Retail Sales, Musk's Twitter Demands, Walmart Earnings

© Reuters.

By Geoffrey Smith 

-- U.S. retail sales data for Apri, and their significance for Federal Reserve policy, are set to dominate at least the early part of the day. Earnings and guidance from Walmart (NYSE:WMT) and Home Depot (NYSE:HD) will also shed light on the strength, or otherwise, of the U.S. consumer. Elon Musk obfuscates in an attempt to drive down the price of his Twitter (NYSE:TWTR) acquisition, causing Twitter stock to drop further and Tesla (NASDAQ:TSLA) stock to bounce. The defenders of the Azovstal steelworks in Ukraine lay down their arms, ending the longest battle of Russia's war in Ukraine, and oil prices hit a seven-week high as confidence in Shanghai's reopening rises. Here's what you need to know in financial markets on Tuesday, 17th May.

1. Retail sales to sway Fed?

Is the U.S. consumer still spending, or have inflation and talk of an economic slowdown ahead already killed the desire to get out and have fun in a world without lockdowns? We shall all be a little bit the wiser at 8:30 AM ET (1230 GMT), when the U.S. releases retail sales numbers for April.

Sales are expected to have risen 0.9%, which would be their strongest increase in three months, while core sales are expected to have grown only 0.4%, which would be their weakest increase in four months.

With forecasts like that, any number of interpretations should be possible. Fortunately, there will be a handful of speakers from the Federal Reserve in the course of the day to let us know if the numbers have changed anything (there’s a hint of hope in the air that a bad number will persuade the Fed to ease up on the policy tightening front).

Fed chair Jerome Powell headlines at 2 PM ET, while James Bullard and Patrick Harker will be the warmup acts and Loretta Mester and Charles Evans will be your hosts for the after-party.

2. Obmuskation

Elon Musk said his deal for Twitter can only proceed if the social media company can prove its estimates about fake and spam users. Twitter CEO Parag Agrawal had posted a long thread on Monday explaining why this is, for all practical purposes, impossible.

Musk claimed, via the microblogging site (not via an SEC filing, of course), “20% fake/spam accounts” as a baseline – some four times what Twitter says. He added for good measure that the figure “could be *much* higher.”

“My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does.”

The news strengthened suspicions that Musk may be looking for an excuse to walk away from the deal, preferably without triggering the $1 billion break fee he agreed to. Twitter stock was down 2.6% in premarket, while Tesla stock, which hit a nine-month low on Monday, bounced 3.7%.

3. Stocks set to open higher on Shanghai reopening hopes; Walmart, Home Depot eyed

U.S. stocks are set to open higher, as global growth concerns ease in response to news that Shanghai has moved a step closer to lifting a two-month-long lockdown.

By 6:15 AM ET, Dow Jones futures were up 488 points, or 1.5%, while S&P 500 futures were up 1.8% and Nasdaq 100 futures were up 2.1%. The Nasdaq contract has gained for three of the last four days since touching an 18-month low last week.

The retail sales data will be cross-checkable at the corporate level against Walmart and Home Depot earnings, which are due early. Imperial Brands (OTC:IMBBY), the owner of West and Winston cigarettes, rose 7.5% to a two-year high after putting its own earnings out in London earlier. Numbers are also due from Canada Goose, Sea Ltd, AerCap and JD (NASDAQ:JD).com

4. Ukraine aid bill progressess as Mariupol defenders surrender

Ukrainian soldiers defending the Azovstal steelwork in Mariupol laid down their weapons, allowing Russia to complete the conquest of the port city on the Black Sea. That comes a day after Russian troops successfully repulsed a Ukrainian counter-attack in the same region.

Elsewhere, Turkish President Recep Tayyip Erdogan said he would oppose NATO membership for Sweden and Finland, due to their harboring his political opponents. Newswires cited defense officials as expecting the objections to be smoothed over.

The $40 billion U.S. aid package for Ukraine advanced in the Senate on Monday, passing a procedural bill 81-11, despite opposition from some Republican Senators. Treasury Secretary Janet Yellen echoed some of their sentiments on Tuesday by calling for Europe to increase its aid to Ukraine.

5. Oil hits 7-week high on Shanghai hopes, OPEC+ shortfall

Crude oil prices hit a seven-week high as Shanghai completed a third straight day without detecting any new cases of Covid-19 in its quarantine area, bolstering confidence that it can lift its lockdown in June as signalled by local officials.

By 6:30 AM ET (1030 GMT), U.S. crude futures were up 0.6% at $112.54 a barrel, while Brent crude was up 0.7% at $115.00 a barrel.  

Prices were also supported by newswire reports suggesting that OPEC and its allies had pumped 2.6 million barrels a day less than planned in April, as sanctions on the Russian oil industry compounded problems with underinvestment in other members of the bloc. 

The American Petroleum Industry will report its weekly inventory numbers at 4:30 PM ET, as usual.

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