OPENING CALL

Stock futures slipped on Tuesday as bond yields edged higher, with investors continuing to reduce bets on Federal Reserve interest rate cuts following stronger-than-expected economic data.

A gauge of activity at U.S. manufacturers turned positive in March for the first time in 17 months, and the prices-paid component, a measure of inflation, rose 3.3 points to 55.8%.

"This fanned further fears that the economy is continuing to expand under its own steam, with the sharp spike in production and new orders, alongside rising component prices, also potentially adding to the possibility of further inflationary pressures," Interactive Investor said.

"The readings seemed to vindicate the comments from Federal Reserve Chair Powell late last week that growth remained strong and inflation not yet at the target rate, thus meaning that the Fed does 'not need to be in a hurry to cut'."

Premarket Movers

Canoo said it expects fiscal-year revenue of $50 million to $100 million, below analysts' forecasts of $152.5 million. The stock was down 24%.

Humana was down 9.2%, UnitedHealth fell 3.9%, and CVS Health declined 5.2% after the Centers for Medicare and Medicaid Services announced an average 3.7% increase in revenue for Medicare Advantage plans in 2025.

PVH was down 26% after the company said it expects fiscal first-quarter revenue to decrease about 11% to $1.92 billion, below analysts' estimates.

Tesla's report on first-quarter deliveries will be released Tuesday. Wall Street expects about 457,000 units, up 8% from 423,000 delivered in the first quarter of 2023. Tesla shares were down 1.3%.

Trump Media & Technology was down 4%. Shares of the parent company of Truth Social fell 21% on Monday after it was disclosed the company lost $58.2 million in 2023 on sales of $4.13 million.

Walt Disney was down 0.3% after The Wall Street Journal reported the entertainment company has pulled ahead in its proxy fight against Nelson Peltz's Trian Partners with more than half of all shares voted.

Post-Close Movers

Acorda Therapeutics filed for bankruptcy protection and secured a "stalking horse" bid as it enters an auction process. Shares declined 33%.

Economic Insight

LBBW Research has adjusted its forecast for the start of interest-rate cuts by the Federal Reserve--irrespective of the presidential election--to July from June in anticipation of progress in disinflation that has largely failed to materialize so far in 2024.

LBBW expects four rate cuts by the Fed this year, totaling 100 basis points, compared with its previous forecast of five rate cuts.

Watch For:

Factory Orders for February; Domestic Auto Sales for March; Fed speakers include Loretta Mester and Mary Daly; Intel investor webinar; GE Vernova begins trading

Today's Headlines/Must Reads

- Disney Winning Proxy Fight Against Trian With More Than Half of Votes Cast

- Regulator Probes BlackRock and Vanguard Over Huge Stakes in U.S. Banks

- Bitcoin Is Soaring This Year. Goldman's Crypto Skeptic Isn't Biting

- Comments by China's Xi Hint at Possible Expansion of PBOC Toolkit

MARKET WRAPS

Forex:

The DXY dollar index was slightly firmer early in the European session, with JOLTS and U.S. factory orders data awaited, potentially giving the greenback a further boost, Swissquote Bank said.

"Any positive surprise on both data should continue to soften the Fed doves' hands into Friday's official jobs data and back a further rally in the dollar across the board."

UBS Global Wealth Management said the backdrop for a well-bid dollar is expected to stay in place moving into the second quarter.

"With the timing of Federal Reserve easing still in doubt, the balance of risks points to fewer rather than more cuts compared with current consensus expectations."

UBS still advises holding the dollar on an unhedged basis, but it notes that there are well-known limits on dollar strength linked to the elevated U.S. twin deficits and the expectation that global growth dynamics will converge with the U.S. in the second half of the year.

Brown Brothers Harriman said more strengthening of the dollar is likely ahead.

"The strength of the U.S. economy and sticky underlying inflation mean the Fed can afford to stay on the sidelines for longer than is currently discounted by the money market. We expect USD to benefit further from a reassessment in Fed funds rate expectations."

MUFG said the strength of the dollar has been capped against the yen in the near term by the heightened threat of intervention from Japanese officials to support the yen. "It has helped to keep USD/JPY below the 152.00-level."

Japanese Finance Minister Shunichi Suzuki reiterated again that the government will monitor market developments closely with a high sense of urgency, and will take appropriate measures against excessive moves, without ruling out any options.

