S&P Futures Tick Lower Ahead of Key U.S. Retail Sales Data, Debt-Ceiling Talks in Focus

June S&P 500 futures (ESM23) are trending down -0.14% this morning as market participants digested soft Chinese economic data while awaiting an update on plans to raise the federal debt limit as well as crucial retail sales data.

In Monday’s trading session, the tech-heavy Nasdaq 100 outperformed the other two indices, helped by a more than +2% rise in Meta Platforms Inc (META) after Loop Capital upgraded the stock to buy from hold. Also, Western Digital (WDC) surged over +11% and was the top percentage gainer on the S&P 500 following a report that the memory chip firm and Kioxia Holdings Corp are speeding up merger talks. In addition, regional bank stocks recovered some of their recent sharp losses, with PacWest Bancorp (PACW) rising about +17% and Zions Bancorporation (ZION) climbing over +8%. 

Data on Monday showed the U.S. NY Empire State Manufacturing index, a gauge of manufacturing activity in New York State on current business conditions, dropped to a 4-month low of -31.80 in May, weaker than expectations of -3.70, raising concerns over a slowing U.S. economy.

Atlanta Fed President Raphael Bostic said Monday he didn’t see interest rate cuts until “well into 2024” and cautioned that the Fed might need to hike rates more if inflation doesn’t cool. Also, Minneapolis Fed President Neel Kashkari said the Federal Reserve probably has “more work to do on our end to try to bring inflation back down.”

Meanwhile, U.S. rate futures have priced in an 84.5% probability of no hike and a 15.5% chance of a 25 basis point rate increase at the next central bank meeting in June.

Later today, President Joe Biden will resume debt talks with senior Republican leaders, including House Speaker Kevin McCarthy, in another attempt to avert an unprecedented U.S. default. Treasury Secretary Janet Yellen issued a fresh warning on Monday that the U.S. is already paying a price for its failure to raise the debt ceiling.

Today, all eyes are focused on U.S. Retail Sales data in a couple of hours. Economists, on average, forecast that April Retail Sales will stand at +0.8% m/m, compared to the previous value of -1.0% m/m.

Also, investors are likely to focus on U.S. Core Retail Sales data, which was at -0.8% m/m in March. Economists foresee the new figure to be +0.4% m/m.

U.S. Industrial Production data will be reported today. Economists foresee this figure to stand at -0.1% m/m in April, compared to the previous number of +0.4% m/m.

U.S. Manufacturing Production data will come in today. Economists expect April’s figure to be +0.1% m/m, compared to the previous number of -0.5% m/m.

U.S. Business Inventories data will be reported today as well. Economists estimate this figure to be +0.1% m/m in March, compared to the previous value of +0.2% m/m.

In addition, investors will likely focus on a batch of speeches from Fed officials Mester, Bostic, Williams, and Logan for further clues on the outlook for rates.

In the bond markets, United States 10-Year rates are at 3.474%, down -0.97%.

The Euro Stoxx 50 futures are up +0.21% this morning as investors digested a slew of important regional economic data while monitoring U.S. debt ceiling developments. Strength in technology and utility stocks is lending support to the overall market. On the economic front, Eurostat confirmed on Tuesday that Eurozone economic growth was +0.1% q/q in the first quarter. Meanwhile, the most recent survey by Bank of America Corp. showed that 72% of investors believe that European stocks will decline in the upcoming months due to monetary tightening. In the corporate sector, shares of Embracer Group Ab (EMBRB.S.DX) plunged over -15% after the Swedish game developer lowered its full-year adjusted EBIT outlook. In other news, Telecom Italia (TIT.M.DX) dropped more than -1% following a report that Italy’s state lender plans to drop the 19.3 billion euros offer for the company’s landline network.

U.K.’s Average Earnings Index +Bonus, U.K.’s Claimant Count Change, U.K.’s Employment Change 3M/3M, U.K.’s Unemployment Rate, Italy’s CPI, Germany’s ZEW Current Conditions, Germany’s ZEW Economic Sentiment, Eurozone’s GDP (preliminary), and Eurozone’s ZEW Economic Sentiment data were released today.

U.K. March Average Earnings Index +Bonus has been reported at 5.8%, in line with expectations.

U.K. April Claimant Count Change stood at 46.7K, weaker than expectations of 31.2K.

