Here are five things you must know for Tuesday, June 14:
1. — Stock Futures Bounce From Bear Market Lows
US equity futures bounced higher Tuesday, following the biggest three-day trading decline of the year on Wall Street, investors looked to the start of the Federal Reserve’s two-day policy meeting amid accelerating bets on faster and deeper rate hikes.
The Street’s benchmark gauge of stock market volatility, the VIX, however, surged 20% in overnight trading to 33.19 points, suggesting a likely session of wild swings for US markets as the Fed begins deliberations for its Wednesday rate decision.
Bets now suggest he Fed will abandon its previous guidance and boost the FedFunds range by 75 basis points, to between 1.5% and 1.75%, following last week’s inflation shock and the prospect of faster CPI readings to come over the summer months.
The shift in rate sentiment triggered a late-hour sell-off on Wall Street Monday, pulling the S&P 500 into bear market territory — defined as a 20% decline from a previous all-time peak — and dragging the Dow to a 52 -week low of 30,373.72 points.
Stocks were also hit by a sell-off in crypto markets, which saw Bitcoin fall to an 18-month low of just under $23,000 each as major exchanges and coin lending platform froze withdrawals in order to limit some of the worst of the volatility.
Overnight in Asia, the downdraft from yesterday’s slump pulled the region-wide MSCI ex-Japan index 0.68% lower heading into the final hours of trading, while European stocks tracked US equity futures higher, with the Stoxx 600 rising 0.12% in early Frankfurt trading .
In the US, benchmark 10-year Treasury bond yields held at 3,301% while 2-year notes were pegged at 3,269%, a gap of only 3 basis points that could portend an inversion of the yield curve, one of the market’s most-reliable indicators of recession.
The dollar index, meanwhile, eased 0.25% from yesterday’s 20-year high of 105.16 to trade at 104.82 against a basket of six global currencies ahead of factory gate inflation data for the month of May at 8:30 am Eastern time.
On Wall Street, futures tied to the Dow Jones Industrial Average indicating a 140 point opening bell gain while those linked the S&P 500 are priced for a 22 point advance. Futures linked to the tech-focused Nasdaq are looking at 98 point opening bell gain.
2. — Fed Rate Bets Flip, With Traders Locking-In 75 Basis Points For Wednesday
Rate traders have executed a complete reversal on expectations for the Fed’s Wednesday policy decision and now forecast the near-certainty of bigger near-term moves as inflation looks to accelerate over the summer months.
The CME Group’s FedWatch now indicates a 96.2% chance of a 75 basis point rate hike tomorrow at 2:00 pm Eastern time, up from just 3.9% a week ago. The change in heart followed a series of reports yesterday, including from TheStreet, that suggested the Fed would front-load its rate hikes amid the fastest consumer price inflation in 40 years in order to provide itself more room to pivot should the data begin to change in the autumn.
Record high gasoline prices, which nudged to a record high of $5,016 a gallon last night will continue to drive headline inflation rates as crude oil holds firmly above the $120 per barrel mark, while food prices extend their recent run-up amid transport snarls and uneven planting seasons.
Moderating wage growth, however, and easier year-on-year price comparisons for items such as used cars will help mitigate gains in core inflation, as jobless claims rise to the highest levels since early January and firms pause hiring plans amid the broader economic uncertainty .
All that said, bets on a follow-on rate hike of 75 basis points in July, which would take the FedFunds rate to a range of between 2.25% and 2.5%, were pegged at 79.8%, up from virtually zero at the start of the month.
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3. — Oracle Shares Surge on Q4 Earnings Beat, Solid Cloud Outlook
Oracle Corp. (ORCL) – Get Oracle Corporation Report shares surged higher in pre-market trading after the cloud-focused software group posted stronger-than-expected fourth quarter earnings and said robust demand would help offset strong-dollar headwinds as it kicks off its new fiscal year.
Oracle said overall revenues rose 5%, topping $11.84 billion, over its fiscal fourth quarter, which ended in March, helping adjusted earnings rise 7% to $1.54 per share. Both tallies topped Wall Street forecasts,
Looking into the current quarter, Oracle said it sees revenues rising by as much as 18%, thanks in part to its recently-closed purchase of Kansas City, Missouri-based Cerner (CERN) – Get Cerner Corporation Reportthe second-largest designer of software used by doctors and hospitals to mange and store medical records.
We feel very optimistic about our business momentum. And we also recognize that there is increasing macro uncertainty right now,” CEO Safra Catz told investors on a conference call late Monday. “Our fundamental principle is to grow EPS while accelerating cloud revenue growth. Given our increasing confidence in organic revenue growth, we will continue to prudently invest back in the business and you can already see the returns in our performance.”
Oracle shares were marked 13% higher in premarket trading to indicate an opening bell price of $72.38each, a move that would trim the stock’s year-to-date decline to around 17%.
4. — Twitter Share Bump Higher As Musk Sets Town Hall Meeting Date
twitter (TWTR) – Get Twitter Inc. report shares moved higher in pre-market trading, but still sit well below the level at which Elon Musk has said he’ll purchase the company, ahead of a town hall meeting with the Tesla (TSLA) – Get Tesla Inc. report CEO later this week.
Musk is set to address Twitter employees on Thursday, according to a company-wide email sent by CEO Parag Agrawal, as the micro-blogging website prepared to vote on the $44 billion takeover bit put forward by the world’s richest man later this summer.
Whether the meeting indicates a desire to complete the on-again/off-again deal, however, is anyone’s guess, with Musk only last week questioning the group’s filings with the Securities and Exchange Commission that peg the number of so-called ‘bot’ accounts at less than 5% of total users on the platform.
The website reportedly agreed to share a “firehose’ of data with Musk, including details of the more than 500 million Tweets posted each day, in order to placate his concerns over the level of fake accounts.
Twitter shares were marked 1.8% higher in premarket trading to indicate an opening bell price of $37.69 each, a move that would still leave the stock more than 30% shy of Musk’s ‘best and final’ offer of $54.20 per share.
5. — Bitcoin Extends Slide Amid $1 Trillion Crypto Wipeout
Bitcoin extended declines Tuesday, briefly falling below the $21,000 level, as investors continue to question the near-term solidity of global cryptocurrency markets.
Yesterday’s moves by cryptocurrency lending group Celsius Network to freeze withdrawals and transfers on its platform — which houses around $11.8 billion in assets — rippled through yesterday’s markets, as did a temporary halt on withdrawals from Binance, the world’s biggest crypto exchange.
Investors on Tuesday were closely-tracking bitcoin levels to see if they fall, and hold, below the $21,000 mark, a level that could trigger a margin call on bitcoin backed loans taken by software group MicroStrategy (MSTR) – Get MicroStrategy Incorporated Report.
Bitcoin prices were last seen 3.5% lower on the session at $22,394.23, a move that extends its year-to-date decline to around 50%. The coins hit a fresh December 2020 low of $20,816.36 in overnight Asia trading.
Broader crypto markets, which peaked at $2.9 trillion last year, have lost nearly $1 trillion in collective value over the past two months.