Bonds:

Volatility in bond markets is expected to continue to fall in the second quarter, Generali Asset Management said, with falling inflation rates and declining inflation volatility, combined with upcoming key rate cuts contributing to this.

This offers some potential for lower swap spreads, Generali added.

"In addition to the decline in bond market volatility, the record-high 12-month rolling net issuance of Bunds, combined with the expected steepening of the yield curve, also points to somewhat tighter swap spreads."

Generali expects bond yields to remain within a fairly narrow corridor in the coming months, while in the longer term, there is potential for a decline, particularly for U.S. yields.

"There are opposing effects regarding the future development of core yields. In this respect, we do not expect a clear trend and the absolute change is likely to remain within a relatively narrow range," it said.

Overall, Generali sees the evolution of yields skewed to the downside.

Energy:

Oil prices hit a five-month high on signs of tighter supply due to OPEC+ cuts and growing geopolitical risks, as well as improving demand in the U.S. and China.

Gains were boosted by escalating hostilities in the Middle East after Syria and Iran accused Israel of a missile attack on an Iranian diplomatic building in Damascus.

"To date, the market hasn't been worried about supply disruptions, with the war remaining contained," ANZ said. But "Iran's involvement could see its oil supply under threat."

Meanwhile, manufacturing activity in the U.S. and China expanded in March, raising expectations that improving economic growth in both countries will boost demand for oil.

Metals:

Base metals were higher with gold trading just below its all-time record, a clear symptom of the economic and political turmoil shaking global markets as investors seek a haven, Xs.com said.

That said, experts are divided on whether this bullish trend will persist in the long term, Xs.com added.


TODAY'S TOP HEADLINES


The Dollar-Store Showdown Comes Down to Real Estate

America's two leading dollar-store chains are heading in opposite directions. One discounter is expanding aggressively while its rival contracts.

The difference comes down largely to the choice of real estate.


Two Members of Warner Bros. Discovery's Board Resign to Resolve Antitrust Concerns

Two independent board members of Warner Bros. Discovery resigned after the Justice Department told them it was investigating whether their presence on the board violated antitrust laws.

The two board members, Steven Miron and Steve Newhouse, have ties to the cable and broadband provider Charter Communications through Advance/Newhouse Partnership, a privately held company that owns about 12% stake in Charter, which Warner Bros. Discovery has said is a "peer group company" in regulatory filings.


China Developers' Shares Suspended in Hong Kong for Missing Results Deadline

Several Chinese developers' shares have been suspended from trading in Hong Kong starting Tuesday due to their failure to meet the deadline for publishing last year's annual results, another sign of the turmoil in the country's real-estate sector.

Well-known names like Country Garden Holdings, Central China Management and Modern Land (China) are among the companies that failed to meet the Hong Kong stock exchange's March 31 deadline due to an inability to sort out their financial and accounting estimates or delays in getting their accounts audited. Some had auditors being replaced due to disagreement on fees.


The Stock Market's Magnificent Seven Is Now the Fab Four

The Magnificent Seven trade is beginning to fizzle-and yet, the stock market is still heading higher.

The S&P 500 climbed 10% in the first quarter, its best start to a year since 2019, even though two of its biggest constituents suffered double-digit declines. Apple shares fell 11% in the first three months of the year, while Tesla dropped almost 30%. Alphabet shares sputtered for much of the period before making a run in the past three weeks and ending up 8%.


Dow 40,000: What's taking so long to get there?

Investor psychology may be the reason why the Dow Jones Industrial Average is having trouble crossing the 40,000-point threshold.


Yen Intervention Risk Is Rising, but Effects Could Be Short-Lived

The yen faces rising risks of intervention by Japanese authorities as it approaches the psychologically important 152.00 level against the U.S. dollar, but the impact of any actions could be short-lived.

Traders are increasingly wary of potential intervention following recent warnings from Japanese officials as the yen weakened to 34-year lows against the dollar. Finance Minister Shunichi Suzuki said Tuesday that the ministry is watching market trends with a "high sense of urgency" and that it wants to respond "appropriately" to any "excessive movements" in the local currency, according to a local media report.


Donald Trump Obtains $175 Million Bond in Civil Fraud Case

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04-02-24 0615ET