MARKET WRAPS

Watch For:

New Home Sales for April

Opening Call:

Stock futures fell Tuesday, as negative sentiment returned to global markets.

Asian indexes closed in the red, weighed down by losses among technology stocks, while European markets also traded lower.

Snap's shares fell 28% premarket, following a profit warning Monday. The company noted that the macroeconomic environment has deteriorated more than anticipated.

Its losses rippled to other technology stocks, with Meta Platforms down 6.4% before the opening bell and Google-parent Alphabet down 4%. Advanced Micro Devices lost 2%.

Read Barrons.com: Snap Stock Falls Further, Drags Other Social Media With It

Investors are confronting a range of signals as they try to map out the trajectory of the U.S. economy. Many have grown worried that the Federal Reserve's plans for monetary tightening to tamp down inflation could tip the economy into a recession.

That has been among the catalysts for the U.S. stock market's brutal year, which has sent the S&P 500 falling 17% from its January high, based on Monday's close.

There have been signs of optimism, however, such as on Monday, when JPMorgan Chase said U.S. consumers appear to be in good financial health. But that sanguine depiction was quickly counterbalanced by Snap's warning.

Later Tuesday, investors will receive new commentary from Jerome Powell, who will give remarks at an economic summit in Las Vegas. Investors will be looking for fresh clues about his outlook for inflation, the economy and the path of interest-rate increases.

Several pieces of economic data are also due Tuesday, including U.S. new-home sales data and gauges of U.S. manufacturing activity.

Economic Insight:

New residential sales data for April are likely to further evidence the current slowdown in the housing sector amid rising mortgage rates, said Pantheon Macroeconomics, with sales seen falling to an annual rate of 700,000 from 763,000 in March, although the monthly data is very volatile.

"A would-be buyer of a new home today needs to be prepared to make monthly payments about 50% higher than in September last year, and we've never seen a housing market that can take that sort of shock without a significant drop in activity."

Forex:

The dollar's upward momentum could ease but the currency is unlikely to turn weaker just yet, as the Fed will continue to take a more aggressive approach to tightening policy than other central banks, said Swissquote Bank.

"It's just that the others will also stop turning a blind eye on the inflation problem. And that should slow the dollar appreciation."

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The euro pared gains against the dollar but only marginally after data showed growth in eurozone manufacturing and services activity slowed by more than expected in May.

The S&P eurozone manufacturing purchasing managers' index fell to 54.4 in May from 55.5 in April and the services PMI dropped to 56.3 from 57.7. The euro remained buoyant, however, after Christine Lagarde said the ECB could lift its deposit rate out of negative territory by the end of September.

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Sterling could weaken as U.K.-EU tensions over the Northern Ireland protocol that forms part of the Brexit deal look set to escalate, said MUFG Bank.

Noting that Northern Ireland Secretary Brandon Lewis has signalled that the U.K. plans to introduce legislation to override parts of the Brexit deal in the next three weeks, MUFG said such action could create elevated uncertainty that will weigh on sterling. The EU could threaten scrapping the entire Brexit trade agreement or suspend parts of the deal.

"The pound will get hit if these options are even mentioned as considerations by the EU."

Energy:

Oil futures extended losses in Europe as Chinese stimulus measures have so far failed to alleviate concerns about slowing growth.

Adding to concerns is continued Hungarian opposition to the EU's plan to ban imports of Russian oil. "The EU is increasingly unlikely to approve a ban," said DNB Markets.

Other News:

Ukrainian officials have descended on Davos to make sure the world doesn't forget about the war while contending with inflation and other challenges, said Andrii Zhupanyn, head of the parliament's subcommittee on gas policy.

On Europe's ongoing reliance on Russian natural gas, Zhupanyn said "something needs to be done." A full embargo on Russian gas in the EU is off the table for now but Ukraine is suggesting alternatives that would deprive Moscow of revenue, Zhupanyn said.

They include a tariff on Russian fuel or a requirement that payments go into an escrow account that cannot be accessed for general purposes--a workaround previously used for purchases of Iranian oil.

Metals:

Base metal prices were lower in early trading in London, as data from Australia and Japan signaled dips in manufacturing growth.

While both readings were expansionary, the data confirmed manufacturing took a significant hit as inflation worries, China lockdowns and supply-chain issues added pressure to global industry.

   
 
 
   
 
 

TODAY'S TOP HEADLINES

 
 

Samsung Group to Invest About $356 Bln in Chips, Biopharmaceuticals, Next-Generation Technology

SEOUL --Samsung Group said Tuesday that it would invest about $356 billion over the next five years in its semiconductor and biopharmaceuticals businesses, as well as other next-generation technologies, where global competition is intensifying.

The plan extends and increases a decision to invest $190 billion through 2024, announced in August last year.

