Concerns About New Russia Sanctions May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground after moving mostly higher over the two previous sessions.

Concerns about the impact of additional sanctions against Russia may weigh on Wall Street, with members of the European Union under pressure to extend sanctions to Russia’s oil and coal sectors in response to alleged war crimes in Ukraine.

The price of crude oil is extending yesterday’s surge amid worries about the potential for new sanctions, leading to renewed inflation anxiety.

Trading activity may be somewhat subdued, however, as traders look ahead to the release of the minutes of the Federal Reserve’s March meeting on Wednesday.

The Fed raised interest rates for the first time since 2018 at the March meeting, and traders will be looking to the minutes for clues about the outlook for future rate hikes.

CME Group’s FedWatch tool is currently indicating a 74.4 percent chance the Fed will raise rates by 50 basis points next month.

Stocks moved mostly higher over the course of the trading day on Monday, adding to the gains posted in last Friday’s session. Tech stocks helped lead the advance, resulting in a standout gain by the Nasdaq.

The major averages all closed in positive, although the tech-heavy Nasdaq outperformed its counterparts. While the Nasdaq surged 271.05 points or 1.9 percent to 14,532.55, the S&P 500 advanced 36.78 points or 0.8 percent to 4,582.64 and the Dow rose 103.61 points or 0.3 percent to 34,921.88.

Shares of Twitter (TWTR) helped lead the rally by tech stocks, soaring by 27.1 percent after a Securities and Exchange Commission filing revealed Tesla (TSLA) CEO Elon Musk has taken a 9.2 percent stake in the social media giant.

Significant strength was also visible among computer hardware stocks, as reflected by the 2 percent jump by the NYSE Arca Computer Hardware Index.

Within the hardware sector, computer peripheral maker Logitech (LOGI) posted a strong gain after Goldman Sachs upgraded its rating on the company’s stock to Buy from Neutral.

Semiconductor stocks also turned in a strong performance on the day, driving the Philadelphia Semiconductor Index up by 1.7 percent. Networking and biotechnology stocks also moved notably higher.

Outside of the tech sector, retail stocks saw substantial strength, resulting in a 2 percent surge by the Dow Jones U.S. Retail Index.

Meanwhile, stocks gave back ground following recent strength, with the Dow Jones Utilities Average falling by 1.1 percent after ending the previous session at a record closing high.

Traders also kept an eye on developments in the ongoing war between Russia and Ukraine, as the conflict continues to impact energy prices.

Ukraine has accused Russia of carrying out a “massacre” in the town of Bucha, and Western nations have reacted to images of dead civilians with calls for new sanctions on Russia.

In U.S. economic news, a report released by the Commerce Department showed new orders for U.S. manufactured goods decreased in line with economist estimates in the month of February.

The Commerce Department said factory orders fell by 0.5 percent in February after surging by an upwardly revised 1.5 percent in January.

Economists had expected factory orders to decrease by 0.5 percent compared to the 1.4 percent jump originally reported for the previous month.

Commodity, Currency Markets

Crude oil futures are jumping $1.12 to $104.40 a barrel after spiking $4.01 to $103.28 a barrel on Monday. Meanwhile, after rising $10.30 to $1,934 an ounce in the previous session, gold futures are edging down $0.70 to $1,933.30 an ounce.

On the currency front, the U.S. dollar is trading at 122.96 yen compared to the 122.79 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0957 compared to yesterday’s $1.0972.

Asia

Asian stocks rose broadly on Tuesday, though regional gains remained capped by talk of more sanctions against Russia and rising prices of important commodities, including crude oil. Trading volumes were thin due to public holidays in China, Hong Kong and Taiwan.

Japanese shares eked out modest gains on the back of improved services and household spending data. The Nikkei 225 Index rose 0.2 percent to settle at 27,787.98.

Heavyweights SoftBank and Fast Retailing rallied 2.6 percent and 2.1 percent, respectively, while oil explorer Inpex rose about 2 percent. Shimamura soared 7.3 percent after the apparel retailer posted a record fiscal-year net profit.

Australian markets ended on a positive note as the Reserve Bank of Australia kept its cash rate at 0.1 percent but signaled higher interest rates were closer.

