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MARKET WRAPS

Watch For:

Housing Starts for April; EIA Weekly Petroleum Status Report; Canada CPI for April; earnings from Target, Cisco Systems

Opening Call:

Stock futures crept lower after major stock indexes rallied in the prior session, putting Wall Street on course to extend the year's volatility.

Stocks have largely fallen in recent weeks as investors contemplated the global economic outlook, central banks' plans to tame inflation, geopolitical tensions and China's zero-Covid strategy. The culmination of factors has boosted volatility in markets. Even with Tuesday's rally, the S&P 500 is down about 14% this year.

At the forefront of investors' minds is decades-high inflation in the U.S., how much policy makers are willing to tighten financial conditions to subdue it and what that means for economic growth.

"Our expectation is that growth will start to slow down over the next few months," said Salman Ahmed, global head of macro at Fidelity International, adding that he anticipates that the Fed's actions will help curb inflation. "Then the next step for the Fed will be to focus on the growth shock."

The mix of concerns hitting markets has led Ahmed to adopt a more cautious investment approach in recent weeks, he said.

Investors are also monitoring whether Russia's war against Ukraine could further bolster geopolitical tension. Finland and Sweden formally applied for NATO membership on Wednesday, a move that, if approved, would fundamentally transform the security landscape of Northern Europe.

Stocks in Asia were mixed, while the pan-continental Stoxx Europe 600 edged down 0.1%.

Forex:

The dollar gained around 0.2% as investors continued to digest remarks from Jerome Powell that reaffirmed the Fed's commitment to controlling inflation by raising interest rates.

"While the dollar momentum is set to remain weak as long as global assets stay in recovery mode, the notion of aggressive Fed tightening continues to argue against a sustained bearish dollar trend," said ING.

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The scope for the euro to rise against the dollar looks limited as the market's expectations for interest-rate rises from the ECB seem too aggressive, said ING.

Markets are pricing in too much tightening for the ECB but not for the Fed, while the U.S.-eurozone growth divergence will become more relevant into the summer, exacerbated by the EU-Russia standoff on commodities, said ING.

"With this in mind, we suspect that any further rally in EUR/USD may start to lose steam around the 1.0650-1.0700 area, with risks of a return below 1.0500 in the near term being quite material."

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Sterling fell after data showed U.K. inflation accelerated further in April, hitting 9%, and adding pressure on already strained household incomes. Economists polled by the WSJ expected inflation to reach 9.1%.

"Inflation in the U.K. is completely out of control, and there is no doubt that soaring inflation is having a negative influence on disposable incomes," said AvaTrade analyst Naeem Aslam.

The Bank of England is under pressure to do more to control inflation but it is walking a fine line and can only do so much, he said.

Energy:

Oil futures were more than 1% higher in Europe on easing Covid curbs in China and expectations for new sanctions on Russia, with DNB Markets forecasting prices will rise as high as $130 by the end of the year before easing to $115 next year.

A combination of increased demand as China eases its Covid-19 lockdowns and declining Russian oil production is likely to completely exhaust global capacity by the end of the year, said DNB Markets.

Macquarie said that while the near-term outlook for oil is strong, it expects prices to fade in the second half.

Brent crude has averaged $107 in the second quarter so far but a likely increase in supply from OPEC and other countries, potentially including Iran, should weigh on prices in the second half, Macquarie said.

"We maintain our long-term assumption of $65 but defer this to the first quarter of 2024 [from 1Q of 2023]," Macquarie said.

Metals:

Industrial metals weakened on gloomy signs for the global economy following Jerome Powell's comments Tuesday. And weak Chinese data in recent days caused by lockdowns have raised concerns about demand.

TODAY'S TOP HEADLINES

Cerebral Board Members Agree to Replace CEO Amid Federal Probe Into Prescription Practices

Directors who control the board of Cerebral Inc. agreed on a plan to replace Chief Executive Kyle Robertson, sparking leadership tumult at the mental-health startup as it contends with scrutiny over its prescription practices for controlled substances, people familiar with the situation said Tuesday.

Investors and an independent director who together control four of the board's seven seats agreed that Mr. Robertson should be replaced by the firm's president and chief medical officer, David Mou, some of the people said. Mr. Robertson, who is also Cerebral's co-founder and controls the other three seats, didn't participate in the meeting, but afterward he lost access to the company's Slack messaging system without advance notice, another person said. Mr. Robertson hadn't agreed to depart his CEO role as of late Tuesday, the people said.

