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By Geoffrey Smith
Investing.com -- Snap snaps the relief rally with a profit warning that sends chills through social media stocks. Chinese markets don't like the government's stimulus plans after taking a second look at them. Pandemic winner Zoom Video reports a big improvement in profitability. Federal Reserve Chair Jerome Powell is due to speak amid signs that some are thinking already of when the Fed can afford to 'pause' rate hikes. The dollar drops as Christine Lagarde keeps a 50 basis point hike in July on the table for the ECB. And the American Petroleum Institute's stockpiles data will show how far, if at all, Americans are cutting down on driving due to high gas prices. Here's what you need to know in financial markets on Tuesday, 24th May.
1. Snap snaps 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. Various reports also cited an internal memo from CEO Evan Spiegel saying that the company will slow hiring and defer some expansion plans to next year, as well as looking for increased cost savings this year. Snap (NYSE:SNAP) stock fell over 30% in response.
The news came only hours after an upbeat outlook from JPMorgan (NYSE:JPM) CEO Jamie Dimon had reassured investors of the ongoing underlying strength of demand in the U.S. economy, something that will bolster its core lending business. JPMorgan stock rose over 6% in response, but gave back just under 1% in premarket trading Tuesday.
2. China sentiment hit as stimulus plan is reappraised; Uighur news also weighs
Risk sentiment was also hurt overnight by a gloomier reassessment of the fiscal stimulus package adopted by the Chinese cabinet late on Monday.
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.
Foreign investor sentiment toward China also faces a new headwind in the disclosure by German magazine Der Spiegel of conditions in the region of Xinjiang, documenting what it calls major human rights abuses toward the mainly Muslim Uighur population.
3. Stocks set to open lower; social media under pressure but Zoom set to bounce
U.S. stocks are set to open lower later, giving back around half of what they gained in Monday’s bounce. The respective news from JPMorgan and Snap put value stocks back firmly in outperformance mode, while growth stocks are struggling again.