U.S. stocks ease lower and oil prices stabilize, with jobs report due Friday

What’s driving markets

Calmer conditions in energy and bond markets, and the looming catalysts of jobs data and company earnings, are so far discouraging equity investors from making bold bets early on Tuesday.

If the S&P 500 stays in the green by the end of Tuesday’s trading, that would be a five-day winning streak for the index and the longest so far in 2023.

The S&P 500 sits at a seven-week high, up 7.4% so far this year, after traders absorbed the prospect of an economic slowdown in the wake of tremors in the banking sector and tighter credit conditions but preferred to celebrate the lower interest rates that may result.

While Silicon Valley Bank and Signature Bank shuttered nearly a month ago, the crisis in the banking sector is not over year, JPMorgan Chase & Co. CEO Jamie Dimon said Tuesday morning.

Still, Dimon wrote in his annual shareholder letter, “recent events are nothing like what occurred during the 2008 global financial crisis (which barely affected regional banks).”

While investors keep an eye on banks, they are weighing new dynamics in the oil markets after OPEC+ members announced surprise production cuts. That pushed oil prices CL.1, +1.17% higher on Monday, and gains are so far extending into Tuesday’s oil futures.

Higher fuel prices could push other prices higher and force central banks to raise interest rates for longer. But that could be counteracted by news of weakening activity in the U.S. manufacturing sector.

“For investors keen to see an end to the monetary tightening environment … U.S. manufacturing activity dipped to its lowest level in almost three years in March, with new orders slumping amid the possibility of further falls if the expected credit tightening from banks washes through,” said Stephen Hunter, head of markets at Interactive Investor.

Treasury yields TMUBMUSD10Y, 3.395%, though, were only a few basis points higher early Tuesday, and U.S. crude oil prices were up less than a dollar per barrel.

A week shortened for the Good Friday holiday, which will close the U.S. stock market on April 7, is encouraging investors to sit on their hands, but the March nonfarm payrolls report will still be published on that day, and traders will be wary of being badly positioned and not able to immediately react.

Next week also sees the start of the first-quarter corporate-earnings season, possibly another reason for caution.

Further dissuading bullish bets is that the S&P 500 is getting near the top of the 3,800 to 4,200 trading range within which it has vacillated for more than five months.

And futures contracts on the index, currently around 4,150, face significant resistance just above the 4,175 level, according to strategists at Saxo Bank.

“So the question is whether U.S. equities will soon lose momentum … the breadth of the market has been quite narrow with mega caps doing the major heavy lifting of indices. This is probably as good as it gets for now in equities, as equity valuations are getting stretched as more and more signs are showing that the real estate sector is slowing down dramatically, which will impact credit transmission in the economy,” said Saxo.

U.S. economic updates set for release on Tuesday include factory orders and job openings, both for February and both to be released at 10 a.m. Eastern time.

Cleveland Fed President Loretta Mester is due to make comments at 6 p.m. Eastern.

Companies in focus

• AMC Entertainment Holdings Inc. AMC, -22.93% shares are down by more than 15% in early trading Tuesday after the the movie-theater operator and focus of meme-stock traders said it had agreed to settlement terms on shareholder litigation related to a stock conversion. The deal could result in an equity raise as large as $16 billion, one analyst said.
• Virgin Orbit Holdings Inc.  VORB, -17.94% shares are off more than 22% Tuesday morning at the market open, following the space launch company’s decision to file for Chapter 11 bankruptcy protection. The debt-restructuring process will let the company “maximize value for its business and assets” as it eyes a sale, it said in a statement.