U.S. Stocks Set To Open Lower As Focus Shifts To Economic Data

The World Faces Its Worst Year Since The Great Depression

S&P 500 futures are losing about 2% in premarket trading as market participants turn their attention to grim economic forecasts.

Yesterday, International Monetary Fund predicted that the world output would decline by 3% in 2020. The U.S. economy is expected to shrink by 5.9%. The IMF stated that the world was facing the biggest downturn since the Great Depression.

As I wrote earlier, the recent market upside was set to be tested by the U.S. earnings season and by fresh economic data. S&P 500 gained as much as 30% during the current rebound, so the market will likely need additional good news to continue the upside move.

Oil Continues To Fall Due To Huge Hit To Demand

Oil extended its losses after the International Energy Agency publised its April Oil Market Report. IEA stated that the global oil demand would fall by a record 9.3 million barrels per day (bpd) in 2020.

The month of April will be especially challenging since oil production would be 29 million bpd lower than in April 2019.

In this situation, the recently announced oil production cuts will not help the market in the near term. Not surprisingly, WTI oil is already testing its recent lows below $20 per barrel.

The rapid downside in oil prices will put additional pressure on the market as shares of oil producers and oil services companies will fall materially.

In fact, there’s plenty of room for downside in stocks of major oil producers which have enjoyed the recent rebound just like other stocks despite low oil prices.

Retail Sales Decline By 8.7%

U.S. Retail Sales declined by 8.7% in March compared to analyst consensus which called for a decline of 8%. Virus containment measures put heavy pressure on consumer activity.

Meanwhile, NY Empire State Manufacturing Index for April came at -78.2 compared to analyst estimates of -35. This is not surprising given the fact that New York has the worse virus situation in the U.S.

Finally, the market is put to a test by bad economic data. The following economic releases are almost guaranteed to look grim, so we’ll soon see whether bulls will be able to keep buying shares in hope that the situation will get better or bears will take control of the market once again.