Geoffrey Smith 

Snap (NYSE) snaps relief rally, sending chills through social media stock stocks. Chinese markets aren’t impressed by the government’s stimulus programs after taking another look. Zoom Video, Pandemic Winner reports significant improvements in profitability. Jerome Powell, Federal Reserve Chair will speak. This comes amid indications that many are already thinking about when the Fed could afford rate increases. While the dollar falls, Christine Lagarde still has a 50 basis points hike for July at the ECB. American Petroleum Institute stockpiles data will reveal how little Americans, if any, are driving less due to rising gas prices. This is what you should know about financial markets Tuesday 24th May.

1. Snap shots of the rally

A profit warning from Snap quickly put an end to Monday’s relief rally after the closing bell, putting global markets back into risk-off mode

The Snapchat parent said conditions had worsened “further and faster” than it expected when it put out a disappointing earnings statement last month. Reports also mentioned an internal memo by CEO Evan Spiegel stating that the company would slow down hiring, defer expansion plans until next year and look for cost-savings opportunities this year. Snap stock plunged over 30% as a result. 

It came just hours after JPMorgan CEO Jamie Dimon had given a positive outlook. This was despite the fact that Dimon assured investors about the continued strength of U.S. economic demand. The company’s core lending business will be bolstered by the news. JPMorgan shares rose more than 6% as a result, but only 1% was lost in premarket trade Tuesday.

2. China sentiment hits as the stimulus plan is repraised. Uighur news weighs in.

Overnight, risk sentiment was affected by a more bleak reassessment by the Chinese cabinet of Monday’s fiscal stimulus package.

The measures, which include over $20 billion of tax cuts and rebates, may stimulate economic activity at the margins, but are unlikely to outweigh the effect of lengthy wholesale shutdowns of activity for cities such as Shanghai and Beijing, if the country sticks – as indicated – to its Zero Covid policy.

The disclosure by German magazine Der Spiegel about conditions in Xinjiang and what it considers major human rights violations against the predominantly Muslim Uighur population in Germany has created a fresh obstacle for foreign investors to China.

3. Stocks will open lower. Social media is under pressure. Zoom however, set to bounce 

U.S. stocks are set to open lower later, giving back around half of what they gained in Monday’s bounce.  Snap’s news and JPMorgan’s Snap’s announcements placed value stocks back in high performance mode. Growth stocks have been struggling.

At 6:20 am ET, they were down only 210 points or 0.7%. They were also down 1.1%, and down 1.7%.

Snap is currently quoted at 29% lower than its peers in premarket. Zoom Video is another stock that will be under scrutiny later. It reported higher profits, but experienced the slowest growth in its last three months. Premarket, Zoom stock rose 6.4%

4. Powell speaks; Home sales to increase

Jerome Powell, Federal Reserve chairman will be speaking at 12.20 ET. He spoke this morning after two of his senior colleagues dropped the first hint of moderating the pace of monetary tightening.

Atlanta Fed President Raphael Bostic had said on Monday that the Fed may be able to afford a pause in rate hikes after two more increases of half a point each, while Kansas City’s Esther George suggested a pause could be possible when the Fed funds target range reaches 2% (up from 0.75%-1% now). 

Later, new home sales and surveys by the Chicago Feds and Richmond Feds will be available.

Overnight trading saw the dollar fall, but Christine Lagarde (ECB President) declined to rule out a 0.5-point rate increase in July. She had all but confirmed that the era with negative rates would end in September. The composite PMI of the Eurozone dropped more in May than was expected.

5. Petroleum prices rise as oil falls; API watchful

Prices for crude oil fell due to tight supplies, the reopening Shanghai and strong U.S. consumption. According to American Automobile Association, the average U.S. gasoline price is now at $4.5980 per gallon.

The dollar’s sudden weakness is also encouraging global buyers, but prices remain at a level that will destroy demand in the medium term. Newswires quoted India’s Energy Minister as saying that prices of $110 a barrel “are unsustainable” for his country, one of the world’s biggest importers.

Futures had risen 0.1% to $110.36 per barrel by 6:35 am ET (1135 GMT) while they were down 3c to $110.75 per barrel. The American Petroleum Institute’s data on crude and product stockpiles are due at 4:30 PM ET.