue of $612 million to $617 million, much better than consensus of $586 million.

Shoe Carnival (SCVL +0.47%) fell 4% in after-hours trading after it forecast full-year EPS of $1.85 to $2.00, the midpoint below consensus of $1.94.

Sonic (SONC +2.22%) dropped nearly 5% in after-hours trading after it reported Q2 system-wide comparable ales unexpectedly fell -2.9%, weaker than consensus of a +0.5% increase.

Pareteum (TEUM -4.35%) slid nearly 6% in after-hours trading after it forecast gross margins for 2018 of 70%-75%, the midpoint below the 72.8% in 2017.