Finance

U.S. stock index futures were flat during overnight trading on Monday, following a volatile session that saw the S&P 500 and Nasdaq Composite continue their march lower.
Futures contracts tied to the Dow Jones Industrial Average were flat. S&P 500 futures were slightly higher, while Nasdaq 100 futures added 0.13%.

During regular trading the S&P dipped 0.39%. In a volatile session the benchmark index at one point gained 0.56%, while shedding about 1% at the session low.
The Dow Jones Industrial Average saw a similar swing, although the 30-stock index eked out a 0.8% gain at the closing bell, pushed higher by Chevron and UnitedHealth.
The Nasdaq Composite, meantime, was the session’s underperformer as the carnage in tech stocks continued. The tech-heavy index finished the day 1.2% lower, and is now 28% below its intraday all-time high from Nov. 22.
“In a sense, the poor performance this year for tech and growth companies is somewhat of a payback for the impressive returns these market segments had recently enjoyed,” UBS said Monday in a note to clients.
The tailwinds of the pandemic — a jump in stay-at-home spending and low interest rates — have since turned to headwinds. Now, consumer spending is shifting and rates are rising.

“While we think that long-term interest rates have peaked for now, growth stocks are still expensive relative to value stocks,” UBS added.
Investors will also be watching key economic data out Tuesday, with retail sales numbers hitting at 8:30 a.m. ET followed by industrial production numbers later in the morning.

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Inflation concerns have been a mounting headwind for stocks, with some investors worried the economy could ultimately tip into a recession.
“We see clear late-cycle indicators, and while the risk of economic growth contraction or recession has risen steadily through the first four-and-a-half months of this year, we are now beginning to cross over a probability level that makes recession a base case for the end of this year and beginning of next,” Darrell Cronk, president of Wells Fargo Investment Institute wrote in a note Monday.
The firm added that ultimately it should be a “relatively mild economic growth contraction and a short-lived one.”
While the bulk of earnings season is in the rearview mirror, a number of companies are on deck for Tuesday, including Walmart, Home Depot and JD.com.
As of Friday afternoon, of the more than 90% of the S&P 500 that’s posted quarterly results, 78% of companies have beat earnings expectations while 75% have topped revenue forecasts, according to data from Refinitiv.

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Spirit Airlines planes on the tarmac at the Fort Lauderdale-Hollywood International Airport on February 07, 2022 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images

Check out the companies making headlines in midday trading Monday.
Spirit, JetBlue — Shares of JetBlue Airways dipped 6% on news that the company’s offering $30 a share to take over Spirit Airlines. The airline turned down a previous offer from JetBlue amid a planned merger with Frontier Airlines. Spirit’s shares soared 13.5% on the takeover news.

Eli Lilly — The drugmaker’s shares rose 2.6% after the Food and Drug Administration approved the company’s tirzepatide treatment for type 2 diabetes for adults. The drug is expected to be available in the United States in the coming weeks.
Signature Bank — Shares fell 7% after the bank gave a midquarter update. Signature reported total deposits are down $1.39 billion. The drop comes as the crypto market is experiencing steep losses. Signature is known for serving crypto institutions, and swings in crypto prices can be reflected in its crypto-related deposit and transaction volume growth.
Carvana — Carvana shares gained 4.1% before pulling back after the online used car retailer forecast a quicker-than-expected timeline for profitability. The company also shared plans to cut costs.
Twitter — Twitter shares were 8.2% lower Monday as speculation about whether Elon Musk would complete his takeover deal of the social media company continued. The Tesla CEO tweeted over the weekend that Twitter’s legal team said he violated a nondisclosure agreement.
Nucor Corporation — Shares of the steel products manufacturer fell 3.3% after the company announced plans to acquire C.H.I. Overhead Doors, a manufacturer of overhead doors for residential and commercial markets in the U.S. and Canada. The transaction is valued at $3 billion and is expected to be completed in June.

Rivian, Ford — Shares of Rivian fell 6.9% after Ford Motor disclosed in a Securities and Exchange Commission filing that it sold an additional 7 million shares of the electric vehicle maker. That follows Ford’s earlier sale of 8 million shares last week. Ford shares fell 3.3%.
SoFi — Shares of the consumer financial services provider rose 2.4% after Piper Sandler upgraded them to overweight from neutral, saying they have the potential to rebound by about 50% on earnings momentum in the second half of this year and into 2023.
Warby Parker — The eyewear company fell 5.3% after it reported an unexpected loss of 30 cents per share as compared with estimates of a 1 cent per share profit, according to Refinitiv, for its most recent quarter. It also posted weaker-than-expected revenue.
Energy stocks — Energy names were the top gainers in the S&P 500 on Monday, as oil prices got a boost after the European Union moved closer to banning crude imports from Russia. Occidental Petroleum advanced 5.6%. APA Corp advanced more than 3%, along with Marathon, Devon Energy and Chevron.
 — CNBC’s Hannah Miao and Samantha Subin contributed reporting.

