Futures tumble/rebound overnight, Walmart fights suppliers, Micron earnings: What to watch
Here are three things to keep an eye on during Wednesday's trading session...
Number 1:
Was it only a bad dream?
It’s unlikely our kids will be asking us to tell of the ten-minute overnight stock futures crash of March 31, 2014. But on dealing desks this morning traders are still puzzling over a sudden 1.3% drop in S&P 500 index futures (ESM15.CME) around 9pm Eastern time, on a cluster of fairly heavy selling.
Most of the instant drop has been recovered, but not because people figured out what it was all about.
A stray headline about the Iran nuclear talks? A strong China manufacturing number overnight that maybe told some machine to close out bets on heavy Chinese stimulus? Some odd quarter-end rotation trade?
We don’t know and probably won’t. But if it matters at all, it’s because it reinforces the impression that the market is jumpy, suggestible and in the sway of tactical agendas over short time spans.
The overnight low in S&P futures was around the 2035 level. That would be equivalent to around a three-week low for the regular index. There’s a school of thought among trading types that overnight gaps in futures often need to be “tested” at some point.
Without endorsing that idea, it helps top know that others feel such points on a chart have a gravitational force.
Number 2:
Walmart (WMT) is cracking heads with its suppliers again, pressing its advantage for the benefit of customers and its own market-share goals.
As Greg Foran, head of Walmart’s U.S. business, will give an update today to analysts and investors in New York, as the Wall Street Journal highlights the company’s stepped-up efforts to press suppliers to focus on driving down prices rather than spending on in-store marketing.
On some level this is business-as-it’s-always-been for the discount omnimarket chain. But the fact that the company is out front with this message denotes a move back to the offensive in its fight with dollar stores and drugstore chains and everyone else who wants to sell you the basics.
It should also get investors to recall the 1990s, when a strong dollar (UUP) was a boon to Walmart and its customers’ purchasing power. Most of what you find in a Walmart is imported, giving the company an ability to flex prices lower. Granted, a lot of the stuff comes from China, whose currency isn’t traded freely and so hasn’t dropped much. But the broad case is there for the pendulum of influence swinging back to Bentonville.
Walmart stock had a great fourth-quarter run and has since settles back about 9% off its January high. It might never be the must-own stock it was through the ‘90s. But with only eight of 32 analysts recommending the stock, Wall Street might be sleeping on Walmart, so be alert to the message the company sends to investors today.
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Number 3:
Micron (MU) was last year’s hedge-fund plaything, an old name in a tough business that pulled it all together for a bump in the PC cycle and supply constraints by competitors in its segment of the chip business.
Today the company reports earnings after the close, and expectations are as muted as you’d expect for a company whose shares are off 25% in five months.
Micron is one of those deeply cyclical players at the whip end of tech hardware’s boom-bust pattern. As such, standard wisdom is to sell the stock when it appears cheap based on earnings, because those cyclically fat profits are often set to fall away.
Micron’s report today is most interesting as a possible preview of how the Street might respond to the impending earnings season. Forecasts have been chopped down, many stocks are down big below the surface of the indexes.
So let’s see whether it means a “sell the rumor, buy the news” dynamic is at work, or if the market has been prescient in punishing Micron and others as the profit cycle turns challenging.
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