Apple Pauses Plans to Go From Two Days to Three Days a Week in the Office

Apple Inc. is sticking with two days back in the office each week, for now.

The iPhone maker on Tuesday paused plans to start bringing employees back to the office an extra day a week, amid an increase in Covid-19 cases in the San Francisco area and complaints from some workers, unhappy with the proposed increase.

U.S. Allows Chevron to Maintain Venezuela Operations but Won't Permit Drilling

The U.S. extended a limited license held by Chevron Corp. on Tuesday that allows the oil company to maintain its operations in Venezuela and negotiate future business in an attempt to encourage talks between the government of Venezuelan President Nicolás Maduro and the U.S.-backed opposition to open a path to free and fair elections.

The U.S. didn't expand the license to allow Chevron to drill for and market Venezuelan crude, as the company had hoped. Chevron didn't immediately respond to a request for comment.

JPMorgan Shareholders Reject Jamie Dimon's $50 Million Bonus

JPMorgan Chase & Co. shareholders objected to a roughly $50 million retention bonus for Chief Executive Jamie Dimon and voted against the bank's compensation plan Tuesday.

Only 31% of shareholders voted in favor of the bank's pay plans at the annual shareholder meeting.

JD.com Drops on Uncertain Demand Outlook Amid China Lockdowns

Shares of e-commerce company JD.com fell in early Asian trade after analysts cut target prices amid guidance for softer second-quarter demand, largely due to the effects of pandemic-related lockdowns in China.

JD.com's Hong Kong-listed shares fell as much as 4.5% to 205.20 Hong Kong dollars (US$26.14) early Wednesday, a day after the company reported a first-quarter earnings beat, while also flagging concerns about demand going forward.

Powell Says Fed Has Resolve to Bring U.S. Inflation Down

The Future of Everything Festival is happening right now. Click here to register and watch for free as a member.

Federal Reserve Chairman Jerome Powell said the central bank's resolve in combating the highest inflation in 40 years shouldn't be questioned, even if it requires pushing up unemployment.

Fed's Evans: Inflation Is Much Too High and Fed Must Act

Federal Reserve Bank of Chicago President Charles Evans said Tuesday that aggressive central bank rate rises are needed to get inflation back under control.

"Inflation is clearly much too high and monetary policy must be repositioned to address this," Mr. Evans said in a speech in New York.

China's New Home Prices Fall for the First Time in More Than Six Years

BEIJING-A monthly measure of new home prices in China fell for the first time in more than six years, offering further evidence of the pain that Beijing's regulatory campaign is inflicting on a sector that has long served as an economic growth engine.

Average new-home prices in 70 major cities edged 0.11% lower in April from a year earlier, according to Wall Street Journal calculations based on data released Wednesday by China's National Bureau of Statistics.

UK Inflation Accelerated to 40-Year High of 9% in April

U.K. annual inflation reached a four-decade high of 9% in April as higher energy prices fed through households' utility bills, exacerbating a cost-of-living crisis that is squeezing consumers' real incomes.

The consumer price index--which measures what consumers pay for some goods and services--increased at its fastest pace since 1982, a sharp pickup from the 7% inflation rate registered in March, according to data from the U.K.'s Office for National Statistics released Wednesday.

Chinese Bonds Suffer Third Straight Month of Foreign Outflows

Foreign investors cut their holdings of Chinese bonds in yuan by more than $16 billion in April, marking a third straight month of outflows.

Global investors started scaling back their investments in February, amid concerns about the geopolitical risks of investing in Chinese assets, and about the economic impact of China's tough approach to Covid-19. Yields on Chinese sovereign bonds last month fell below those on equivalent U.S. Treasury notes for the first time in more than a decade, further reducing the former's appeal.

Spain, Australia, U.K. Most Exposed to Financial Shock as Rates Rise, Says Fitch

SYDNEY-As central banks raise interest rates to combat the biggest inflation spike in decades, Fitch Ratings says Australia, Spain and the U.K. are the most exposed to a financial shock.

Australia and Spain's vulnerability stems from a high proportion of variable-rate mortgage lending, while borrowers in the U.K. already have relatively high debt-to-income ratios.

Japan's Economy Shrank Slightly in First Quarter

TOKYO-Japan's economy contracted in the first three months of this year, when restrictions related to a resurgence of Covid-19 infections held back consumer spending.

