Inflation Concerns Rise As Crude Prices Soar Today

There has been a notable increase today in the S&P 500 Index ($SPX) (SPY), a gain of +0.06% in the Dow Jones Industrials Index ($DOWI) (DIA), and a decline in the Nasdaq 100 Index ($IUXX) (QQQ).

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OPEC+ cut crude production by one million barrels per day, which sent crude prices soaring and raised inflation concerns, and resulted in mixed markets for U.S. stock indexes following the action. As a result of Tesla's disappointing Q1 vehicle deliveries, technology stocks were also under pressure, with Tesla losing more than -5%.

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After the OPEC+ announced on Sunday that it would cut production of more than 1 million barrels per day starting May 1, May WTI crude oil is up by more than +6% to a two and a quarter month high today. The Saudi Arabian oil industry said that the cuts were taken as a precautionary measure to support the stability of the oil market.

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As Morgan Stanley warned, the rally in technology stocks this year is not sustainable and that the sector will fall to new lows soon. A report by JPMorgan Chase also indicated that the technology sector would stop outperforming strongly in the long-term as earnings risks, unattractive valuations, and extremely high price relations will stop the sector from outperforming strongly.

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Today, there have been positive developments in energy stocks in pre-market trading, as crude oil prices are up more than +6% to a two and a half month high, with oil prices up more than 6%. Stocks have also benefited from an increase in M&A activity, as Life Storage increased by over 5% after Extra Space Storage agreed to buy the company for $12.4 billion, and Apellis Pharmaceuticals increased by more than +16% after Trade Algo reported that several larger pharmaceutical companies were interested in buying the company.

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It is being reported today that global bond yields have risen on concerns that a surge in oil prices will fuel inflation pressures. The 10-year US Treasury bond yield has increased by 4.3 basis points to 3.511%. The 10-year German bund yield has climbed by 2.9 basis points to 2.321%. As for the 10-year UK gilt yield, it has risen by 3.1 basis points to 3.521%. 

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It is an upward trend for the overseas stock markets. The Euro Stoxx 50 is up by 0.09 percent today. The Shanghai Composite stock index closed up by 0.72% today, and the Nikkei Stock Index closed up by 0.56 percent. 

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There has been an increase of modest gains in the Euro Stoxx 50 index today, which has reached a 14-1/2 month high. A surprise cut in production by OPEC+ is pushing crude prices up more than +5%, which is bolstering the overall market. A boost in the European stocks was also gained as a result of today’s positive economic news, which showed that the eurozone’s manufacturing PMI was revised upward for the month of March.  According to a Swiss newspaper, up to 30% of Credit Suisse Group's workforce might be laid off in the deal, while UBS Group AB fell more than -3% after Switzerland's top prosecutor opened an investigation into the takeover. 

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The Vice President of the European Central Bank, Guindos, has said that the underlying inflation dynamics will remain strong, but the headline inflation is predicted to decline considerably.

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According to the S&P manufacturing PMI for the Eurozone for March, the index was revised by 0.02 points higher from the originally reported 47.1 to 47.3.

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Chinese chip-related stocks soared to a 3-1/2 week high and closed moderately higher today. The government launched a cybersecurity review of imports from Micron technology, leading to Chinese stocks climbing moderately higher. A number of Macau casino stocks also rallied after a flurry of Chinese tourists returned to Macau after the end of Covid Zero sparked a travel boom in March, which resulted in a 3-year high in gaming revenue.  The China Mar Caixin manufacturing PMI came in lower than expected, which indicated that manufacturing activity had been weaker than expected. Furthermore, internet stocks dropped following Bilibili's stock price dropping over 5% after Chinese media reported that content creators had complained that the video platform was not paying them enough.

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It fell -1.6 to 50.0 in the latest Chinese manufacturing PMI, falling below expectations of 51.4 by a year.

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Despite the fact that today's Nikkei Stock Index soared to a new high of almost three weeks, it closed moderately up. As a result of the Japanese currency falling to a two-week low against the dollar, exporter stocks moved higher today, improving the earnings prospects of Japanese exporters. As a result of TBS's report that the Japanese government would end its border control measures against Covid-19 on May 8, Japanese tourism stocks rallied as well.

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Also, as the Mar Jibun Bank manufacturing PMI increased by five months to a 5-month high, stocks were supported by signs that Japanese manufacturing activity was stronger than expected. There was however a larger than expected drop in Tankan large manufacturing business conditions during the first quarter to a 2-year low, which was a negative outcome.

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It is expected that the business conditions for large manufacturers in Japan will fall -6 to a two-year low of 1, lower than expectations of 3.

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The manufacturing PMI for Japan Mar Jibun Bank has been revised upwards by +0.6 points to a 5-month high of 49.2, up from the initial estimate of 48.6.

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U.S. stock market movers before the opening bell

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Following Tesla's Q1 vehicle deliveries of 422,875, a slight overshoot from their consensus expectations of 421,164, Tesla shares fell more than 2% in pre-market trading after the company announced Q1 vehicle deliveries of 422,875. This disappointed some analysts who had expected a bigger beat, especially after Tesla cut vehicle prices in January.

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As a result of China launching a cybersecurity review of Micron Technology (MU) imports, the company's stock price has dropped more than -1 percent in pre-market trading, on top of last Friday's -4 percent drop.

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As a result of Barclays downgrading ArcelorMittal (MT) to an equal weight from an overweight rating earlier in the day, the stock dropped more than -2% in pre-market trading. 

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A report from Citigroup, a financial services company, downgraded Wolfspeed (WOLF) to neutral from buy in premarket trading, causing the stock to fall by almost 3%.

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FORM (FormFactor Technologies) is down more than 2% following Citigroup's decision to downgrade the stock to neutral from buy in pre-market trading today.

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After OPEC+ announced that it would cut oil production by one million barrels per day, energy stocks and energy service providers are trading higher in pre-market trading as oil prices surged more than +6% to a two and a quarter month high. Among these companies, Chevron (CVX), Diamondback Energy (FANG), Devon Energy (DVN), Exxon Mobil (XOM), ConocoPhillips (COP), Marathon Oil (MRO), Occidental Petroleum (OXY), and Halliburton (HAL) were all up by more than 3 percent.

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A report by Trade Algo revealed that several large drugmakers were interested in acquiring Apellis Pharmaceuticals (APLS) earlier this week, which resulted in the stock rising more than +16% in pre-market trading.

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There was a significant jump in the price of Life Storage (LSI) in pre-market trading following the announcement that Extra Space Storage would acquire the company for $12.4 billion.

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Macau-related casino operators that are listed on the U.S. stock exchange are trending higher in pre-market trading after data revealed the city’s gaming revenue in March grew by +247% as tourists returned after the Covid restrictions were removed. In the last week alone, Las Vegas Sands (LVS), Wynn Resorts (WYNN), MGM Resorts International (MGM), and Melco Resorts & Entertainment (MLCO) have all risen by more than 3%.