Stocks drop, Fed minutes, Elon Musk and Big Oil-5 things to know

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Here are five things you need to know for Wednesday, April 5:

1. — Stock futures fall, bond yields rise on Fed hawkish concerns

U.S. stock futures traded lower on Wednesday as Treasury yields jumped and the dollar hit a two-year high against its global peers as investors adjusted their bets on Federal Reserve rate hikes ahead of the release of the minutes of its March policy meeting.

Federal Reserve Governor Lael Brainard said Tuesday night at an event in Minneapolis that the Fed would not only be “methodical” in its efforts to raise interest rates to rein in the worst levels of inflation high in forty years, but that it would also begin the run-up to the Fed’s $9 trillion balance sheet as early as next month, and at a “considerably” faster pace than in the past.

Those comments, along with data showing at least a 76.6% chance of a 50 basis point rate hike at next month’s policy meeting, lifted Treasury yields to the highest levels in two years, taking the 10-year bond to 2.639% in overnight trade. , while pushing the U.S. Dollar Index to a 2020 high of 99.487 in overnight trading.

Soaring bond yields dampened gains in global equities, which were also hit by data from China showing a sharp slowdown in economic activity last month as the country’s Covid infection rate jumped and closed factories and businesses across the country.

China’s Caixin PMI, a composite snapshot of activity in the world’s second-largest economy, plunged to 43.9 points last month, the lowest in more than two years and well below the 50 mark. points that separate growth from contraction.

In Europe, as investors focused on both the human tragedy of Russia’s war on Ukraine and the impact of sanctions on Moscow’s exports, oil prices extended gains ahead of a statement. from the White House later in the day and comments from European Commission President Ursula von der Leyen suggesting crude could be the next target.

WTI crude futures for May delivery rose $1.17 from Tuesday’s close at $103.13 a barrel in overnight trading, while Brent contracts for June, the new global price benchmark, rose $1.10 to trade at $107.73 a barrel.

On Wall Street, futures tied to the Dow Jones Industrial Average showing an opening bell drop of 155 points while those tied to the S&P 500, which is down 5.06% for the year, are priced for down 25 points. Tech-focused Nasdaq-linked futures are eyeing an opening slide of 120 points.

2. — Fed Minutes: Focus on balance sheet run-off as rate bets hold

The Federal Reserve will release the minutes of its March policy meeting, where members raised interest rates for the first time since 2019, later today as investors focus on all the details as to how and when the central bank will unwind its $9 trillion balance sheet.

The comments will also outline how voting members of the Fed’s Open Markets Committee have changed their views on inflation since their January meeting, when at least some had suggested inflation would return to target ahead of the end of the year.

Since then, supply chains have been hit by another Covid surge in China and oil, food and energy prices have soared due to the impact of Russia’s war on Ukraine, adding to the “stickiness” of the inflation outlook and solidifying the case for at least seven more rate hikes by the end of the year.

CME Group’s FedWatch tool suggests a 76.6% chance of a 50 basis point hike in May, followed by a 60% chance in June and a 48.5% chance in July.

This shines a light on the Fed’s $9 trillion balance sheet — acquired through years of bond purchases under its quantitative easing and pandemic relief programs. Selling these assets in the bond market will raise “market” interest rates in line with the official Fed Funds rate, creating a “double tightening” effect that will both fight inflationary pressures more aggressively, but also putting the economy in a more vulnerable position in terms of a downturn and the resulting recession.

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3. — Musk hands over SEC filings, points to Twitter Stake’s “active” role

Elon Musk conceded on Tuesday evening what virtually everyone in financial work, and certainly those invested in Twitter (TWTR) – Get the report from Twitter, Inc. already knew: he plans to play an active role in the microblogging website.

Musk has submitted an updated 13-D filing with the U.S. Securities and Exchange Commission, noting his intention to take an active role in the group after his 9.2% stake was revealed earlier this week.

Musk’s original 13-G dossier, typically used by passive investors, was called into question when billionaire Tesla (TSLA) – Get the Tesla Inc report The CEO began tweeting about proposed changes to the group’s user interface and accepted a seat on the company’s board with the stated intention of “working with (CEO Parag Agrawal) and the board of Twitter administration to make significant improvements to Twitter in the coming months.”

In exchange for his seat on the board, Musk, the world’s richest man with an estimated fortune of more than $300 billion, will only be able to amass a 14.9% stake in the London-based group. San Francisco.

Twitter shares were down 1.4% in premarket trading to point to an opening price of $50.28 each.

4. — JetBlue Makes $3.6 Billion Offer for Spirit, Over the Gate Border

Spirit Airlines (SAVE) – Get the report from Spirit Airlines, Inc. shares fell in premarket trading after the low-cost carrier received an unsolicited $3.6 billion takeover bid from JetBlue Airways (JBLU) – Get JetBlue Airways Corporation Report which could potentially upset its planned merger with Frontier Group (ULCC) – Get the report from Frontier Group Holdings, Inc..

JetBlue’s cash offer of $33 per share for Spirit, which it says will help the New York-based carrier compete with bigger rivals such as American Airlines (AAL) – Get the report from American Airlines Group, Inc.delta (DAL) – Get the report from Delta Air Lines, Inc. and united (LAU) – Get the report from United Airlines Holdings, Inc.is about 33% higher than Frontiers’ cash and stock offering from earlier this year, but would likely face significant regulatory hurdles and scrutiny from the Department of Justice on the grounds that ‘it could raise prices and limit customer choice.

Spirit said it would consider the offer.

“We’ve had unprecedented levels of consolidation, which the DOJ has approved and now it’s about how do we make sure the rest of us can continue to discipline the legacy carriers and create that competition,” he said. JetBlue CEO Robin Hayes told Reuters. “We think ultimately it’s the best deal that’s really going to drive competition.”

Shares of Spirit Airlines fell 2.4% in premarket trading to point to an opening price of $26.26 each while JetBlue fell 3.3% to $13.19 each. Frontier was marked down 1.5% to $11.74 each.

5. — Big oil bosses face gas price grid from Congress

Executives of America’s biggest oil companies are expected to face criticism in Washington on Wednesday from lawmakers over record gasoline prices as the impact of Russia’s war on Ukraine continues to reverberate on consumer spending in the world’s largest economy.

The U.S. Energy and Commerce Subcommittee on Oversight and Investigations will ask Exxon Mobil bosses (XOM) – Get Exxon Mobil Corporation reportchevron (CLC) – Get Chevron Corporation reportDevon Energy (NDV) – Get the Devon Energy Corporation report and others for reasons such as the price of gasoline rose so rapidly when crude prices rose in early March, and they’ve taken so long to come down now that WTI crude is about 16% south of its March 8 peak.

Gasoline prices hit an all-time high of $4.31 in early March and were last pegged at a national average price of $4.164 by the AAA, a figure that would represent only a 3 .5%.

“Changes in the price of crude oil do not always result in immediate changes at the pump,” Chevron CEO Mke Wirth said in prepared testimony. “And while the price of crude oil may fall faster, it often takes longer for competition between gas stations to drive down prices at the pump.”

Chevron shares, which have gained more than 39.2% so far this year – versus a 5.1% decline for the S&P 500 – rose 0.9% in premarket trading to $164.90 each. Exxon shares rose 1.1% to $83.64 apiece.

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