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Luna Foundation Guard said it spent almost all of the bitcoin in its reserve last week in a futile attempt to save terraUSD.
TerraUSD — or UST, for short — has fallen well below its intended $1 peg. By Monday, it was trading at just 9 cents.
Terra creator Do Kwon had promised to use the bitcoin in the event of a dramatic fall in the value of UST.

Bitcoin fell below the $26,000 level since December 2020. (Photo credit should read CFOTO/Future Publishing via Getty Images)
CFOTO | Future Publishing via Getty Images

Investors have been eager to find out what happened to the more than $3 billion in bitcoin bought up by crypto firm Terra to back its failed stablecoin. Now, they’ve got their answer.
Luna Foundation Guard, a fund set up by Terra creator Do Kwon, said Monday it spent almost all of the bitcoin in its reserve last week in a futile attempt to save terraUSD — or UST, for short.

The foundation had accumulated a total of more than 80,000 bitcoins, which was worth over $3 billion last week. Kwon had promised to use the bitcoin in the event of a dramatic fall in the value of UST.
In a series of tweets, Luna Foundation Guard said it transferred 52,189 bitcoin to “trade with a counterparty” as UST fell below its intended $1 peg. A further 33,206 bitcoin was sold by Terra directly in a last ditch effort to defend the peg, the foundation said.
As of Monday, Luna Foundation Guard had just 313 bitcoins left in its reserve, worth approximately $9.3 million. The firm said it would use the remainder of its assets — which include some other digital tokens, like BNB and avalanche — to “compensate remaining users” of UST.
“We are still debating through various distribution methods, updates to follow soon,” Luna Foundation Guard said.
UST is what’s known as an “algorithmic” stablecoin. Unlike tether and USDC, which hold fiat assets in a reserve to back their tokens, UST relied on a complex mix of code, combined with a floating token called luna, to balance supply and demand and stabilize the price.

When UST began to drop below $1 last week, luna also started to sell off, resulting in a vicious cycle that caused UST to plunge to less than 30 while luna became worthless. UST is now worth just 9 cents, according to CoinGecko data.
The collapse of Terra’s tokens rippled through crypto markets, wiping out more than $200 billion of wealth in a single day. Bitcoin on Thursday briefly plunged bitcoin fell below $26,000, its lowest level since December 2020.

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Take a look at some of the biggest movers in the premarket:
Spirit Airlines (SAVE) – Spirit Airlines surged 19.3% in premarket trading after JetBlue (JBLU) launched a $30 per share tender offer for its rival airline. Spirit had rejected a prior bid by JetBlue, preferring to keep a previously struck deal to merge with Frontier Airlines parent Frontier Group (ULCC). Frontier shares jumped 5.5% while JetBlue was down 0.6%.

Carvana (CVNA) – Carvana shares rallied 13.3% in premarket action after the used car retailer forecast significant core earnings for 2023. In a Securities and Exchange Commission filing, Carvana also detailed its plans to cut costs.
Warby Parker (WRBY) – The eyewear retailer’s stock slipped 3.8% in the premarket after the company reported an unexpected quarterly loss as well as revenue that came in slightly below forecasts. Warby Parker reiterated its prior full-year outlook.
Twitter (TWTR) – Twitter fell 2% in the premarket, amid speculation about whether Elon Musk will complete his takeover deal for the social media platform. Musk tweeted over the weekend that Twitter’s lawyers told him he had violated a non-disclosure agreement by revealing sample sizes used by Twitter when it analyzes spam accounts.
Netflix (NFLX) – Netflix added 1.8% in premarket trading after Wedbush upgraded the stock to “outperform” from “neutral.” The firm said the staggered release of shows like “Ozark” and “Stranger Things” will help reduce churn and that it believes Netflix is once again positioned to grow.
Rivian (RIVN) – Ford Motor (F) sold another 7 million shares of the electric vehicle maker, according to an SEC filing. That follows the sale of 8 million shares last week, with the two sales leaving Ford with a 9.7% stake. Rivian lost 1.1% in premarket trading.

