S&P Futures Tick Higher Ahead of Key U.S. Inflation Data, U.S. Debt-Ceiling Talks in Focus

June S&P 500 futures (ESM23) are trending up +0.12% this morning after the S&P 500 and Nasdaq 100 closed sharply higher on Thursday as blowout guidance from Nvidia and progress on debt ceiling talks boosted market sentiment, while investors awaited a reading on the Federal Reserve’s preferred inflation gauge.

U.S. President Joe Biden and top congressional Republican Kevin McCarthy have moved closer to a deal to raise the debt ceiling and cap federal spending for two years, according to people familiar with the matter. The White House and Republican negotiators are looking to finalize the agreement in the coming days, raising hopes of an end to the fiscal standoff. President Biden said Thursday the U.S. would avoid a catastrophic credit default.

In Thursday’s trading session, the tech-heavy Nasdaq 100 posted a 13-month high, helped by a more than +24% jump in shares of NVIDIA Corporation (NVDA) after the semiconductor giant reported upbeat Q1 results and blew away forecasts for the upcoming quarter. Also, Ralph Lauren Corp (RL) climbed over +5% after reporting upbeat Q4 results. In addition, Best Buy Co Inc (BBY) rose more than +3% after the retailer posted better-than-expected Q1 adjusted EPS. At the same time, the blue-chip Dow underperformed major benchmarks, dragged by an over -5% drop in Intel Corporation (INTC), which investors view as lagging in the AI race.

Economic data on Thursday showed weekly initial jobless claims rose +4K to a seasonally adjusted 229K last week, stronger than expectations of 250K. Also, first-quarter U.S. GDP was revised upward to +1.3% q/q from +1.1% q/q, while U.S. core PCE inflation was revised upward to 5.00% from 4.90% in the first quarter. At the same time, U.S. pending home sales were unchanged m/m in April, weaker than expectations of +0.5% m/m.

Richmond Fed President Thomas Barkin said on Thursday that the U.S. was in the middle of a demand slowdown. “Demand is cooling after the unusually hot demand from the pandemic, higher interest rates from the Federal Reserve policy tightening, and banking stresses,” he said. Also, Boston Fed President Susan Collins said Thursday that the Federal Reserve may be “at, or near, the point” where it can pause interest-rate hikes. “While inflation is still too high, there are some promising signs of moderation,” Collins said.

“Most of the morning’s data supported more Fed tightening, so traders ignored Fed’s Collin’s comment that a rate pause would give us space to assess actions to date,” said Edward Moya, a senior market analyst at OANDA.

Meanwhile, U.S. rate futures have priced in a 58.8% probability of no hike and a 41.2% chance of a 25 basis point rate increase at the June meeting.

Today, all eyes are focused on the U.S. core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, in a couple of hours. Economists, on average, forecast that the Core PCE Price Index will stand at +0.3% m/m and +4.6% y/y in April, compared to the previous values of +0.3% m/m and +4.6% y/y.

Also, investors are likely to focus on U.S. Core Durable Goods Orders data, which was at +0.3% m/m in March. Economists foresee the April figure to be unchanged m/m.

U.S. Michigan Consumer Sentiment Index will be reported today. Economists foresee this figure to stand at 57.9 in May, compared to April’s value of 63.5.

U.S. Michigan Consumer Expectations Index will come in today. Economists expect the May figure to be 53.4, compared to 60.5 in April.

U.S. Personal Spending data will also be closely watched today. Economists forecast Personal Spending to be at +0.4% m/m in April, compared to the previous figure of unchanged m/m.

U.S. Durable Goods Orders data will be reported today as well. Economists estimate April’s figure to come in at -1.0% m/m, compared to the previous number of +3.2% m/m.

In the bond markets, United States 10-Year rates are at 3.795%, down -0.50%.

The Euro Stoxx 50 futures are up +0.07% this morning as investors digested better-than-expected British retail sales data while continuing to monitor U.S. negotiations over the debt ceiling deal. Gains in mining and tech stocks are leading the overall market higher. Meanwhile, the Office for National Statistics said Friday that U.K. retail sales unexpectedly rose in April, highlighting resilience in consumer spending. In corporate news, shares of Rio Tinto Plc (RIO.LN) gained more than +3% after Morgan Stanley upgraded the stock to overweight from equal weight.

U.K.’s Core Retail Sales, U.K.’s Retail Sales, and France’s Consumer Confidence data were released today.

U.K. April Core Retail Sales stood at +0.8% m/m and -2.6% y/y, stronger than expectations of +0.3% m/m and -2.8% y/y.

U.K. April Retail Sales stood at +0.5% m/m and -3.0% y/y, compared to expectations of +0.4% m/m and -2.8% y/y.

The French May Consumer Confidence has been reported at 83, weaker than expectations of 84.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.35%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.37%.

China’s Shanghai Composite today closed higher, boosted by a rally in semiconductor stocks. Shares of Chinese chipmakers gained ground on Friday following an over +24% overnight surge in U.S.-based Nvidia Corp, with Zbit Semiconductor Inc jumping +20% and Ingenic Semiconductor rising over +3%. At the same time, automobile stocks underperformed, with BYD Co Ltd falling over -3% and Great Wall Motor Co Ltd plunging more than -4%. Meanwhile, market participants increased bets on Chinese monetary easing to the most since November after data in recent weeks showed China’s post-Covid economic rebound was running out of steam. In other news, U.S. Commerce Secretary Gina Raimondo and Chinese Commerce Minister Wang Wentao raised concerns about their countries’ trade and investment policies at a meeting in Washington but agreed to keep communication channels open. The U.S. Commerce Department said the officials had “candid and substantive” discussions.

Japan’s Nikkei 225 Stock Index closed higher today amid increased optimism over chipmaking stocks. Also, government data showed on Friday that core consumer prices in Tokyo, Japan’s capital, slowed slightly in May. Meanwhile, shares of chip-testing machine maker Advantest rose nearly +4%, building on Thursday’s +16% jump. Also, Tokyo Electron climbed over +4% to its highest level in almost a year. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.68% to 18.49.

The Japanese May Tokyo Core CPI has been reported at +3.2% y/y, weaker than expectations of +3.3% y/y.

Pre-Market U.S. Stock Movers

Gap Inc (GPS) surged over +11% in pre-market trading after reporting an unexpected profit in Q1.

Marvell Technology Group Ltd (MRVL) climbed more than +15% in pre-market trading after the semiconductor company reported better-than-expected Q1 results and issued upbeat Q2 guidance.

Workday Inc (WDAY) gained over +9% in pre-market trading after the company posted upbeat Q1 results and raised its FY24 subscription revenue guidance.

Tilray Inc (TLRY) plunged about -18% in pre-market trading after the company announced a $150M offering of convertible senior notes.

PDS Biotechnology Corp (PDSB) rose over +15% in pre-market trading after disclosing “promising” interim data from the VERSATILE-002 trial.

MongoDB (MDB) dropped more than -2% in pre-market trading after Guggenheim downgraded the stock to sell from neutral. 

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - May 26th

Booz Allen Hamilton (BAH), Buckle (BKE), Hibbett Sports (HIBB), Diana Shipping (DSX), CNFinance (CNF), KNOT Offshore Partners LP (KNOP), LightInTheBox (LITB).

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