The benchmark S&P/ASX 200 Index edged up 0.2 percent to 7,527.90 as surging oil prices on worries over tighter supply lifted energy stocks. Tech stocks also surged, with Block Inc., owned by Twitter founder Jack Dorsey, rallying 6.2 percent.

Nickel-lithium miner IGO fell 2.9 percent after the company said its US$829.3 million takeover of nickel producer Western Areas might fall through.

Seoul stocks ended on a flat note after data showed inflation accelerated to the fastest pace in more than a decade in March.

Investors also awaited the U.S. Federal Reserve’s minutes from its March meeting, set to be released on Wednesday, and the Bank of Korea’s rate-setting meeting scheduled for next week, for clues on the rate outlook.

Batter maker LG Energy Solution climbed 2.4 percent and Samsung SDI added 2.6 percent after Tesla reported a strong quarterly performance.

Europe

European stocks have moved mostly lower during on Tuesday, as fresh sanctions against Russia loom. The 27-member EU is under pressure to extend sanctions to Russia’s oil and coal sectors for what appear to be war crimes in Ukraine.

In economic news, Eurozone PMI data released earlier in the day pointed to a strong expansion in private sector activity in March, helped by robust growth across services. However, business confidence hit a 17-month low due to a record surge in inflation.

While the French CAC 40 Index has tumbled by 1.4 percent, the German DAX Index is down by 0.5 percent and the U.K.’s FTSE 100 Index is down by 0.1 percent.

Societe Generale shares have moved sharply lower. ING Group has signed an agreement with Boursorama, a subsidiary of the French lender, to offer services to retail customers of ING in France.

Energy stocks are mixed even as oil prices climb on concerns over the prospect of tougher sanctions from the U.S. and Europe against Russia.

HomeServe shares have gained. The British home repairs and improvements business said it made very good progress in fiscal 2022, delivering an acceleration in performance compared to prior year, in line with expectations.

Go-Ahead Group has also surged. The transport operator said it would reinstate its pre-Covid dividend policy of paying a dividend to shareholders equivalent to between 50 percent and 75 percent of underlying earnings per share from fiscal 2022.

Casino Group shares have also advanced. The French retailer said that it has sold its remaining shares in the real estate firm Mercialys for 86 million euros through a total return swap or TRS.

Kion Group AG has also rallied. The German warehouse-equipment supplier has decided to withdraw the outlook for the fiscal year 2022, due to the ongoing and substantial uncertainties in the procurement markets.

Sixt SE shares have also jumped. The provider of mobility services said it expects consolidated earnings before taxes for the first quarter of 2022 to be between 80 million euros and 95 million euros compared to negative 14 million euros in the previous year.

U.S. Economic Reports

A report released by the Commerce Department on Tuesday showed the U.S. trade deficit was nearly unchanged in February, as imports and exports both increased.

The Commerce Department said the trade deficit narrowed by less than $0.1 billion to $89.2 billion in February. Economists had expected the deficit to narrow to $88.5 billion from the $89.7 billion originally reported for the previous month.

The trade deficit was little changed as the value of imports jumped by $4.1 billion or 1.3 percent to $317.8 billion, while the value of exports surged by $4.1 billion or 1.8 percent to $228.6 billion.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on service sector activity in the month of March.

The ISM’s services PMI is expected to rise to 58.0 in March from 56.5 in February, with a reading above 50 indicating growth in the sector.

Minneapolis Federal Reserve President Neel Kashkari is also due to give opening remarks at a virtual Minneapolis Fed conference on the unequal impacts of inflation at 10 am ET.

At 10:05 am ET, Federal Reserve Governor Lael Brainard is also scheduled to speak at the virtual Minneapolis Fed conference.

New York Federal Reserve President John Williams is due to participate in a Health and the Economy moderated discussion hosted by the New York Times at 2 pm ET.

Stocks In Focus

Shares of First Solar (FSLR) are moving notably lower in pre-market trading after Bank of America Securities downgraded its rating on the solar company’s stock to Underperform from Neutral.

Online car seller Carvana (CVNA) may also see initial weakness after RBC Capital Markets downgraded its rating on the company’s stock to Sector Perform from Outerperform.

On the other hand, shares of Carnival (CCL) are seeing notable pre-market strength after the cruise line operator said the one-week period of March 28-April 3 was the busiest booking week in the company’s history.