SoFi (SOFI) – The fintech firm’s shares rallied 4.2% in the premarket after Piper Sandler upgraded it to “overweight” from “neutral.” The firm said SoFi will benefit from rapid growth in deposits, the expiration of the student loan moratorium and revenue growth in financial services.
ManTech International (MANT) – Carlyle Group (CG) is close to finalizing a roughly $4 billion buyout of defense contractor ManTech, according to people familiar with the matter who spoke to Bloomberg. A deal could be announced as soon as this week.
Trade Desk (TTD) – The programmatic advertising company’s stock added 3.3% in premarket trading after Stifel Financial upgraded it to “buy” from “hold” and increased its price target to $80 per share from $50 a share. Stifel said The Trade Desk will benefit from the addition of ad-supported versions of Netflix and Disney+.

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Retail sales fell by 11.1% in April from a year ago, more than the 6.1% decline predicted in a Reuters poll.
Industrial production dropped by 2.9% in April from a year ago, in contrast with expectations for a slight increase of 0.4%.
The unemployment rate in China’s 31 largest cities climbed to a new high of 6.7% in April, according to data going back at least to 2018.
Shanghai city announced Sunday that it would start to allow restaurants to reopen gradually, and said Monday the city aimed to resume normal production and life by the middle of June.

The persistent spread of Covid and resulting stay-home orders — primarily in Shanghai — forced factories to close or operate at limited capacity in April. Pictured here on May 12 is a refrigerator factory in Hefei, China, about a five hours’ drive from Shanghai.
Xie Chen | Visual China Group | Getty Images

BEIJING — China reported a drop in retail sales and industrial production in April — far worse than analysts had expected.
Retail sales fell by 11.1% in April from a year ago, more than the 6.1% decline predicted in a Reuters poll.

Industrial production dropped by 2.9% in April from a year ago, in contrast with expectations for a slight increase of 0.4%. The output of mining and utilities businesses grew.
But manufacturing fell by 4.6%, mostly dragged down by a slump in the auto sector and equipment manufacturing, said Statistics Bureau Spokesperson Fu Linghui. In addition to Covid, he said industrial production faces pressure from insufficient market demand, rising costs and other factors.
Last month, the persistent spread of Covid and resulting stay-home orders — primarily in Shanghai — forced factories to close or operate at limited capacity.
The “increasingly grim and complex international environment and greater shock of [the] Covid-19 pandemic at home obviously exceeded expectation, new downward pressure on the economy continued to grow,” the statistics bureau said in a statement. The bureau said the impact of Covid is temporary and that the economy “is expected to stabilize and recover.”

Fixed-asset investment for the first four months of the year rose by 6.8% from a year ago, slightly missing expectations of 7% growth. Investment in real estate declined by 2.7%, while that in manufacturing rose by 12.2.% and that in infrastructure rose by 6.5%.

China’s passenger car production dropped by 41.1% year-on-year in April, according to the China Passenger Car Association. The auto sector in China accounts for about one-sixth of jobs and roughly 10% of retail sales, according to official figures for 2018 compiled by the Ministry of Commerce.
Auto sales dropped by 31.6% in April from a year ago, the statistics bureau data showed. That was better than the peak of the decline in early 2020 — down 37% year-on-year in January and February that year — but worse than the 0% year-on-year change recorded for April 2020.

We believe local lockdowns will still severely impact the production-end of the economy in May and view a quick turnaround as all but impossible.

Chief China Economist, Nomura

Catering sales plunged by 22.7% — better than a 31.1% year-on-year drop in April 2020. Restaurants in Shanghai were essentially closed in April, while Beijing city’s ban on dining in restaurants only took effect in early May.
Within retail sales, only beverages, medicine, food and petroleum products saw year-on-year growth.
“Although Covid case numbers have declined markedly from the peak in mid-April, the unwinding of lockdowns has been extremely slow, due partly to the caution among local government officials,” Ting Lu, Chief China Economist at Nomura, said in a note. “Therefore, we believe local lockdowns will still severely impact the production-end of the economy in May and view a quick turnaround as all but impossible.”
Shanghai city announced Sunday that it would start to allow restaurants to reopen gradually, and said Monday the city aimed to resume normal production and life by the middle of June.

Jobless rate ticks higher

The unemployment rate in China’s 31 largest cities climbed to a new high of 6.7% in April, according to data going back at least to 2018.
The unemployment rate across cities rose by 0.3 percentage points from March to 6.1% in April. The jobless rate among those aged 16 to 24 was nearly three times higher at 18.2%.
For an additional sense of the scale of economic slowdown in April, other data showed a slump in business and household demand for loans.

