US pre-open: Futures point to losses as post-lockdown recession fears weigh on sentiment
US futures were pointing to losses on Wednesday as concerns about how long the coronavirus lockdown will last and just what its after effect will be weighed on sentiment.
As of 1210 BST, Dow futures were down 1.61%, while S&P 500 and Nasdaq-100 futures had the indices opening 1.86% and 1.25% weaker, respectively.
The Dow closed 558.99 points higher on Tuesday as market participants seemingly grew more optimistic regarding the Covid-19 pandemic as corporate earnings season kicked off.
While that the pandemic was easing drove stocks higher in the previous session, with Donald Trump stating he believes certain states would be able to lift the strict social distancing measures that have strained their economies before the end of April, expectations for some dismal earnings from US companies were now spooking investors.
Also in focus were comments from the International Monetary Fund, which warned on Tuesday that the economic recession which will follow the "Great Lockdown" will be the steepest in a century. The IMF caution also sent West Texas Intermediate back below $20 a barrel.
Oanda's Craig Erlam said: "The last month has been much better than the one the preceded it for stock markets, but the rally may be running out of steam as earnings season brings us back down to earth.
"Stocks have enjoyed a decent rebound over the last month so perhaps we're seeing a little risk now being taken off the table as the economic reality of the situation starts to hit home. That said, if economies now start to ease lockdown measures and the cloud of uncertainty lifts, investors may see opportunity in these dips once again. The central banks have flooded the market with liquidity and we've seen what that has done before."
On the data front, despite wider-than-usual daily swings last week, mortgage rates dropped to their lowest level in the history of the Mortgage Bankers Association’s weekly survey.
Total mortgage application volume rose 7.3% last week from the previous week, while the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $510,400 or less decreased to 3.45% from 3.49%.
Still to come, advance retail sales for March will be posted at 1330 BST, while March's industrial production figures and business inventories for February will follow at 1415 BST and 1500 BST, respectively.
The Fed's Beige Book will also be published at 1900 BST.
In earnings news, Bank of America posted a 45% decline first-quarter profit and braced for big loan losses as a result of the Covid-19 pandemic.
Still to report, Goldman Sachs, Citigroup, United Health and Bed Bath & Beyond will post earnings before the day is done.