Stocks Little Changed Before the Open as Investors Weigh Interest Rate Outlook

June S&P 500 futures (ESM23) are up +0.05%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.15% this morning after three major U.S. benchmark indices finished the regular session mixed as an unexpected Bank of Canada rate increase forced investors to recalibrate their expectations regarding the Federal Reserve interest rate decision next week.

In Wednesday’s trading session, the tech-heavy Nasdaq 100 underperformed major benchmarks, posting its worst day since April 25th as U.S. Treasury yields climbed after the Bank of Canada unexpectedly raised interest rates. Also, Campbell Soup Company (CPB) plunged over -8% and was the top percentage loser on the benchmark S&P 500 after the company’s full-year adjusted EPS guidance fell slightly short of expectations. On the positive side, energy stocks advanced as the price of WTI crude rose about +1%. Chip stocks also gained ground, with Microchip Technology Inc (MCHP) climbing over +4% and NXP Semiconductors NV (NXPI) rising more than +2%. In addition, Warner Bros Discovery Inc (WBD) surged over +8% after the Wall Street Journal reported that the ad-based tier of its Max streaming service could be included in Amazon's Prime Video Channels roundup.

The Bank of Canada on Wednesday unexpectedly hiked its key overnight benchmark rate by 25 basis points to a 22-year high of 4.75%. The central bank said that “concerns have increased that CPI inflation could get stuck materially above the 2% target.”

Meanwhile, U.S. rate futures have priced in a 67.3% probability of no hike and a 32.7% chance of a 25 basis point rate increase at the upcoming monetary policy meeting. 

“There is persistence and resilience in inflation in the U.S., but also in much of the G10, as well, meaning that central banks are likely to be cautious,” said Jane Foley, a chief strategist at Rabobank. 

The Organization for Economic Cooperation and Development Wednesday slightly raised its 2023 global GDP forecast to 2.7% from the previous estimate of 2.6% in March, citing easing inflationary pressures and the reopening of China.

Today, all eyes are focused on U.S. Initial Jobless Claims data in a couple of hours. Economists, on average, forecast that Initial Jobless Claims will come in at 235K, compared to last week’s value of 232K.

Also, investors are likely to focus on U.S. Wholesale Inventories data. Economists foresee this figure to stand at -0.2% m/m in April, compared to the previous number of 0.0% m/m.

U.S. Wholesale Trade Sales data will be reported today as well. Economists expect April’s figure to be +0.4% m/m, compared to the previous number of -2.1% m/m.

In the bond markets, United States 10-Year rates are at 3.797%, up +0.29%.

The Euro Stoxx 50 futures are up +0.05% this morning as gains in automobile and bank stocks helped offset losses in technology stocks, which were weighed down by concerns about slowing growth and elevated interest rates. Revised Eurostat data on Thursday showed the Eurozone economy unexpectedly slipped into a technical recession in the first quarter. Meanwhile, the European Central Bank is widely anticipated to hike interest rates by an additional 25 basis points next week. ECB President Christine Lagarde stated earlier this week that inflationary pressures remain strong, and interest rates will be further increased to tackle them. In corporate news, Wizz Air Holdings Plc (WIZZ.LN) rose about +2% after the company said it would return to profit this year as the summer travel season gets underway.

France’s Non-Farm Payrolls and Eurozone’s GDP data were released today.

The French Non-Farm Payrolls stood at +0.3% q/q in the first quarter, stronger than expectations of +0.2% q/q.

Eurozone GDP has been reported at -0.1% q/q and +1.0% y/y in the first quarter, weaker than expectations of 0.0% q/q and +1.2% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.49%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.85%.

China’s Shanghai Composite today closed higher as optimism over more stimulus measures boosted sentiment while market participants looked ahead to consumer and producer inflation data. Bank stocks gained ground after the country’s biggest state-owned banks Thursday cut rates on yuan demand deposits by 5 basis points and three-year and five-year time deposits by 15 basis points, pointing to a further increase in local liquidity conditions. On the negative side, media and artificial intelligence stocks underperformed. Also, Hong Kong-listed tech stocks retreated on Thursday as an unexpected Bank of Canada interest rate hike reignited concerns about the possibility of higher U.S. rates being sustained for longer. Investor focus is now on Chinese consumer and producer inflation data due on Friday.

At the same time, Japan’s Nikkei 225 Stock Index closed lower today, retreating further from a 33-year high as investors continued to lock in profits. Also, a tick-up in the yen weighed on export-oriented stocks. Revised data on Thursday showed that the country's economy expanded more than initially expected in the first quarter, driven by a post-pandemic pickup in corporate and consumer spending. Meanwhile, Eisai climbed more than +7% and was the top percentage gainer on the Nikkei after the U.S. Food and Drug Administration’s review memo on Leqembi raised expectations for full approval of the Alzheimer’s drug. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 3.92% to 21.98.

The Japanese GDP came in at +0.7% q/q and +2.7% y/y in the first quarter, stronger than expectations of +0.4% q/q and +1.6% y/y.

The Japanese April Current Account n.s.a. stood at 1.895T, weaker than expectations of 2.947T.

Pre-Market U.S. Stock Movers

GameStop Corp (GME) plunged over -17% in pre-market trading after the company reported downbeat Q1 results and terminated Matt Furlong as chief executive.

Hashicorp Inc (HCP) tumbled more than -21% in pre-market trading after the company reported upbeat Q1 results but issued weaker-than-expected Q2 and FY24 guidance. The company also announced targeted cuts in discretionary spending and a workforce reduction of about 8%.

eXp World Holdings Inc (EXPI) gained over +9% in pre-market trading after entering S&P SmallCap 600 index.

Torrid Holdings Inc (CURV) slid more than -15% in pre-market trading after the company posted weaker-than-expected Q1 results and cut its full-year guidance.

4D Molecular Therapeutics Inc (FDMT) surged about +18% in pre-market trading after announcing promising interim data from a Phase 1/2 AEROW clinical trial.

Quantumscape Corp (QS) fell over -5% in pre-market trading after Wolfe Research downgraded the stock to Underperform from Peer Perform.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - June 8th

DocuSign (DOCU), Toro (TTC), Vail Resorts (MTN), Braze (BRZE), Signet Jewelers (SIG), Duckhorn Portfolio (NAPA), Planet Labs PBC (PL), Mission Produce (AVO), Rev Group (REVG), Argan (AGX), American Software (AMSWA), Comtech (CMTL), Hooker Furniture (HOFT), Hyzon Motors (HYZN), AstroNova (ALOT).

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