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Total social financing — a broad measure of credit and liquidity — roughly halved last month from a year ago to 910.2 billion yuan ($134.07 billion), the People’s Bank of China said late Friday.
However, Macquarie’s Chief China Economist Larry Hu said he expected the drop in credit demand would be short lived. He pointed out that on Sunday, the central government took its “first action … to save property” by cutting mortgage rates for first-time homebuyers.
The rate, which used to follow the five-year loan prime rate as a benchmark, is now 20 basis points below that.
“Today’s cut is far from enough to turn the property sector around, but more property easing would come,” Hu said in a note Sunday.
Real estate and related industries account for about a quarter of China’s GDP, according to Moody’s.

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Traders on the floor of the NYSE, May 6, 2022.
Source: NYSE

Stock futures were higher Sunday evening after a week of steep losses that ended on a high note, and ahead of a big earnings week for retailers.
Futures tied to the Dow Jones Industrial Average rose 89 points, or 0.3%, while S&P 500 futures added 0.4%. Nasdaq 100 futures jumped 0.6%.

On Friday, the Dow rose 466.36 points, or 1.47%, while the S&P 500 climbed 2.39%. The Nasdaq Composite jumped 3.82% and posted its strongest one-day gain since November 2020. Still, all three averages posted losing weeks. 
The gains came as investors went into relief rally mode to cap off a bad week for stocks in which the S&P 500 nearly descended into bear market territory.
It remains to be seen, however, how long the rally will last or how much further stocks have to fall before this year’s downtrend bottoms.
“Given the history of bear markets, coupled with the fact that the Fed has just begun its rate hike cycle and would like to see financial conditions continue to tighten so that demand pulls back further, this rally will most likely weaken,” said Quincy Krosby, chief equity strategist for LPL Financial.

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Still, some investors and analysts say, whether or not the bottom is in, there are good buying opportunities at the market’s current lows.

“I’m not calling the bottom here, but there’s some opportunity here to dollar cost average,” said Sylvia Jablonski, CEO and chief investment officer at Defiance ETFs, told CNBC. “If you’re sitting on a bunch of cash, you’re locking in losses because of inflation. Investing in equities or asset classes that you believe in… it is the lesser evil. The selling fatigue will wane, the market will reset. It’s unlikely the Dow and the S&P are going to be in correction territory six months to a year from now.”
Retail earnings season kicks off this week with several big-box retailers set to report results for the first quarter, including Walmart, Target and Home Depot. Elsewhere, Deere is also on deck, along with a handful of technology companies.
Investors will also have their eye on retail sales data this week, which could give them insight into how retailers are managing inflation, which remains near 40-year highs.

