Following Monday's across-the-board move higher, U.S. equity futures point to a rough market open here on Tuesday. Weighing on stocks is the cut to Snap Inc.'s (SNAP) outlook for the current quarter and the news that "buy now, pay later" firm Klarna will be shedding 10% of its workforce. Snap shares cratered in aftermarket trading Monday night as the company warned its revenue and EBITDA for the current quarter will fall below its previous low-end guidance issued on April 21. The company noted that since its late April guidance that called for revenue growth of 20% to 25% year over year, the macroeconomic environment has "deteriorated further and faster than anticipated."

This outcome likely points to a reallocation of ad dollars as well as reduced advertising spending, which explains why other social media companies and those with advertising revenue business models, such as Pinterest (PINS) , Meta Platforms (FB) , The Trade Desk (TTD) and Twitter (TWTR) , are poised to move lower this morning. We are also seeing our shares of Alphabet (GOOGL) trade off in pre-market trading, and while the reaction is to be expected, we'd remind members that during the Great Recession as well as the pandemic the company's search business thrived. The nature of that business in our view should help insulate the company's core business model as advertisers look to place ads where consumer eyeballs are. We do not see any major ramifications on our Mastercard (MA) shares from the Klarna news given that Stripe is reportedly used in about 90% of Klarna's payment processing volume.

The above speaks to the quickly changing landscape as companies adapt to the confluence of factors that have been hitting the global economy as well as growing concerns for what lies ahead as the Fed ramps up its inflation-fighting efforts. The above sector isn't likely to be the only industry that will need to adjust for a more cautious outlook, which increases the probability we'll see another leg lower in revenue and earnings expectations in the coming days and weeks. We've built the portfolio's cash position and as members know we've also increased its exposure to market-hedging inverse ETFs, which should help cushion the impact as a renewed sense of uncertainty creeps back into the market. Near term, we'll use the evolving landscape to revisit existing positions as we look to identify more defensively positioned dividend payers, aiming to add them to the portfolio when the risk-to-reward tradeoff makes sense.

Later this morning we'll get the first look at how the US economy fared in April courtesy of the S&P Global Flash May PMI report. In perusing the analogous report for the eurozone published earlier this morning, Flash PMI figures were reported in the mid-to high 50s, meaning that both Manufacturing and Services activity remain in an expansionary phase despite the multitude of headwinds impacting the region. On the inflation front, the May Flash report confirms it remains at elevated levels: "Average prices charged for goods and services meanwhile rose sharply, increasing at a rate below April's all-time high but still registering the second-steepest increase yet recorded by the survey." For the US Flash PMI report, Manufacturing is expected to dip slightly to 58.0 from the previously reported 59.2 and Services is expected to tick up to 56.0 from 55.6, but it will be the comments surrounding input and output prices that will likely garner a greater focus.

Ahead of those findings, prepared remarks from Kansas City Fed President Esther George hint at what could come from the Federal Reserve's June and July monetary policy meetings: "I expect that further rate increases could put the federal funds rate in the neighborhood of 2 percent by August, a significant pace of change in policy settings. Balance sheet reduction plans will also be underway as a tightening mechanism... Evidence that inflation is clearly decelerating will inform judgments about further tightening." We see those comments simply confirming the current narrative shared in recent weeks by Fed Chairman Powell that the Fed will continue to hike rates until it sees meaningful progress, including rate hikes at its June and July meetings.

And as if we didn't have enough going on this week between economic data and additional earnings reports, mark your calendars! Secretary of State Antony Blinken is expected to give a speech this Thursday outlining the White House's strategy on China. There is some speculation that calls for the removal of some Chinese tariffs, but given recent comments regarding Taiwan we'll make no judgements until we have more data in hand.

A quick note on Airbnb (ABNB) , which late yesterday announced it will shutter its business in China. That business accounted for less than 1% of Airbnb's revenue in the last few years, which means it will have a very modest impact on the company's revenue. Instead, Airbnb shared it will focus on providing listings for Chinese travelers going abroad, which is a far better strategy in our view given the longer-term forecast for international travel out of China.

At the time of publication, Action Alerts PLUS was long ABNB, GOOGL and MA.