   
 
 

Snap Issues Profit Warning on Economic Conditions Including Inflation

Snap Inc. issued a profit warning Monday and said it planned to slow hiring and spending, adding to adjustments social-media companies are making to adapt to disruptions in the digital ad market.

The company said it is grappling with a range of issues, from rising inflation to Apple Inc.'s privacy policy changes to the impacts from the war in Ukraine and other factors. "There is a lot to deal with in the macro environment today," Chief Executive Evan Spiegel said Monday at a JP Morgan Chase & Co. conference. Conditions have deteriorated "further and faster" than expected since the company issued its guidance for the current quarter, he said.

   
 
 

Zoom Sales Growth Slows as Pandemic Boom Wanes

Zoom Video Communications Inc. sales continued to slow as work life returns to normal and the demand for the company's videoconferencing services winds down.

The San Jose, Calif.-based company on Monday said that sales rose 12% in its first quarter, the slowest growth rate on record, and that the top line is expected to rise less than 10% in the current period.

   
 
 

Airbnb to Quit China Business as Harsh Lockdowns, Competition Weigh on Demand

Airbnb Inc. plans to close its domestic business in China after harsh Covid-19 lockdowns compounded the pain from mounting local competition, according to people familiar with its decision.

Bookings of stays and experiences in China typically account for about 1% of Airbnb's overall revenue, the people said.

   
 
 

Broadcom in Talks to Pay About $60 Billion for VMware

Broadcom Inc. is in talks to pay around $60 billion for VMware Inc., people familiar with the matter said, in what would be one of the biggest takeover deals of the year.

The two technology companies are aiming to announce a cash-and-stock deal worth about $140 a share on Thursday, assuming the talks don't fall apart, the people said. The price wasn't yet set and could still move around, some of the people cautioned.

   
 
 

Meta's Mark Zuckerberg Is Sued by Washington, D.C., Attorney General

The attorney general for Washington, D.C., sued Facebook founder Mark Zuckerberg on Monday, alleging that he participated in decision-making that led to the Cambridge Analytica data breach.

Filed in D.C. Superior Court, the suit echoes charges that the office of Attorney General Karl Racine leveled last year, when it sought to name Mr. Zuckerberg as a defendant in a lawsuit it filed in 2018 against Facebook Inc., now known as Meta Platforms Inc. A judge denied that motion earlier this year.

   
 
 

Fed Officials Weigh Future Rate Policy Shift

Some Federal Reserve officials are starting to talk about a possible shift in the central bank's interest-rate policy.

Federal Reserve Bank of St. Louis President James Bullard, who spoke Friday on the Fox Business Network, and Atlanta Fed President Raphael Bostic, who spoke Monday, both weighed in on the path for rates.

   
 
 

China Central Bank Urges Lenders to Rev Up Support for Real Economy

China's central bank urged the nation's lenders to step up support for the real economy and meet credit demand, as the world's second largest economy faces increased downward pressure.

In a meeting with 24 financial institutions, the People's Bank of China and China's banking regulator urged lenders to "go all out to stabilize the fundamentals of the economy," the PBOC said in a statement Tuesday.

   
 
 

Eurozone Growth Remains Robust in May Thanks to Booming Service Sector, PMIs Show

Eurozone economic growth remained robust in May despite headwinds associated with the Ukraine war, Covid-19 pandemic supply constraints and the rising cost of living, S&P Global said.

The eurozone composite purchasing managers index edged down to 54.9 in May from 55.8 in April, according to the preliminary reading. This figure indicates an expansion of economic activity for the 15th successive month, with the rate of growth easing only modestly.

   
 
 

German Export Sentiment Improves in May

Sentiment among German exporters has brightened despite the climate of uncertainty due to Russia's invasion of Ukraine, the Ifo Institute said.

The Ifo export expectations index rose to 4.5 points in May from 3.0 in April.

   
 
 

Biden Says His Taiwan Policy Hasn't Changed

TOKYO-President Biden said he would maintain longstanding U.S. policy toward Taiwan, a day after triggering global confusion when he said the U.S. would respond militarily to any effort by China to take the island by force.

"My policy has not changed at all. I stated that when I made my statement yesterday," he told reporters here when asked whether he would send U.S. troops to Taiwan if China invaded.

   
 
 

Quad Members Have Eyes on China, No Collective Comment on Russia

TOKYO-President Biden and the leaders of Japan, India and Australia agreed to set up joint monitoring of ships in the Indo-Pacific region, a move designed to deter illegal Chinese fishing and maritime militias, but they didn't jointly condemn Russia for its invasion of Ukraine.

The leaders of the group of democratic countries called the Quadrilateral Security Dialogue, also known as the Quad, met in Tokyo to discuss the war in Ukraine, responses to the Covid-19 pandemic and ways to counter China by deepening their ties and relations with other democracies.

