Dow Futures Tumble As Delta Infections Trigger Growth Concerns: Oil Slumps

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The Monday Market Minute

  • Global stocks slump as investors grow nervous about growth prospects amid a surge in Delta-variant coronavirus infections and stubbornly-high inflation rates around the world.
  • Britain drops COVID restrictions as cases hit a world-high 48,000, with Prime Minister Boris Johnson isolating after coming into close contact with an infected colleague.
  • Around 90% of the 21 S&P 500 companies reporting so far have beaten Street forecasts, with analysts expecting collective earnings to rise 72% from last year to just under $400 billion.
  • Oil prices turn sharply lower after a weekend agreement from OPEC members to pare their production cuts from August, adding 400,000 barrels to the market each day.
  • U.S. equity futures suggest a weaker open on Wall Street ahead of a busy week for corporate earnings, with updates from IBM, Netflix, Johnson & Johnson, Microsoft and Intel.

Wall Street futures turned sharply lower Monday, while oil prices retreated from multi-year highs and Treasury bond yields fell, as investors kicked off a busy earnings week in a cautious mood as coronavirus infections accelerate and inflation remains stubbornly high.

Britain, which dropped nearly all of its domestic restrictions on business and travel as of Monday, record a world-high 48,000 new infections on Sunday, mostly as a result of the fast-spreading Delta variant. Gains were recorded across Europe and Asia, as well, with many countries either imposing or considering fresh lockdowns to tame the spread.

Alongside faster inflation prospects — and a suddenly cautious consumer — investors are now wondering just how long the global economic recovery can last, particularly if central banks were to move too quickly on removing key portions of their monetary stimulus.

Against that backdrop, OPEC’s weekend agreement to pare output reductions by 400,000 barrels per day starting in August, with the aim of returning to normal output schedules in September of next year, will provide a near-term boost for growth prospects, but a more immediate-term hit for oil stocks and the Dow Jones Industrial Average.

Earnings could also provide an avenue for shares to recover this week as 81 companies are expected to report June quarter profits, including IBM  (IBM) – Get Report after the close of trading today. Netflix  (NFLX) – Get Report, Johnson & Johnson  (JNJ) – Get Report, AT&T  (T) – Get Report, Microsoft  (MSFT) – Get Report and Intel  (INTC) – Get Report will follow later in the week.

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So far, 90.2% of the 21 S&P 500 companies reporting have beaten Street forecasts, with analysts expecting collective earnings to rise 72% from last year to a share-weighted $393 billion,

Futures tied to the Dow benchmark, in fact, are priced for a 315 point opening bell decline while those linked to the S&P 500 are indicating a 28 point pullback. 

WTI futures for August delivery were marked $1.84 per barrel lower at $69.97 each while Brent contracts for September were seen $1.82 lower at $71.77 per barrel.

Tech stocks look set to get at least some relief from the retreat in Treasury bond yields, which traded at 1.255% in overnight dealing, as Nasdaq Composite futures indicate a more modest 42 point slip. 

Zoom Video Communications  (ZM) – Get Report were active after the conferencing group agreed to a $14.7 billon all-stock takeover of call center operator FIVE9 Inc.  (FIVN) – Get Report, while Bill Ackman’s Pershing Square Tontine Holdings was lower after the billionaire investor scrapped plans to use the SPAC to purchase a share of Universal Music Group.

 In Europe, rising infections and muted growth forecasts have the Stoxx 600 down 1.7% to a six-week low, while the MSCI ex-Japan benchmark in Asia fell 1.5% heading into the close of trading. 

The Nikkei 225 in Tokyo closed 1.25% lower at 27.652.74 points.