* Major averages red; Dow, small caps take brunt of weakness
* All major S&P 500 sectors down; energy biggest loser
* Dollar, crude fall; gold up; U.S. 10-yr Yield ~0.66%
May 29 (Reuters) - Welcome to the home for real-time coverage of U.S. equity markets brought to you by Reuters stocks reporters and anchored today by Terence Gabriel. Reach him on Messenger to share your thoughts on market moves: terence.gabriel.tr.com@reuters.net
AS THE WORLD TURNS, GLOBALIZATION STAYS PUT (1108 EDT/1508 GMT)
Jack Ablin, chief investment officer at Cresset, is out with a note providing his thoughts on globalization - it isn't dead, it's just different.
According to Ablin, investors believe COVID-19 is the watershed event that marks the end of globalization. This because lockdowns are prompting countries to reevaluate their relationship with China – even those that depend on Chinese demand, like Australia and Brazil.
He also says that in the near term, the eroding relationship between the U.S and China could become a headwind for the stock market as China becomes an election issue.
In Ablin's opinion, China would be ill-advised to retaliate against American companies as a political show of force, since this would only accelerate the supply chain shift away from China. However, he also notes that America's "bumptious behavior" isn't helpful either, considering the current state of the U.S. economy.
Ablin concludes that globalization isn't dead even though that trend has reversed. To him, this suggests emerging market (EM) equities present an intermediate-term opportunity since they are cheap relative to U.S. stocks and are likely to benefit as the world economy recovers from the pandemic. He also says that EM's price-to-book ratio is also cheap relative to its history.
To this end, Ablin believes countries like Bangladesh, Vietnam and Indonesia would benefit from shifting sourcing trends in apparel, while Thailand, South Korea, Indonesia and India would benefit from manufacturing shifts.
(Terence Gabriel)
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SPENDING PLUMMETS, SAVING RATE SOARS AS FEAR GRIPS U.S. CONSUMERS (0956 EDT/1356 GMT)
Data released on Friday showed a record drop in consumer spending and the highest-ever saving rate, which together provided a snapshot of an anxious U.S. consumer burdened by uncertainties in the face of an economic shutdown.
Personal consumption USGPCS=ECI plummeted in April by a record 13.6%, according to the U.S. Commerce Department, worse than the 12.6% consensus expectation.
At the same time, personal income USGPY=ECI unexpectedly surged by 10.5%, blowing away analyst estimates for a 6.5% decline.
The surprise income jump can be attributed to increased unemployment benefits as part of a stimulus package designed to blunt the economic shock of mass job loss.
This resulted in a mind-boggling 33% saving rate, the highest ever. The saving rate is commonly associated with consumer anxiety.
"This underscores how the global coronavirus recession (GCR) is leading to more frugal consumer behavior which will dampen the recovery," said Lydia Boussour, senior economist at Oxford Economics. "This is particularly true as the boost from social benefits will gradually erode over time leaving households more financially constrained."
The personal consumption expenditures (PCE) price index USPCEM=ECI , the U.S. Federal Reserve's preferred inflation gauge, slid further than economist feared, dropping 0.4%.
Year-on-year, core PCE USPCE2=ECI (which excludes volatile food and energy prices) dropped to 1% from 1.7% the previous month, joining most other major inflation indicators in their retreat below the Fed's 2% annual target.
The notable exception is average hourly wages, which sky-rocketed in April, suggesting that low-earning workers bore the brunt of job losses due to mandated lockdowns.
"Looking ahead, the severe demand shock from COVID-19, the collapse of oil prices and the stronger dollar will lead to deflation for headline PCE and the weakest core PCE inflation on record, below 0.5%," adds Boussour.
Wall Street is mixed in early trading as rising U.S.-China tensions are pulling the S&P 500 and the Dow into the red, while tech is boosting the Nasdaq into positive territory.
(Stephen Culp)
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AFTER A LONG SWIM, MAY BE TIME TO TREAD WATER (0909 EDT/1309 GMT)
Scott Wren, senior global market strategist at the Wells Fargo (NYSE:WFC) Investment Institute, is out with a note saying the market's near to intermediate-term primary theme may be "treading water" because the risk versus reward based on the stock market's current level, does not look great.
According to Wren, the market's come a long way off its March lows, given a slightly more than 37% rise in the S&P 500 since that point. Thus, he says the bulk of the gains for the year have likely been seen.
Indeed, as Wren sees its, stocks have done a good job anticipating better-than-expected news on the coronavirus as well as on actions by the Federal Reserve and Congress, and on the reopening fronts.
However, Wren sees risks associated with these positives. He says that the confidence of consumers to "come out of hibernation" and spend on restaurants, travel, and any number of other desires will be by far the critical driver going forward. Wren believes this won't happen if consumers continues to fear COVID-19. Therefore, a return to "normal" employment and activity will likely take time.
Wren says the although the risk vs. the potential reward doesn't look great at this time, he believes it should improve moving into 2021.
(Terence Gabriel)
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MARKETS AWAIT TRUMP PRESSER ON HONG KONG (0844 EDT/1244 GMT)
U.S. stock futures are mixed with just modest changes on Friday as investors brace for President Donald Trump's response to China's national security legislation for Hong Kong. .N
Trump is due to make an announcement later in the day and has vowed a tough U.S. response to China's move. Fed Chair Powell is scheduled to speak via a webcast at 1100 EDT/1500 GMT.
As stands, the S&P 500 .SPX is up 2.5% so far this week, and around 4% for the month.
Meanwhile, with the futures not showing much change, once the regular session kicks off, traders may eye a choppy holding pattern ahead of the day's media events. That said, the VIX .VIX is rising for a second straight day.
The U.S. Dollar =USD is hitting a more than 2-month low, while the U.S. 10-Year Treasury yield US10YT=RR , at about 0.66%, is essentially in the middle of its recent range.
Spot gold XAU= is gaining, while spot silver XAG= has rallied to a 3-month high. NYMEX crude futures CLcv1 are under pressure.
Here is your premarket snapshot:
(Terence Gabriel)
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<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ premarket05292020
https://tmsnrt.rs/2M6yhfw Personal consumption
https://tmsnrt.rs/2zJZS3v Inflation
https://tmsnrt.rs/3eAp37D
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)