While economists expect a rebound in the current April-June quarter, the outlook for this year is cloudy because of factors including Russia's invasion of Ukraine, the rise in energy prices and the weakness of the yen, which is near a 20-year low against the dollar.

EU New Car Sales Slumped in April as Supply Squeezes Drag On

Continued supply chain pressures led to a big decline in new car registrations in the European Union in April, according to data from European Automobile Manufacturers Association, or ACEA.

Total new car registrations in the bloc fell 21% on year to 684,506 units sold. This was the lowest volume for the month of April since records began, barring the Covid-19 pandemic-hit April 2020, ACEA said. "[S]upply chain issues continued to weigh heavily on car production," the association said.

Finland, Sweden Apply for NATO Membership, Breaking Decades of Neutrality

Finland and Sweden formally applied for NATO membership on Wednesday, a move that, if approved, would fundamentally transform the security landscape of Northern Europe and give the alliance a valuable edge against Russia following Moscow's invasion of Ukraine.

The two Nordic countries' bid to join the North Atlantic Treaty Organization breaks with a decadeslong defense doctrine that has seen them balance political and security partnerships with other Western nations while staying out of formal military alliances.

North Korea Receives Aid From China as Covid Outbreak Spreads

SEOUL-North Korea, battling its first major Covid-19 outbreak, has reached out for help to its closest ally, China, while ignoring offers of vaccines from South Korea.

Three North Korean cargo planes flew to the Chinese city of Shenyang on Monday, returning the same day carrying basic medical supplies, according to diplomats familiar with the flights.

John Fetterman Wins Democratic Senate Primary in Pennsylvania; Trump-Backed Candidates in Focus Nationwide

Democratic voters in Pennsylvania nominated Lt. Gov. John Fetterman, a prominent liberal with an untraditional personal style, to be their party's nominee for an open U.S. Senate seat, as five states cast primary ballots on Tuesday.

In North Carolina, Republican voters chose Rep. Ted Buddas their nominee for an open Senate seat, but rejected a bid by gaffe-plagued Rep. Madison Cawthorn to return to the House.

Gov. Asa Hutchinson Says GOP Needs to Move Past Donald Trump

The Republican Party has to move past former President Donald Trump, said Arkansas Gov. Asa Hutchinson. To do so, voters need to see other leaders fighting for the same conservative issues Mr. Trump was passionate about.

"There is a linkage right now between him personally and those things that we care about...de-linking those takes time," Mr. Hutchinson said Tuesday at The Future of Everything Festival. "We have to show that we are the party of the future and not the last election. That is critical for us."

House Plans Vote on Baby Formula Legislation Wednesday

WASHINGTON-Democrats, responding to public anger over the baby-formula shortage, laid out plans for legislation and oversight hearings aimed at boosting supply and preventing a repeat of the problems that left store shelves empty in many locations.

The House plans to vote Wednesday on the Access to Baby Formula Act, a bill that would give emergency authority to the WIC federal nutrition program to relax some non-safety-related regulations. Democrats also unveiled a bill to provide $28 million to the Food and Drug Administration, including to add more inspectors who could clear additional manufacturers to supply U.S. customers.

Steve Wynn Sued by Justice Department

WASHINGTON-The Justice Department sued casino mogul Steve Wynn Tuesday to force him to register as a lobbyist in connection with his 2017 efforts to obtain a diplomatic favor long sought by Chinese authorities.

The lawsuit comes almost a year after the department told Mr. Wynn to register under the Foreign Agents Registration Act and signaled that it would go to court to compel him to do so if necessary, as The Wall Street Journal reported at the time, citing people familiar with the matter.

Prosecutors Seek Transcripts From Jan. 6 Committee

WASHINGTON-The Justice Department is seeking transcripts of interviews conducted by the House select committee investigating the Jan. 6, 2021, attack on the U.S. Capitol by Trump supporters, people familiar with the matter said, a possible signal that law enforcement's probe of the riot is expanding. Meanwhile, the chairman of the committee said Tuesday it doesn't plan to call former President Donald Trump to testify as a witness.

Department officials told the lead investigator for the panel in an April letter that some of the committee's interviews might be relevant to their criminal investigation, one of the people said. That inquiry has up to now largely targeted individuals who entered the Capitol building that day and assaulted police officers, though federal prosecutors have also issued subpoenas for information about the planning of the "Stop the Steal" rally of Trump supporters that preceded the attack.

