Stock Index Futures Move Higher as Investors Await Fed Rate Decision, U.S. PPI Data

June S&P 500 futures (ESM23) are up +0.12%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.16% this morning as market participants braced for the Federal Reserve’s interest rate decision while also awaiting crucial U.S. PPI data.

In Tuesday’s trading session, the benchmark S&P 500 climbed to a 13-1/2 month high, the blue-chip Dow rose to a 4-month high, and the tech-heavy Nasdaq 100 notched a 14-month high. Materials stocks led the gains in the broader market, driven by rising commodity prices on optimism over demand after China’s central bank lowered its short-term lending rate for the first time in 10 months. Also, semiconductor stocks advanced, with NVIDIA Corporation (NVDA) and NXP Semiconductors NV (NXPI) rising more than +3%. In addition, regional bank stocks gained ground, underpinned by an over +6% gain in Comerica Inc (CMA) after the lender said in a filing that it plans to organically exit the mortgage banker finance business by the end of this year. On the bearish side, Biogen (BIIB) slid more than -2% and was among the top percentage losers on the S&P 500 following a report that Biogen and Eisai’s Alzheimer’s treatment may not see wide use in Europe.

The Labor Department’s report on Tuesday showed consumer prices rose +0.1% m/m in May, less than the +0.2% m/m expected and lower than the +0.4% m/m increase in April. On an annual basis, headline inflation dipped to +4.0% in May from +4.9% in April, primarily due to decreases in the prices of energy products and services. Economists had expected a growth of +4.1% y/y. In addition, core CPI, which excludes volatile food and fuel prices, rose +5.3% y/y in May, in line with expectations and lower than the +5.5% y/y increase in April.

“Inflation is still much too high, but the trend is in the right direction, and the Fed is ready to take a break from raising interest rates. They want to wait and see if their actions are sufficient to keep inflation moving in the right direction,” said Chris Zaccarelli, a chief investment officer at Independent Advisor Alliance. 

Today, all eyes are focused on the U.S. Federal Reserve’s monetary policy decision later in the day. U.S. rate futures have priced in a 95.3% chance for the Fed to keep its federal funds rate range unchanged at 5.00%-5.25%. Also, investors will be paying close attention to the post-decision press conference by Fed Chair Jerome Powell and the Fed’s Summary of Economic Projections, specifically the quarterly dot plot.

Also, investors will likely focus on the U.S. Producer Price Index (PPI). Economists, on average, forecast that May U.S. PPI will stand at -0.1% m/m and +1.5% y/y, compared to the previous values of +0.2% m/m and +2.3% y/y.

U.S. Core PPI reading will also be closely watched today. Economists expect May figures to be +0.2% m/m and +2.9% y/y, compared to the previous numbers of +0.2% m/m and +3.2% y/y.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be +1.482M, compared to last week’s value of -0.451M.

In the bond markets, United States 10-Year rates are at 3.807%, down -0.92%.

The Euro Stoxx 50 futures are up +0.41% this morning as investors digested U.K. growth data while adopting a cautious stance ahead of the U.S. Federal Reserve’s interest rate decision. Strength in mining and automobile stocks is lending support to the overall market. Data from the Office for National Statistics on Wednesday showed the U.K. economy grew +0.2% m/m in April, an improvement from the -0.3% m/m fall in March, but industrial production dropped -0.3% m/m in April. The European Central Bank will hold its policy meeting on Thursday, with economists expecting a quarter-point rate increase. In corporate news, shares of Logitech International Sa (LOGN.Z.IX) plunged over -9% after it announced Chief Executive Officer Bracken Darrell would leave the company. In other news, Entain Plc (ENT.LN) tumbled more than -10% after the company said it would buy Poland-based sports betting operator STS Holdings for 750 million pounds.

U.K.’s GDP, U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Monthly GDP 3M/3M Change, U.K.’s Trade Balance, and Eurozone’s Industrial Production data were released today.

U.K. April GDP has been reported at +0.2% m/m and +0.5% y/y, compared to expectations of +0.2% m/m and +0.6% y/y.

U.K. April Industrial Production stood at -0.3% m/m and -1.9% y/y, weaker than expectations of -0.1% m/m and -1.7% y/y.

U.K. April Manufacturing Production came in at -0.3% m/m and -0.9% y/y, compared to expectations of -0.4% m/m and -0.9% y/y.

U.K. April Monthly GDP 3M/3M Change was at +0.1%, stronger than expectations of -0.1%.

U.K. April Trade Balance stood at -15.00B, stronger than expectations of -16.50B.

Eurozone April Industrial Production has been reported at +1.0% m/m and +0.2% y/y, compared to expectations of +1.0% m/m and +0.8% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.14%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.47%.

China’s Shanghai Composite today closed slightly lower as investors anticipated further rate cuts and policy stimulus to bolster the country’s economic recovery. Meanwhile, according to a Reuters poll, the People’s Bank of China is widely expected to cut the borrowing cost of medium-term policy loans for the first time in 10 months on Thursday. Food and beverage stocks outperformed on Wednesday. Shares of Hong Kong-listed electric vehicle manufacturers also gained ground, with Li Auto climbing over +5%, Xpeng rising about +4%, and NIO gaining more than +6%. Investor focus is now squarely on Chinese fixed asset investment, unemployment, industrial production, and retail sales data due on Thursday.

“Domestic sentiment is very weak. China needs to create a situation where producer prices recover, the equity market takes off, and people stop panicking over LGFV credit risks,” said Carlos Casanova, a senior Asia economist at Union Bancaire Privee.

Japan’s Nikkei 225 Stock Index closed sharply higher today, clearing a fresh 33-year high following an upbeat session on Wall Street amid bets for a pause in interest rate hikes from the Federal Reserve. Also, a weaker yen buoyed export-oriented stocks. Meanwhile, Toyota Motor climbed over +6%, building on Tuesday’s +5% jump after shareholders voted down an unprecedented resolution on the company’s climate lobbying and backed its board at an annual general meeting. Shares of other automakers also rose, with Honda Motor climbing over +3%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 4.18% to 21.41.

Pre-Market U.S. Stock Movers

PayPal Holdings Inc (PYPL) gained nearly +1% in pre-market trading after BTIG initiated coverage of the stock with a Buy rating.

Crowdstrike Holdings Inc (CRWD) rose about +1% in pre-market trading after KeyBanc initiated coverage of the stock with an Overweight rating.

Microvision Inc (MVIS) tumbled over -12% in pre-market trading after the company announced an underwritten $75.0M public offering of its common stock.

Mind Technology Inc (MIND) slid over -12% in pre-market trading after the company reported mixed Q1 results.

Kura Oncology Inc (KURA) plunged more than -8% in pre-market trading after announcing a $100M stock and warrants offering.

Ballard Power Systems Inc (BLDP) fell about -2% in pre-market trading after BMO Capital downgraded the stock to Underperform from Market Perform.

Catalent Inc (CTLT) dropped over -1% in pre-market trading after Jefferies downgraded the stock to Hold from Buy.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - June 14th

Lennar (LEN), Anterix (ATEX), Azure Power Global (AZRE), Coda Octopus (CODA).

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