June S&P 500 futures (ESM23) are up +0.14%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.09% this morning as weak trade data from China stoked investor concerns over the strength of global demand.
In Tuesday’s trading session, financial stocks gained ground amid a surge in regional bank stocks that pushed the KBW Nasdaq Regional Banking Index up by more than +5%, with PacWest Bancorp (PACW) surging over +8% and Western Alliance Bancorporation (WAL) gaining about +6%. Also, Intel (INTC) rose over +3% and was the top percentage gainer on the blue-chip Dow after the company said it would sell part of its stake in Mobileye to raise $1.48 billion. In addition, Advanced Micro Devices Inc (AMD) climbed more than +5% after Piper Sandler raised its price target on the stock to $150 from $110. On the negative side, Coinbase Global Inc (COIN) plunged about -12% after the U.S. Securities and Exchange Commission filed a lawsuit against the crypto exchange, alleging that it’s operating as an unregistered securities broker.
Former Fed Vice Chair Richard H. Clarida told Bloomberg television on Tuesday it was unlikely the Federal Reserve would start cutting rates until 2024. “I do think if there are cuts, it's really a 2024 story,” he said.
Meanwhile, U.S. rate futures have priced in a 76.5% probability of no hike and a 23.5% chance of a 25 basis point rate increase at the upcoming monetary policy meeting.
“Although labor market rebalancing and inflation progress have been encouraging, a firmer growth outlook will likely prompt the Fed to hike again in July,” said Jan Hatzius, a chief economist at Goldman Sachs.
The World Bank on Tuesday raised its 2023 global GDP forecast to 2.1% from a January forecast of 1.7%. However, the development lender cut its 2024 global GDP projection to 2.4% from the previous estimate of 2.7% in January. The adjustment was attributed to the lagged effects of central bank monetary tightening and more restrictive credit conditions.
Today, investors are likely to focus on U.S. Crude Oil Inventories data. Economists estimate this figure to be +1.022M, compared to last week’s value of +4.488M.
U.S. Trade Balance data will be reported today as well. Economists foresee this figure to stand at -75.20B in April, compared to the previous number of -64.20B.
In the bond markets, United States 10-Year rates are at 3.678%, down -0.61%.
The Euro Stoxx 50 futures are down -0.40% this morning as investors digested weak China trade data while awaiting key central banks meetings next week. Losses in luxury and chemical stocks are leading the overall market lower. Meanwhile, ECB Executive Board member Isabel Schnabel told De Tijd in an interview published on Wednesday that the central bank hasn’t completed increasing interest rates as core inflation proves stubborn. “We have more ground to cover,” she was cited as saying. In corporate news, Industria DE Diseno Textil Sa (ITX.E.DX) surged over +5% after the Zara owner posted a consensus-beating 43% rise in operating profit for the three months through April.
U.K.’s Halifax House Price Index, Germany’s Industrial Production, France’s Trade Balance, and Italy’s Retail Sales data were released today.
U.K. May Halifax House Price Index has been reported at 0.0% m/m and -1.0% y/y, compared to expectations of 0.0% m/m and -0.9% y/y.
The German April Industrial Production stood at +0.3% m/m, weaker than expectations of +0.6% m/m.
The French April Trade Balance was at -9.7B, weaker than expectations of -7.7B.
The Italian April Retail Sales came in at +0.2% m/m and +3.2% y/y, weaker than expectations of +0.3% m/m and +4.3% y/y.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.08%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.82%.
China’s Shanghai Composite today closed slightly higher as a positive sign in geopolitics outweighed weak trade numbers. Data on Wednesday showed that Chinese exports contracted more than expected in May amid persistent weak global demand, and imports declined, albeit at a slower pace, with the country’s trade surplus hitting its lowest level since April 2022. On the positive side, U.S. Secretary of State Antony Blinken is anticipated to travel to China in the next few weeks for high-level talks, two U.S. officials and a source familiar with the matter told CNN on Tuesday, as the two countries work to restore and normalize their relations. Also, Hong Kong-listed tech stocks gained ground on Wednesday amid hopes for stimulus in China. Bloomberg Economics expects the People’s Bank of China will likely reduce its one-year benchmark interest rate “as early as mid-June.”
The Chinese May Trade Balance has been reported at $65.81B, weaker than expectations of $92.00B.
The Chinese May Exports stood at -7.5% y/y, weaker than expectations of -0.4% y/y.
The Chinese May Imports came in at -4.5% y/y, stronger than expectations of -8.0% y/y.
At the same time, Japan’s Nikkei 225 Stock Index closed sharply lower today, posting its biggest decline in 12 weeks as investors locked in profits ahead of the fixing of special quotation prices at the end of the week. Meanwhile, chip-related stocks slumped on Wednesday, with Tokyo Electron Ltd falling over -4% and Advantest Corp dropping more than -3%. Investor focus is now squarely on a revised first-quarter GDP reading due on Thursday. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 3.03% to 21.15.
“Investors turned cautious after the Nikkei’s gain yesterday, which prompted them to sell stocks. That drove more sell-offs and sent the index lower. Also, ahead of the June 9 setting of special quotation prices used to set values on index options and futures, investors sold stocks to keep the level lower,” said Shoichi Arisawa, a general manager of the investment research department at IwaiCosmo Securities.
Pre-Market U.S. Stock Movers
Yext Inc (YEXT) surged over +19% in pre-market trading after the company posted upbeat Q1 results and raised its FY24 outlook.
Grid Dynamics Holdings Inc (GDYN) climbed more than +5% in pre-market trading after announcing an expansion of its partnership with Alphabet’s Google Cloud focused on artificial intelligence. The company also reiterated its Q2 revenue and adjusted EBITDA guidance.
Vaxart Inc (VXRT) plunged over -18% in pre-market trading after the company announced that it had commenced an underwritten public offering of its common stock.
Day One Biopharmaceuticals Inc (DAWN) dropped about -3% in pre-market trading after pricing its offering of 11.54M shares of its common stock at $13.00 a share.
Duolingo Inc (DUOL) slid more than -1% in pre-market trading after JMP Securities downgraded the stock to Market Perform from Outperform.
Glaukos Corp (GKOS) gained over +2% in pre-market trading after Piper Sandler upgraded the stock to Overweight from Neutral.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - June 7th
Brown Forman (BFb), Campbell Soup (CPB), GameStop Corp (GME), Smartsheet (SMAR), Hashicorp (HCP), Ollies Bargain Outlet Holdings Inc (OLLI), Greif Bros (GEF), Verint (VRNT), United Natural Foods (UNFI), Semtech (SMTC), Tuya (TUYA), J.Jill (JILL), Torrid Holdings (CURV), VersaBank (VBNK), Vera Bradley (VRA), Rent the Runway (RENT), Lakeland Industries (LAKE).
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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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