Stock Market Update

Equity futures point to a lower opening this morning after stocks finished lower yesterday, with the Nasdaq Composite and DJIA closing below their 200-day moving averages, while the S&P 500 finished just modestly above its own. 

Stocks faced a combination of pressures yesterday, but the bulk of the losses were felt in the afternoon in response to the March FOMC meeting. The committee voted 11-1 to keep the fed funds target range unchanged, but the summary of economic projections (SEP) showed a bump in the median estimate for change in real GDP to 2.4% from 2.3% and PCE inflation to 2.7% from 2.4%. Fed Chair Jerome Powell noted in his press conference that officials are still looking for goods inflation to come down as tariffs work their way through the system and that the higher inflation expectations are not solely due to rising oil prices.

Developments on the energy front are back in focus this morning after Iran followed through on its promise to strike energy targets across the region in retaliation for an Israeli strike on an Iranian gas field. Qatari officials said Iranian missiles caused extensive damage at a key hub for liquefied natural gas, according to The Wall Street Journal. Additionally, Reuters reports that the Trump administration is sending thousands of troops to the Middle East, which could weigh on the market's expectations for a timely end to the war with Iran. 

Crude oil is currently up $1.88 (+2.0%) to $97.34 per barrel. 

On the earnings front, Micron (MU 430.19, -31.54, -6.8%) is the latest major tech company to move sharply lower despite a blowout beat-and-raise earnings report. 

In corporate news: 

• EU natural gas prices surged more than 20%, according to The Wall Street Journal.
• Elliot Investment Management builds a stake in Align Technology (ALGN 185.00, +12.59, +7.3%), according to Bloomberg. 
• Alibaba (BABA 127.56, -6.87, -5.1%) missed EPS estimates by RMB 4.42 and missed revenue expectations. 
• Micron (MU 430.19, -31.54, -6.8%) beat EPS expectations by $3.01, beat revenue expectations, guided Q3 EPS and revenues above consensus, and increased its dividend. 

Reviewing overnight developments:

Equity indices in the Asia-Pacific region slumped badly Thursday amid the fallout from post-FOMC selling in the U.S., rising energy prices, and the initial sell-the-news response to Micron's (MU) blowout earnings report. Japan's Nikkei: -3.4%, Hong Kong's Hang Seng: -2.0%, China's Shanghai Composite: -1.4%, India's Sensex: -3.3%, South Korea's Kospi: -2.7%, Australia's All Ordinaries: -1.8%.

In news:

• Ongoing concerns about the Iran war lasting longer than feared and doing more economic damage than feared through the channel of high energy prices weighed on investor sentiment.
• The Bank of Japan left its key policy rate unchanged at 0.75%, as expected, with the uncertainty about the Middle East unrest contributing to the decision.
• It was an 8-1 vote. The lone dissenter (Takata) wanted a 25-basis-point hike.

In economic data:

• Japan's January Core Machinery Orders -5.5% m/m (expected -9.6%; prior 19.1%) and 13.7% yr/yr (expected 10.5%; prior 16.8%); January Industrial Production 4.3% m/m (expected 2.2%; prior 0.6%) and Capacity Utilization 2.9% (prior 0.5%)
• Australia's February Employment Change 48.9K (expected 20.8K; prior 26.1K); February Unemployment Rate 4.3% (expected 4.1%; prior 4.1%)

Major European indices are under selling pressure, clipped by the spike in energy prices that was precipitated by Iran's retaliation on Qatar's LNG facilities at Ras Laffan. STOXX Europe 600: -2.1%, Germany's DAX: -2.4%, U.K.'s FTSE 100: -2.1%, France's CAC 40: -2.0%, Italy's FTSE MIB: -2.2%, Spain's IBEX 35: -2.1%.

In news:

• Brent crude futures topped $118.00/bbl but are now at $114.34/bbl, up 6.5%.
• Concerns about a pickup in inflation and a slowdown in growth have cut risk appetite.
• At the moment, sovereign bond markets appear more concerned with the prospect of higher inflation and an extended delay for additional rate cuts. That concern is reflected in higher yields across European bond markets.
• The Swiss National Bank kept its key policy rate unchanged at 0.00%, as expected.
• Sweden's Riksbank said its repo rate is not likely to change for some time.
• The Bank of England and the ECB will be out with rate decisions later this morning. Both are expected to leave their key policy rates unchanged.

In economic data:

• Eurozone's Q4 Labor Cost Index 3.3% yr/yr (prior 3.4%)
• U.K.'s February Claimant Count Change 24.7K (expected 25.8K; prior 4.7K); January Avg. Earnings Index plus Bonus 3.9% (expected 3.9%; prior 4.2%); January Unemployment Rate 5.2% (expected 5.3%; prior 5.2%)