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

MAG Silver 1Q

Economic Indicators (ET):

0830 Apr CPI

Expected Major Events for Wednesday

04:30/JPN: Mar Revised Industrial Production

06:00/UK: Apr UK producer prices

06:00/UK: Apr UK monthly inflation figures

08:30/UK: Feb Card Spending statistics

08:30/UK: Mar UK House Price Index

11:00/US: 05/13 MBA Weekly Mortgage Applications Survey

12:30/US: Apr New Residential Construction - Housing Starts and Building Permits

12:30/CAN: Apr CPI

14:30/US: 05/13 EIA Weekly Petroleum Status Report

23:01/UK: 3Q Manpower UK Employment Outlook Survey

23:50/JPN: Mar Orders Received for Machinery

23:50/JPN: Apr Provisional Trade Statistics for the Month

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Wednesday

Analog Devices (ADI) is expected to report $1.22 for 2Q.

BARK Inc (BARK) is expected to report for 4Q.

Bath & Body Works Inc (BBWI) is expected to report for 1Q.

CSW Industrials Inc (CSWI) is expected to report $1.04 for 4Q.

Cisco Systems (CSCO) is expected to report $0.77 for 3Q.

Copart Inc (CPRT) is expected to report $1.14 for 3Q.

Dorian LPG Ltd (LPG) is expected to report $0.59 for 4Q.

Dynatrace Inc (DT) is expected to report for 4Q.

Encision (ECIA) is expected to report for 4Q.

Exscientia PLC - ADR (EXAI) is expected to report for 1Q.

Hawkins (HWKN) is expected to report $0.43 for 4Q.

IBEX Limited (IBEX) is expected to report for 3Q.

Lowe's Cos (LOW) is expected to report $3.26 for 1Q.

MAG Silver Corp (MAG,MAG.T) is expected to report for 1Q.

MICT Inc (MICT) is expected to report for 4Q.

Portage Biotech Inc (PBT.U-L,PRTG) is expected to report for 1Q.

Pressure BioSciences Inc (PBIO) is expected to report for 1Q.

Progressive Corp (PGR) is expected to report.

SOPerior Fertilizer Corp (SOP.H.V) is expected to report for 1Q.

Shoe Carnival (SCVL) is expected to report $0.74 for 1Q.

Smart Share Global Ltd - ADR (EM) is expected to report for 1Q.

Synopsys Inc (SNPS) is expected to report $1.76 for 2Q.

Sypris Solutions (SYPR) is expected to report for 1Q.

TJX Companies Inc (TJX) is expected to report $0.60 for 1Q.

Target Corp (TGT) is expected to report $3.06 for 1Q.

Torrid Holdings Inc (CURV) is expected to report for 1Q.

Triumph Group Inc (TGI) is expected to report $0.40 for 4Q.

Velan Inc (VLN.T,VLNSF) is expected to report for 4Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

Advanced Micro Devices Raised to Overweight From Neutral by Piper Sandler

Alliant Energy Raised to Neutral From Underperform by B of A Securities

AutoWeb Cut to Underperform From Market Perform by Barrington Research

Avaya Holdings Cut to Underweight From Equal-Weight by Barclays

Ball Raised to Buy From Hold by Truist Securities

Byline Bancorp Raised to Buy From Neutral by Janney Montgomery Scott

Camden Property Trust Cut to Neutral From Buy by Goldman Sachs

Cooper Cos Raised to Buy From Neutral by Citigroup

Enjoy Technology Cut to Underperform From Market Perform by Telsey Advisory Group

Equity Residential Raised to Buy From Neutral by Mizuho

Essex Property Raised to Buy From Sell by Goldman Sachs

F45 Training Cut to Neutral From Buy by Roth Capital

Maxar Technologies Cut to Underperform From Neutral by B of A Securities

Molson Coors Beverage Cut to Market Perform From Outperform by Bernstein

Nerdy Cut to Neutral From Buy by Goldman Sachs

Paysign Raised to Buy From Neutral by Ladenburg Thalmann

Q2 Holdings Cut to Equal-Weight From Overweight by Stephens & Co.

Shake Shack Raised to Market Perform From Underperform by Raymond James

Tesla Raised to Hold From Sell by Tudor Pickering

Turtle Beach Raised to Outperform From Neutral by Wedbush

Upwork Cut to Hold From Buy by Stifel

Workday Cut to Neutral From Buy by UBS

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

May 18, 2022 05:32 ET (09:32 GMT)

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