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U.S. equity indexes red: Nasdaq down ~0.6%
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Materials weakest S&P 500 sector; industrials sole gainer
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Euro STOXX 600 index down ~0.4%
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Dollar, gold rise; bitcoin slips; crude down ~2%
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U.S. 10-Year Treasury yield ~flat at ~3.52%
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THE CRUELEST MONTH: SMALL BUSINESS MOOD HITS DECADE-LOW IN APRIL (1138 EDT/1538 GMT) Owners of small U.S. businesses grew crabbier last month than they've been in over a decade. The National Association of Independent Business' (NFIB) optimism index shed 1.1 points in April to land at 89, the metric's most dour reading since January 2013. The index has now spent 16-straight months below its historical average of 98. Of note, 'labor quality' overtook 'inflation' as the most pressing problem for the first time since January 2022.
"Optimism is not improving on Main Street as more owners struggle with finding qualified workers for their open positions," writes Bill Dunkelberg, NFIB's chief economist. "Inflation remains a top concern for small businesses but is showing signs of easing." Among other morsels of joy in the report, a net negative 9% reported increase in sales over the last three months, and expectations for gains in sales volume sank to a net negative 19%. On the whole, survey participants reported a decrease in inventories - worrisome, considering the fact that the private inventories component of GDP was the biggest drag on the first-quarter headline, detracting 2.3 percentage points. Take away that component and the 1.1% quarterly annualized growth in the first three months of the year would have come in at a robust 3.4%, according to Commerce Department data.
As inflation gradually cools, the net percentage of respondents to have raised selling prices has also cooled, falling 4 percentage points to a net 33%. Here's a look inflation concerns and price hikes compared with core producer prices (PPI):
Additionally, 56% reported capital expenditures in the last six months - down 1 percentage point from March - 40% of which was spent on machinery. The capex decline "could be linked to the tightening of lending conditions by banks in the wake of regional bank failures, but that is hard to square with other details of the NFIB survey," says Michael Pearce, lead U.S. economist at Oxford Economics.
"Only 6% of firms reported credit as hard to get in April's NFIB survey, and a net 8% of firms say they expect credit conditions to tighten," Pearce adds. It should be noted that the NFIB is a politically-active membership organization which skews heavily conservative, according to the Center for Responsive Politics/opensecrets.org.
(Stephen Culp)
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THE CASE FOR A STOCK MARKET ADVANCE (1102 EDT/1502 GMT) While most of Wall Street is talking anxiously about when the recession will hit, and how bad it will be, Stifel market strategist Barry B. Bannister has raised his target for the S&P 500 by 5%. Bannister is forecasting a target range of 4,200-4,400 by Q2/Q3 2023, the midpoint of which would have the S&P rising just under 4% from Monday's close.
His argument is that there are "encouraging signs of economic resilience in mid-2023 " and he expects inflation to slow sharply, but not to the 1-2% range found in 2009-2019.
With this in mind, Bannister likes cyclical over defensive industry groups as a solid economy tends to favor cyclicals. As for the recession "it is only by late 2023 that we will become more concerned."
(Sinéad Carew)
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WALL STREET INDEXES GO SLIGHTLY RED (1012 EDT/1412 GMT) The S&P 500 and the Nasdaq are now slightly lower early on Tuesday with earnings season and debt ceiling worries adding to jitters ahead of a key inflation reading due on Wednesday. After the latest crop of earnings reports PayPal is down 10% after it failed to impress, while Apple Inc supplier Skyworks is down almost 5% after issuing an underwhelming Q3 outlook.
Shares in electric vehicle (EV) maker Lucid Group Inc are down 6% after it reported lower-than-expected first-quarter revenue and trimmed its 2023 production forecast as a price war sparked by Tesla, hurt sales. In S&P sectors, real estate is falling most, while communication services is now the sole gainer.
While investors are waiting on U.S. inflation data they were also watching anxiously for any progress in Washington on efforts to reach a debt ceiling agreement with the potential for a default as early as June 1, if Congress does not act. U.S. President Joe Biden and top Republican lawmakers are expected declare their positions on the matter face to face in a 4PM meeting on Tuesday. Here is your 1012 AM EDT snapshot:
(Sinéad Carew)
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NASDAQ COMPOSITE VS RESISTANCE; RINSE AND RETREAT? (0900 EDT/1300 GMT) Like the S&P 500 index , the Nasdaq Composite's strength continues to be capped by particularly thorny resistance:
Since hitting a high of 12,270.189 in mid-September of last
year, and then falling to new lows, the Composite's recovery has
been unable to surpass this level.
Indeed, the IXIC ran out of steam in early February at
12,269.555, before suffering another sharp retreat.
And for the past six weeks, the September 2022 high has
continued to cap strength. The weekly highs over this period
have been around 12,228, 12,225, 12,206, 12,245, 12,228, and
12,265. On Monday of this week, the Composite's high was at
12,264.988 before it settled back to end at 12,256.917.
Given that this week will bring highly anticipated CPI data
on Wednesday, traders remain focused on whether the Composite
can break through the ceiling, potentially clearing the way for
further gains, or if it will once again fail, putting the index
at risk for another significant downdraft.
The rising 10-week moving average, which has done a good job
of supporting the IXIC since mid-March, is now around 11,980.
Meanwhile, in what may be of concern to bulls, on Thursday
of last week, the Nasdaq's daily advance/decline line did dip to
a fresh low. However, it has yet to see downside follow-through.
(Terence Gabriel)
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
