Markets Today: Stocks Edge Higher Ahead of FOMC Decision

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are up +0.15% at a 13-3/4 month high, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.12%.

U.S. stock index futures this morning are moderately higher ahead of the results of today’s FOMC meeting, where expectations are for the Fed to pause its rate hiking campaign.  Stock indexes maintained their gains after this morning’s U.S May PPI report showed price pressures at the producer level slowed more than expected. 

U.S. May PPI final demand eased to +1.1% y/y from +2.3% y/y in April, better than expectations of +1.5% y/y and the smallest increase in more than two years.  Also, May PPI ex-food and energy eased to +2.8% y/y from +3.1% y/y in April, better than expectations of +2.9% y/y and the smallest increase in more than two years.

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 today’s FOMC meeting fell to 11% today from 25% Monday. 

Global bond yields are mixed.  The 10-year T-note yield is down -1.9 bp at 3.794%.  The 10-year German bund yield is up +1.7 bp at 2.440%, and the UK 10-year gilt yield is down -2.8 bp at 4.405%.

On the bullish side for stocks, Tesla is up nearly +2% in pre-market trading and is up for a record fourteenth consecutive session on a spate of positive news for the stock over the past few weeks.  Also, Advanced Micro Devices is up more than +3% after falling more than -3% on Tuesday as more analysts expressed optimism about the company’s new line of artificial intelligence processors unveiled at an event on Tuesday.

On the bearish side, health insurance companies retreated in pre-market trading after an executive at UnitedHealth Group said a recent increase in surgeries and other medical care delayed during the pandemic could push expenses higher than anticipated.  Also, Applied Materials, Catalent, and KLA Corp are down more than -1% after being downgraded.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.75%.  China’s Shanghai Composite closed down -0.14%, and Japan’s Nikkei Stock Index closed up +1.47%. 

The Euro Stoxx 50 index today rallied to a 3-week high and is moderately higher.  Positive economic news today gave stocks a boost after Eurozone Apr industrial production rose more than expected, and the German May wholesale price index posted its biggest decline in nearly three years.   Mining stocks are leading the overall market higher as optimism around stimulus in China kept iron ore prices near a two-month high.  Also, Barclays upgraded the mining sector to overweight and said more stimulus in China might revive the China trade into the second half of the year, giving a lift to European equities.  Shell Plc recovered from early losses and is up +0.5% after it said it would increase its dividend by 15% and boost natural gas production. After the outcome of today’s Fed meeting, the focus will shift to the ECB meeting on Thursday, when the ECB is expected to raise interest rates by 25 bp.  

Eurozone Apr industrial production rose +1.0% m/m, stronger than expectations of +0.9% m/m.

The German May wholesale price index fell -2.6% y/y, the weakest report in nearly three years.

China’s Shanghai Composite Stock Index today fell back from a 3-week high and closed slightly lower. Chinese stocks today initially rallied to a 3-week high after the People’s Bank of China (PBOC) on Tuesday 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. 

Chinese stocks gave back their gains today and tuned lower as confidence in Chinese equities remains depressed.  Many Chinese investors are shifting more money to overseas assets.  According to Bloomberg data, the issuance of Qualified Domestic Institutional Investor funds jumped to 26 this year as of June 13, a new half-year record.  Also, Chinese banks launched 144 wealth management products in foreign currencies in the first four months this year, a surge of 177% from a year earlier, according to consultancy PY Standard.

Japan’s Nikkei Stock Index today extended this year’s bull run to a new 33-year high and closed sharply higher.  Japanese stocks found support on the rally in U.S. stocks after May consumer prices eased, which bolstered expectations for the Fed to pause its rake hike campaign. Japanese companies that benefit from trade with China rose as China ramps up policy stimulus to revive its economy. Also, shares of Japanese construction equipment makers with revenue from China rallied on the outlook for additional Chinese stimulus.  Japanese supplies of electric vehicle (EV) and battery makers advanced today on the heels of a rally in U.S. EV makers on Tuesday.   In addition, Japanese automakers moved higher today, with Toyota Motor climbing more than +6% on optimism over the company’s EV strategy and Honda rising more than +3% after Mizuho Securities raised its price target on the stock. 

Pre-Market U.S. Stock Movers

Tesla (TSLA) is up nearly +2% in pre-market trading and is up for a record fourteenth consecutive session on a spate of positive news for the stock over the past few weeks, including GM and Ford making moves to adapt their electric vehicles to Tesla’s Superchargers and the company’s Model 3 sedans becoming eligible for the full U.S. tax credit. 

Advanced Micro Devices (AMD) gained more than +3% in pre-market trading after falling more than -3% on Tuesday as more analysts expressed optimism about the company’s new line of artificial intelligence processors unveiled at an event on Tuesday. 

Crowdstrike Holdings (CRWD) rose more than +1% in pre-market trading after KeyBanc Capital Markets initiated coverage on the stock with an overweight recommendation and a price target of $200.

Super Micro Computer (SMCI) gained nearly +1% in pre-market trading after Loop Capital Markets raised its price target on the stock to $325 from $200.

Shake Shack (SHAK) rose more than +1% in pre-market trading after Piper Sandler named it as one of its top restaurant sector picks with an overweight rating and a price target of $84.

IPG Photonics (IPGP) climbed more than +2% in pre-market trading after Raymond James upgraded the stock to outperform from market perform with a price target of $170. 

Health insurance companies retreated in pre-market trading after an executive at UnitedHealth Group said a recent increase in surgeries and other medical care delayed during the pandemic could push expenses higher than anticipated.  As a result, Humana (HUM) is down more than -7%, UnitedHealth Group (UNH) is down more than -5%, and CVS Health Corp (CVS) is down more than -3%. 

RadNet (RDNT) dropped more than -6% in pre-market trading after offering $175 million of shares via Jeffries and Raymond James.

Catalent (CTLT) fell more than -1% in pre-market trading after Jeffries downgraded the stock to hold from buy. 

Applied Materials (AMAT) slid more than -1% in pre-market trading after Needham downgraded the stock to hold from buy. 

Cinemark (CNK) fell more than -2% in pre-market trading after B Riley Securities downgraded the stock to neutral from buy, saying the film slate for 2024/25 looks increasingly uncertain.

KLA Corp (KLAC) dropped more than -1% in pre-market trading after Needham downgraded the stock to hold from buy. 

Today’s U.S. Earnings Reports (6/14/2023)

Charles Schwab Corp/The (SCHW), Lennar Corp (LEN), Progressive Corp/The (PGR).

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