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Top 5 Things to Know in the Market on Tuesday, May 12th

EconomyMay 12, 2020 06:35AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- The Senate will hold a hearing on the health implications of reopening the economy, with Anthony Fauci heading the cast of testimony-givers. Elon Musk is daring the authorities in Alameda County to arrest him as he reopens Tesla (NASDAQ:TSLA)'s plant in the Bay Area, while global markets remain twitchy amid signs of renewed outbreaks of Covid-19. The dollar strengthened as Fed officials batted away the prospect of negative rates. The price of oil resumed its recovery on the back of nearly 1.2 million barrels a day in additional production cuts by Gulf producers, mostly Saudi Arabia. Here's what you need to know in financial markets on Tuesday, May 12th. 

1. Senate to hold hearing on reopening

The Senate will hear testimony from senior health officials – including Anthony Fauci, the country’s top expert on infectious diseases - on the implications of reopening the U.S. economy.

The hearing will take place via teleconference because both witnesses and senators are, in part, self-isolating after coming into contact with infected people.

The number of U.S. deaths fell for a fourth straight day on Monday to only 837, while the number of confirmed new cases also fell for a third straight day.

On Monday, President Donald Trump had said at a news conference that “we have prevailed” with regard to ramping up testing.  

2. Global markets remain twitchy as mini-outbreaks flare

Global markets are still in cautious mode, afraid of the possibility of a second wave of infections after the discover of five new cases in Wuhan, China, and a new cluster of cases in South Korea linked to the nightclub district of the capital, Seoul.

In addition, Germany’s Robert-Koch-Institute said on Sunday that the reproduction rate of the virus had rebounded above 1 in the wake of lockdown restrictions being eased earlier in the month. The so-called r0 rate had fallen as low as 0.65 only last week but rebounded on an uptick of cases in slaughterhouses and care homes.

Elsewhere, Russian President Vladimir Putin has abandoned his nationwide lockdown even though the rate of new infections stayed above 10,000 for a 10th straight day. The lockdown has caused Putin’s approval ratings to plummet to their worst in over a decade, after exposing weaknesses in the country’s health system and social safety net.

3. Stocks set to open slightly higher; CPI, Fed speakers eyed

U.S. stocks are set to open modestly higher, amid a growing chorus from analysts and investors that the April relief rally had gotten ahead of itself.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 Futures contract was down 57 points or 0.2%, while the S&P 500 Futures contract and the Nasdaq 100 Futures contract were up in parallel. The three indices had been mixed on Monday.

The dollar, meanwhile, is strengthening after three top Federal Reserve officials each downplayed the likelihood of the Fed cutting the target fed funds range to below zero. Atlanta Fed President Raphael Bostic said negative rates were “one of the weaker tools in the toolkit”, while Charles Evans said he saw no use for them. CPI data for April at 8:30 will likely not change their view.

There will be a further barrage of Fed speeches starting with the St. Louis and Minnesota Fed Presidents James Bullard and Neel Kashkari at 9 AM ET, followed by Philadelphia’s Patrick Harker and top banking supervisor Randall Quarles at 10 AM. 

Separately, the Fed will also start its flagged purchases of bond ETFs today.

4. Musk reopens Tesla plant

Elon Musk reopened Tesla’s plant in Fremont, daring Bay Area officials to arrest him.

The Tesla founder has expressed his frustration at the closure of the Fremont facility in increasingly forceful fashion in recent days, as Alameda County keeps the factory shut despite a broader relaxation of restrictions on manufacturing at the state level. Governor Gavin Newsom said he would defer to county officials.  

The news comes after Tesla (NASDAQ:TSLA) stock hit its highest in over two months last week, supported by hopes of a revival in sales as the U.S. and European economies reopen.

5. Oil gains momentum after Saudi leads more output cuts

Oil prices resumed their recovery on the back of additional output cuts announced on Monday by Saudi Arabia, Kuwait and the United Arab Emirates.

The additional cuts will remove another 1.18 million barrels of oil a day from the global market from June 1, hastening the process of rebalancing a market still suffering from an unprecedented drop in demand. Saudi Arabia is cutting 1 million b/d, the UAE 100,000 b/d and Kuwait 80,000 b/d.

Elsewhere, BP (NYSE:BP) CEO Bernard Looney said the pandemic could bring forward the date when global oil demand peaks. Looney said he expected the impact on fuel demand to be long-lasting and, in some regards, permanent.

By 6:30 AM, U.S. crude futures were up 5.4% at $25.45 a barrel, while the international benchmark Brent was up 3.1% at $30.54 a barrel. The American Petroleum Institute will report its weekly analysis of U.S. oil supplies at 4:30 PM ET, as usual.

Top 5 Things to Know in the Market on Tuesday, May 12th
 

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Comments (7)
yozf joe
yozf joe May 12, 2020 8:47AM ET
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NOTE of second wave is only for buying some more cheep oil . Still early for second wave , oil will be back to 29 and go up to 33 34 today
Erminio Deangelis
Erminio Deangelis May 12, 2020 8:45AM ET
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humans are social beings, this lockdown is more devastating that the virus could ever be.
gp it
gp it May 12, 2020 8:45AM ET
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how do you social if you die?
gp it
gp it May 12, 2020 8:45AM ET
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how do you social if you die?
Edson Silva
Edson Silva May 12, 2020 8:45AM ET
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so you prefer being looked down indefinitely over a 5% (or so) chance of dying from covid?
Zhang Chen Chen
Zhang Chen Chen May 12, 2020 8:45AM ET
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Am here to help you guys out
Junk Man
Junk_Man May 12, 2020 8:19AM ET
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Ready or not, the world will reopen. Dr. Fauci already said it's too late to eradicate the virus until there is a vaccine. It's a new normal put there.
Sun Moon
Sun Moon May 12, 2020 8:16AM ET
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"mini outbreaks" IOW, mankind cannot eradicate a virus in three months. It would be so nice if the adults could take the news reporting back from the children.
David Knight
David Knight May 12, 2020 7:59AM ET
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trump is worse then the depression. everyone is broke and locked up.
Mark Terzano
Mark Terzano May 12, 2020 7:59AM ET
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Like him or not, what was the best alternative?
Ronald Clough
Ronald Clough May 12, 2020 7:59AM ET
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Nice analysis. Speak with your governor. Its not trump’s fault.
Rakesh Panchal
Rakesh Panchal May 12, 2020 7:44AM ET
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This is millionaire ‘s world
Shawn Fegely
Shawn Fegely May 12, 2020 7:18AM ET
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"Slaughter houses" ???
William Trombly
William Trombly May 12, 2020 7:18AM ET
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yeah they meant meat packaging plants like Tyson. weird they used that term.
 
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