   
 
 

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

None scheduled

Economic Indicators:

None scheduled

   
 
 

Expected Major Events for Tuesday

00:30/JPN: May Japan Flash Manufacturing PMI

05:00/JPN: Apr Supermarket sales

05:30/JPN: Apr Tokyo area department store sales

05:30/JPN: Apr Nationwide department store sales

06:00/UK: Apr Public sector finances

06:45/FRA: May Monthly business survey (goods-producing industries)

07:15/FRA: May France Flash PMI

07:30/GER: May Germany Flash PMI

08:30/UK: May Flash UK PMI

08:59/JPN: Mar Final Labour Survey - Earnings, Employment & Hours Worked

10:00/UK: May CBI Distributive Trades Survey

10:00/FRA: 1Q OECD trade statistics release

12:55/US: 05/21 Johnson Redbook Retail Sales Index

13:45/US: May US Flash Manufacturing PMI

13:45/US: May US Flash Services PMI

14:00/US: Apr New Residential Sales

14:00/US: May Richmond Fed Business Activity Survey

17:00/US: Apr Money Stock Measures

20:30/US: 05/20 API Weekly Statistical Bulletin

22:59/US: ISM Semiannual Report On Business Economic Forecast

All times in GMT. Powered by Kantar Media and Dow Jones.

   
 
 

Expected Earnings for Tuesday

Abercrombie & Fitch Co (ANF) is expected to report $0.08 for 1Q.

Agilent Technologies (A) is expected to report $0.94 for 2Q.

AutoZone Inc (AZO) is expected to report $26.19 for 3Q.

Best Buy Co Inc (BBY) is expected to report $1.64 for 1Q.

Caleres Inc (CAL) is expected to report $0.85 for 1Q.

California First Leasing Corp (CFNB) is expected to report for 3Q.

Canadian Solar (CSIQ) is expected to report $-0.07 for 1Q.

Citi Trends Inc (CTRN) is expected to report $0.43 for 1Q.

Clearday Inc (CLRD) is expected to report for 1Q.

FTI Consulting (FCN) is expected to report $1.74 for 4Q.

Genesis Healthcare Inc (GENN) is expected to report $-0.33 for 4Q.

Intuit Inc (INTU) is expected to report $6.23 for 3Q.

Ituran Location (ITRN,ITRN-TV) is expected to report for 1Q.

LiveRamp Holdings Inc (RAMP) is expected to report $-0.40 for 4Q.

NetEase Inc - ADR (K3MD.SG,NTES) is expected to report $1.51 for 1Q.

Nordstrom Inc (JWN) is expected to report $-0.06 for 1Q.

Ooma Inc (OOMA) is expected to report $-0.05 for 1Q.

Petco Health & Wellness Co Inc (WOOF) is expected to report for 1Q.

Ralph Lauren Corp (RL) is expected to report $0.37 for 4Q.

Toll Brothers (TOL) is expected to report $1.50 for 2Q.

Trip.com Group Ltd (K3RD.SG,TCOM) is expected to report for 1Q.

Urban Outfitters (URBN) is expected to report $0.43 for 1Q.

iMedia Brands Inc (IMBI) is expected to report for 1Q.

Powered by Kantar Media and Dow Jones.

   
 
 

ANALYST RATINGS ACTIONS

Abercrombie & Fitch Cut to Neutral From Buy by Citigroup

American Eagle Outfitters Cut to Neutral From Buy by Citigroup

Asbury Automotive Cut to Underweight From Equal-Weight by Morgan Stanley

Axon Enterprise Cut to Equal-Weight From Overweight by Morgan Stanley

Carter's Cut to Sell From Buy by Citigroup

Children's Place Cut to Sell From Neutral by Citigroup

Dow Cut to Neutral From Overweight by Piper Sandler

DTE Energy Raised to Outperform From Neutral by Credit Suisse

frontdoor Cut to Hold From Buy by Truist Securities

Gap Inc Cut to Sell From Neutral by Citigroup

Group 1 Auto Cut to Underweight From Equal-Weight by Morgan Stanley

HP Cut to Neutral From Buy by Citigroup

Luna Innovations Raised to Outperform From Market Perform by Northland Capital Markets

Motorola Solutions Raised to Overweight From Equal-Weight by Morgan Stanley

Nike Cut to Neutral From Outperform by KGI Securities

Ralph Lauren Cut to Neutral From Buy by Citigroup

Trimble Raised to Equal-Weight From Underweight by Morgan Stanley

Under Armour Cut to Neutral From Buy by Citigroup

Zebra Raised to Equal-Weight From Underweight by Morgan Stanley

This article is a text version of a Wall Street Journal newsletter published earlier today.

 

(END) Dow Jones Newswires

May 24, 2022 05:55 ET (09:55 GMT)

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