U.K. March Employment Change 3M/3M came in at 182K, stronger than expectations of 160K.

U.K. March Unemployment Rate was at 3.9%, weaker than expectations of 3.8%.

The Italian April CPI stood at +0.4% m/m and +8.2% y/y, weaker than expectations of +0.5% m/m and +8.3% y/y.

The German May ZEW Current Conditions came in at -34.8, stronger than expectations of -37.0.

The German May ZEW Economic Sentiment was at -10.7, weaker than expectations of -5.3.

Eurozone GDP has been reported at +0.1% q/q and +1.3% y/y in the first quarter, in line with expectations.

Eurozone May ZEW Economic Sentiment stood at -9.4, weaker than expectations of -1.0.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.60%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.73%. 

China’s Shanghai Composite today closed lower after April economic data missed expectations and pointed to a wobbly recovery in the world’s second-largest economy. Data released by the National Bureau of Statistics on Tuesday showed Chinese industrial output and retail sales growth undershot forecasts in April, suggesting the economy lost further momentum at the start of the second quarter. At the same time, losses in Chinese stocks were limited as disappointing economic data bolstered bets that the People’s Bank of China will further loosen policy to shore up a staggered post-COVID recovery. Meanwhile, energy and semiconductor stocks outperformed on Tuesday. Also, Hong Kong-listed tech stocks gained ground after filings showed that a few hedge funds added positions for overseas-listed Chinese companies during the first quarter.

“The data set follows downside surprises in Consumer Price Index and Purchasing Managers’ Index. Chinese assets should keep trading with a risk-off tone with bonds rallying, as the post-reopening rebound fades,” UBS analysts wrote in a note.

The Chinese April Industrial Production has been reported at +5.6% y/y, weaker than expectations of +10.9% y/y.

The Chinese April Retail Sales stood at +18.4% y/y, weaker than expectations of +21.0% y/y.

The Chinese April Fixed Asset Investment came in at +4.7% y/y, weaker than expectations of +5.5% y/y.

The Chinese April Unemployment Rate was at 5.2%, stronger than expectations of 5.3%.

At the same time, Japan’s Nikkei 225 Stock Index climbed to a new 18-month high today as a strong first-quarter earnings season and a dovish Bank of Japan monetary policy stance made Japanese stocks especially appealing to investors. Also, Japan’s Topix index hit a 33-year high today as chip-related stocks tracked overnight gains on the tech-heavy Nasdaq 100. Chip-making equipment maker Tokyo Electron Ltd climbed over +4%, while chip-testing equipment producer Advantest Corp rose more than +5%. On the negative side, Japan Post Holdings tumbled over -6% after the company reported weaker-than-expected earnings for the fiscal year ended March 31st, 2023. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.96% to 16.09.

Pre-Market U.S. Stock Movers

Beam Global (BEEM) climbed more than +14% in pre-market trading after the company reported upbeat Q1 results.

Capital One Financial Corporation (COF) soared more than +6% in pre-market trading after Warren Buffett's Berkshire Hathaway disclosed a new 9,922,000 share position in its latest 13F filing.

Amdocs Ltd (DOX) rose over +2% in pre-market trading after Barclays upgraded the stock to overweight from equal weight. 

Ducommun Incorporated (DCO) plunged about -16% in pre-market trading after the company announced it had launched an underwritten public offering of 2M shares of its common stock.

Gilead Sciences Inc (GILD) gained over +1% in pre-market trading after BMO Capital upgraded the stock to outperform from market perform.

Williams Companies Inc (WMB) rose about +1% in pre-market trading after Citi upgraded the stock to buy from neutral.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - May 16th

Home Depot (HD), Sea (SE), Baidu (BIDU), Keysight Technologies (KEYS), Tencent Music Entertainment Group (TME), James Hardie Industries ADR (JHX), Miniso (MNSO), iQIYI (IQ), Burford (BUR), Agilysys (AGYS), Star Bulk Carriers (SBLK), Golden Ocean (GOGL), Nextgen Healthcare (NXGN), Stratasys Ltd (SSYS), HUYA (HUYA), Pagaya (PGY), Yatsen (YSG), International General Insurance (IGIC), Quipt Home Medical (QIPT), GSI Technology (GSIT), Container Store (TCS), Allot Communications (ALLT).

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