Pre-Market Brief: Stocks Slide as a Surge in Crude Oil Boosts Inflation Concerns

Morning Markets

March S&P 500 futures this morning fell to a 1-week low and are down by -0.34%.  Stocks are lower on concern that today’s surge in crude prices to a 13-1/2 year high will boost global inflation and undercut economic growth. The 10-year breakeven inflation rate today climbed to a record high of 2.785% (data from 1998).  However, WTI crude oil is currently up by only 2%, versus an overnight surge of more than +13%, after after Germany said it has no current plans to halt Russian energy imports.

The International Monetary Fund (IMF) warned that the war in Ukraine and the subsequent sanctions imposed on Russia would have a "severe impact" on the global economy, and price shocks from the war would have a worldwide ripple effect.

The Euro Stoxx 50 index today tumbled to a 15-1/2 month low and is down by -0.38% on concern about the surge in crude prices.  European stocks recovered from their worst levels ahead of the third round of talks today between Ukraine and Russia.  The prospects of any meaningful results from the talks are slim after Russian President Putin said Ukraine must “demilitarize,” and he made clear his goal is to remove the current government in Ukraine.   

Today’s Eurozone economic data was mixed for stocks.  On the negative side, the Eurozone March Sentix investor confidence index sank -23.6 to a 16-month low of -7.0, weaker than expectations of 5.3.  On the bullish side, German Jan factory orders rose +1.8% m/m, stronger than expectations of +1.0% m/m.  Also, German Jan retail sales rose +2.0% m/m, stronger than expectations of +1.9% m/m and the largest increase in 7 months.

Russia said it will keep its stock market closed until at least Wednesday, which would be the longest the Russian stock market has ever been closed.   Today, the offshore ruble sank to a new record low of 142.46 rubles/USD.

Asian markets today closed sharply lower.  China’s Shanghai Composite fell to a 6-week low and closed down -2.17%, and Japan’s Nikkei Stock Index sank to a 15-month low and closed down -2.94%.  Asian stock markets sold off sharply today on concern today’s surge in crude prices to a 13-1/2 year high will undercut the global economic recovery and boost inflation.  In a positive factor for Chinese stocks, China’s Feb exports rose +16.3% y/y, stronger than expectations of +14.0% y/y.  Another negative factor for Japanese stocks was the report from Reuters today that said the BOJ at next week’s policy meeting might cut its economic assessment of the Japanese economy as Covid infections hit consumption. 

Pre-Market U.S. Stock Movers

Travel stocks and cruise line operators are falling in pre-market trading as crude oil prices surge to a 13-1/2 year high.  American Airlines Group (AAL), Delta Air Lines (DAL), Southwest Airlines (LUV), and United Airlines (UAL) are all down more than -3%, and cruise operators Carnival (CCL), Norwegian Cruise Line Holdings (NCLH), and Royal Caribbean Cruises (RCL) are all down more than -4%. 

Citigroup (C) dropped -3% in pre-market trading after Jeffries cut its recommendation on the stock to hold from buy.

Bank stocks are falling in pre-market trading as investors continue to shun risk assets amid the ongoing war in Ukraine.  Wells Fargo (WFC) is down more than -2%, and Bank of America (BAC), Goldman Sachs (GS), and JPMorgan Chase (JPM) are down more than -1%. 

Cryptocurrency-exposed stocks are under pressure this morning, with Bitcoin down nearly -2%. Bit Digital (BTBT), Coinbase Global (COIN), Marathon Digital (MARA), MicroStrategy (MSTR), and Riot Blockchain (RIOT) are all down more than -1%.

Energy stocks and energy service providers are climbing in pre-market trading, with the price of WTI crude up more than +2% at a 13-1/2 year high.  Chevron (CVX), Exxon Mobil (XOM), Devon Energy (DVN), Haliburton (HAL), Marathon Oil (MRO), and Occidental Petroleum (OXY) are all up at least +3. 

Uber Technologies (UBER) rose nearly +4% in pre-market trading after it raised its Q1 adjusted Ebitda outlook to $130-$150 million from a prior view of $100-$130 million. 

Today’s U.S. Earnings Reports (3/7/2022)

AvidXchange Holdings Inc (AVDX), Ciena Corp (CIEN), Clarus Corp (CLAR), Day One Biopharmaceuticals Inc (DAWN), Durect Corp (DRRX), Eagle Pharmaceuticals Inc/DE (EGRX), Heritage Insurance Holdings In (HRTG), HighPeak Energy Inc (HPK), IDT Corp (IDT), Indus Realty Trust Inc (INDT), Infrastructure and Energy Alte (IEA), Instil Bio Inc (TIL), International Money Express In (IMXI), Intrepid Potash Inc (IPI), 

KVH Industries Inc (KVHI), National Energy Services Reuni (NESR), Ranger Oil Corp (ROCC),  Scholar Rock Holding Corp (SRRK), Sorrento Therapeutics Inc (SRNE), Vectrus Inc (VEC), Viemed Healthcare Inc (VMD).