Morning Markets
June E-Mini S&P 500 futures (ESM23) this morning are up +0.25% at a 13-1/2 month high, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.55% at a 14-month high.
U.S. stock index futures this morning are moderately higher after today’s U.S. consumer price report for May showed moderation in price pressures, which paves the way for the Fed to pause its interest rate hikes. Also, a +4% jump in Oracle in pre-market trading is leading technology stocks higher after it said its cloud-computing business would continue its rapid growth in the coming fiscal year.
U.S. May CPI eased to +4.0% y/y from +4.9% y/y in Apr, better than expectations of +4.1% y/y and the smallest increase in more than two years. Also, May CPI ex-food and energy eased to +5.3% y/y from +5.5% y/y in Apr, the smallest increase in 1-1/2 years but higher than expectations of +5.2% y/y.
U.S. stocks have carryover support from a rebound in Chinese stocks today after Bloomberg reported the country is considering broad stimulus measures to revive the economy, including interest rate cuts. Also, the PBOC today unexpectedly lowered its seven-day reverse repurchase rate, which bolsters the outlook for a cut in one-year policy loans on Thursday.
The markets are looking ahead to interest rate decisions from the Fed, ECB, and BOJ this week. Market odds for the Fed to raise the fed funds target range by +25 bp at Wednesday’s FOMC meeting fell to 12% today from 25% Monday.
Global bond yields are mixed. The 10-year T-note yield is down -4.4 bp at 3.691%. The 10-year German bund yield is down -3.8 bp at 2.350%, and the UK 10-year gilt yield rose t a 2-week high of 4.412% and is up +4.1 bp at 4.379%.
On the bullish side for stocks, Oracle climbed up more than +4% in pre-market trading after reporting Q4 adjusted EPS above consensus, and CEO Catz said its cloud-computing business would continue its rapid growth in the coming fiscal year. Also, Amazon.com is up more than +1% on optimism over the company’s improving earnings and growth prospects, as well as a valuation that is below its peers. In addition, U.S.-listed Chinese stocks are moving higher after China’s central bank announced a surprise short-term policy interest rate cut to boost the economy.
On the bearish side, Apple slid nearly -1% in pre-market trading after UBS downgraded the stock to neutral from buy, citing a softer demand outlook for the iPhone and services growth. Also, Bunge is down more than -2% after agreeing to buy Glencore’s Viterra for about $8.2 billion in stock and cash. In addition, Methode Electronics is down more than -8% after forecasting 2024 net sales below consensus.
Overseas stock markets are higher. The Euro Stoxx 50 is up +0.28%. China’s Shanghai Composite closed up +0.15%, and Japan’s Nikkei Stock Index closed up +1.80%.
The Euro Stoxx 50 index today rose to a 2-week high and is moderately higher. An unexpected improvement in German investor optimism is giving stocks a lift today after the German May ZEW expectations of economic growth index rose. Carryover support from a rally in the Nasdaq 100 Stock index Monday to a 14-month high is boosting European technology stocks. Also, stocks garnered support today from a Bloomberg report that said China is considering a broad package of stimulus measures to revive economic growth. Mining stocks rose as copper prices climbed on speculation an increase in Chinese stimulus would boost demand for industrial metals.
The German May ZEW expectations of economic growth unexpectedly rose +2.2 to -8.5, stronger than expectations of a decline to -13.5.
China’s Shanghai Composite Stock Index today recovered from early losses and closed slightly higher. Chinese stocks moved higher today on a Bloomberg report that said the government is considering a broad package of stimulus measures to boost the economy, including property support and interest rate cuts. Stocks also rose, and the yuan dropped to a 6-1/2 month low today, after the People’s Bank of China (PBOC) lowered the seven-day reverse repurchase rate. The PBOC cut the seven-day reverse repurchase rate by -10 basis points to 1.9%, the first reduction in the rate since August 2022. That increases the likelihood the PBOC will reduce its one-year loan rate on Thursday, with banks expected to cut their lending rates shortly after. A slowdown in credit growth may also prompt the PBOC to cut rates after today’s news showed China May aggregate financing rose less than expected.
China May aggregate financing, the broadest measure of credit growth, rose +1.56 trillion yuan, weaker than expectations of +1.90 trillion yuan. Also, May new yuan loans rose +1.36 trillion yuan, weaker than expectations of +1.55 trillion yuan.
Japan’s Nikkei Stock Index today rallied to a nearly 33-year high and closed sharply higher. Japanese technology stocks moved higher today on the heels of Monday’s rally in the Nasdaq 100 to a 14-month high and the jump in Oracle late Monday after it gave a strong forecast on cloud computing demand amid the boom in generative artificial intelligence. Also, SoftBank Group climbed more than +5% after its chip designer unit Arm is said to be in talks for investment from Intel. In addition, Japanese trading houses climbed to record highs after Jeffries raised their price targets on the companies by more than 40% following Monday’s close. Finally, Toyota Motor rose more than +4%, and EV battery-related companies rallied after Toyota executives sounded more confident in their ability to build and sell millions of electric vehicles.
The Japan Q2 BSI large manufacturing business conditions rose to -0.4 from -10.5 in Q1.
Pre-Market U.S. Stock Movers
Oracle (ORCL) climbed more than +4% in pre-market trading after reporting Q4 adjusted EPS of $1.67, better than the consensus of $1.58. The company reported Q4 cloud sales gained +54% after a +45% jump in Q3, and CEO Catz said its cloud-computing business would continue its rapid growth in the coming fiscal year.
Amazon.com (AMZN) gained more than +1% in pre-market trading on optimism about the company’s improving earnings and growth prospects, as well as a valuation that is below its peers.
U.S.-listed Chinese stocks are moving higher in pre-market trading after China’s central bank announced a surprise short-term policy interest rate cut to boost the economy. As a result, Alibaba Group Holding (BABA), Baidu (BIDU), JD.com (JD), and PDD Holdings (PDD) are up +2% or more.
Cruise-line operators are climbing in pre-market trading after Bank of America and JPMorgan Chase highlighted a continued uptick in demand, even with consumers mindful of their discretionary spending. Carnival (CCL), Norwegian Cruise Line Holdings (NCLH), and Royal Caribbean Cruises (RCL) are up more than +2%.
Assurant (AIZ) rose more than +1% in pre-market trading after Piper Sandler upgraded the stock to overweight from neutral with a price target of $144.
Devon Energy (DVN) is up more than +2% in pre-market trading after Goldman Sachs upgraded the stock to buy from neutral with a price target of $58.
Apple (AAPL) slid nearly -1% in pre-market trading after UBS downgraded the stock to neutral from buy, citing a softer demand outlook for the iPhone and services growth.
Bunge (BG) fell more than -2% in pre-market trading after agreeing to buy Glencore’s Viterra for about $8.2 billion in stock and cash.
Methode Electronics (MEI) dropped more than -8% in pre-market trading after forecasting 2024 net sales of $1.15 billion-$1.20 billion, the midpoint below the consensus of $1.19 billion.
EOG Resources (EOG) fell nearly -1% in pre-market trading after Piper Sandler cut its price target on the stock to $155 from $170.
First Horizon (FHN) slid more than -1% in pre-market trading after JPMorgan Chase cut its recommendation on the stock to neutral from rating suspended.
Today’s U.S. Earnings Reports (6/13/2023)
Motorcar Parts of America (MPAA).
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On the date of publication, Rich Asplund 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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