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Since 1900 the global economy has fallen into recession, as defined by a year-on-year decline in gdp per person, about once a decade on average. In 2020 the world experienced the deepest downturn since the end of the second world war. Just two years on, is another recession on the way? Worries are certainly mounting. The war in Ukraine has triggered higher food and energy prices, which have hammered households’ disposable incomes. Lockdowns in China are disrupting supply chains. And central banks are rapidly raising interest rates to tame inflation. Fears about the state of the world economy have jolted financial markets. In the past month stockmarkets in the rich world have fallen by nearly a tenth. Risky assets including tech stocks and cryptocurrencies have taken a nasty blow. Economists are steadily downgrading their forecasts for global growth. To what extent are recession fears already materialising? A look at the data gives grounds for cautious optimism—for now, at least. True, in many countries people sound as though the recession is already here. Across the oecd, a club mostly of rich countries that accounts for over 60% of global gdp, consumer confidence is now lower than it was when the coronavirus first struck (see chart 1). A gauge of American consumers’ sentiment, constructed by the University of Michigan, this month fell to its lowest level in a decade, according to a preliminary estimate released on May 13th. Respondents became gloomier about their own financial situations; fewer of them thought it a propitious time to buy durable goods, on account of high inflation. If consumers hold back from spending, the economy will slow. Yet, so far, what people say and what people do seem to be different things. Global restaurant bookings on OpenTable, a reservations website, are still above the pre-pandemic norm. In America hotel occupancy still shows sign of improvement. A high-frequency measure of Britons’ spending habits, constructed by the Office of National Statistics and the Bank of England, shows little sign that people are holding off on social activities, or on purchases that could be deferred. Consumers are likely to be able to carry on spending for a while, even as inflation cuts into purchasing power. Households across the oecd are still sitting on roughly $4trn of savings (worth 8% of gdp) accumulated during the pandemic, according to our estimates. And, contrary to what is commonly supposed, not all of that money is in the hands of the rich. In America the bank accounts of low-income families were still 65% fatter at the end of last year than in 2019. Businesses look more resilient still. Many company bosses have complained about sky-high costs in recent earnings calls. But the oecd’s measure of business confidence remains solid. Data from Indeed, a jobs site, suggest that vacancies in rich countries may have stopped increasing—but they are still plentiful. There is appetite for investment, too. Analysts at JPMorgan Chase, a bank, reckon that global capital expenditure rose by 7.6% in the first three months of the year, compared with the year before, twice its rate towards the end of 2021.Some countries do look weak. Goldman Sachs, another bank, produces a “current activity indicator”, a high-frequency measure of economic growth based on a combination of surveys and official data. The Russian economy has sharply slowed since Western countries slapped on sanctions in response to the invasion of Ukraine. And in China, where the government’s zero-covid strategy has led to the strictest lockdowns since early 2020, the economy may well be shrinking (see chart 2). According to Ting Lu and colleagues of Nomura, another bank, 41 cities accounting for nearly 30% of China’s gdp were in full or partial lockdown on May 10th. A range of “real-time” indicators illustrates the severe hit to the economy. Movie box-office revenues, for instance, were 82% lower in the five days to May 4th than they were a year ago. Car sales in April were 35% below their level in 2021.But most places are stronger. Adapting a weekly gdp series for 45 countries, including India, Indonesia and the g7, produced from internet-search data by Nicolas Woloszko of the oecd, we estimate that global gdp growth has remained steady in recent weeks (see chart 3). Overall, Goldman’s measure of economic activity is lower than it was in early 2021, when economies reopened, but is still respectable. The data could yet turn—if Russia turns off the gas taps to Europe, China tightens lockdown restrictions even further or central banks are forced to raise interest rates faster than they currently expect. When America’s labour market has been this tight in the past, notes JPMorgan, a recession has tended to follow in the “medium term”. But the 12th global recession since 1900 does not seem to have started just yet. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Traders work on the floor of the New York Stock Exchange. 

Check out the companies making headlines in midday trading.
Twitter — Shares of the social media platform slid 9.7% after Elon Musk said his take-private deal is on hold until he receives more information about how many fake accounts there are on Twitter. Still, Musk said he was “still committed to the acquisition.”

Affirm — Shares of the buy-now, pay-later lender surged 31.4% after Affirm beat expectations for its fiscal third quarter. The company reported a loss of 19 cents per share on $355 million of revenue. Analysts surveyed by Refinitiv had penciled in a loss of 51 cents per share on $344 million of revenue. Affirm also announced a multiyear extension of its partnership with Shopify.
Robinhood — Shares of the investing app jumped 24.9% on Friday after the CEO of crypto exchange FTX, Sam Bankman-Fried, picked up a 7.6% stake in Robinhood for $648 million after the stock hit an all-time low this week. His new position makes him the third-largest shareholder in the company.
Duolingo — Shares surged 34% after the language software company posted better-than-expected quarterly earnings and revenue. Duolingo issued upbeat quarterly revenue guidance, and reported all-time high active user numbers.
Figs — Figs shares fell 25% on the back of disappointing quarterly results. The health-care apparel maker posted a profit of 5 cents per share on revenue of $110.1 million. Analysts expected earnings of 6 cents per share on sales of $117.3 million, according to StreetAccount. The company also issued weaker-than-expected revenue guidance for the year.
Krispy Kreme — Shares of the doughnut chain popped 10.4% after an upgrade from HSBC. “We expect more pricing and higher scale resulting from an aggressive point of access expansion will keep earnings expectations on track,” HSBC said. 

Toast — Shares of Toast added 4.9% after the tech and payments platform for restaurants reported a loss for its most recent quarter that was narrower than expected by Wall Street analysts. The company also issued upbeat revenue guidance for the year.
Poshmark — Poshmark rose 23.9% after the company reported a quarterly loss of 18 cents per share. Wall Street analysts expected a loss of 22 cents per share, according to Refinitiv. Revenue for the quarter of $90.9 million also beat estimates of $87.5 million.
The Honest Company — Shares of The Honest Company were up 8.2% after the maker of personal care and household products reported a quarterly loss and revenue that were in line with analyst expectations. The company also reiterated its full-year revenue guidance.
Ford Motor — Shares of the carmaker added 8.5% after Morgan Stanley upgraded the stock to equal weight from underweight, saying the market is underestimating certain parts of the company’s business.
— CNBC’s Jesse Pound, Sarah Min, Yun Li and Hannah Miao contributed reporting

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