September S&P 500 futures (ESU23) are trending down -0.06% this morning after three major U.S. benchmark indices finished the regular session lower as market participants weighed China’s outlook while bracing for Federal Reserve Chairman Jerome Powell’s congressional testimony.
In Tuesday’s trading session, energy stocks were the biggest drag on the market as the price of WTI crude dropped over -1% on a cloudy demand outlook. A number of U.S.-listed Chinese consumer stocks also lost ground, with JD.com (JD) and PDD Holdings (PDD) plunging more than -6%. In addition, Nike Inc (NKE) fell over -3% after Morgan Stanley said the inventory glut could weigh on the company’s margins in Q4. On the bullish side, Tesla Inc (TSLA) climbed more than +5% and was among the top percentage gainers on the tech-heavy Nasdaq 100 after Rivian announced that it had agreed to adopt Tesla’s charging standard. Also, PayPal Holdings Inc (PYPL) rose over +3% after KKR & Co agreed to buy up to 40 billion euros worth of the company’s “buy now, pay later” loans in Europe.
Economic data on Tuesday showed that U.S. housing starts unexpectedly rose to a 13-month high of 1.631M in May, stronger than expectations of 1.400M, while U.S. May building permits rose to a 7-month high of 1.491M, stronger than expectations of 1.425M, further contributing to concerns surrounding monetary tightening.
Meanwhile, U.S. rate futures have priced in a 79.4% probability of a 25 basis point rate increase and a 20.6% chance of no hike at the next central bank meeting in July.
Today, market participants will be closely watching Federal Reserve Chairman Jerome Powell’s semi-annual monetary policy testimony before the U.S. House Financial Services Committee for fresh clues on the U.S. central bank’s next move.
“Investors are taking a pause and are waiting to see if Powell continues with hawkish comments as he did at the prior Federal Reserve meeting,” said Chris Zaccarelli, a chief investment officer for Independent Advisor Alliance.
Also, investors will likely focus on speeches from Chicago Fed President Austan Goolsbee and Cleveland Fed President Loretta Mester for further clues on the outlook for rates.
The U.S. economic data slate is mainly empty on Wednesday.
In the bond markets, United States 10-Year rates are at 3.745%, up +0.43%.
The Euro Stoxx 50 futures are up +0.11% this morning as investors digested U.K. inflation data and cautiously awaited U.S. Federal Reserve Chair Jerome Powell’s two-day testimony before lawmakers. Data from the Office for National Statistics showed on Wednesday that British consumer inflation remained elevated in May, with investors ramping up their bets of a 50 basis point rate hike by the Bank of England on Thursday, compared to the previously anticipated 25 basis points hike. Real estate stocks underperformed on Wednesday, while automobile stocks gained ground after data from the region’s carmaker association indicated new car registrations rose in May. In corporate news, shares of Halfords Group Plc (HFD.LN) climbed over +5% after the company said it plans to grow market share across the bikes and car parts sectors to boost profits.
U.K.’s CPI and U.K.’s Core CPI data were released today.
U.K. May CPI has been reported at +0.7% m/m and +8.7% y/y, stronger than expectations of +0.5% m/m and +8.4% y/y.
U.K. May Core CPI came in at +0.8% m/m and +7.1% y/y, stronger than expectations of +0.6% m/m and +6.8% y/y.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.31%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.56%.
China’s Shanghai Composite today closed lower as investors remained disappointed regarding Beijing’s lack of new and specific economic support measures, while geopolitical tensions continued to hurt sentiment. The People’s Bank of China implemented a 10 basis point reduction in both the one-year and five-year loan prime rates Tuesday, disappointing some investors who were anticipating a more substantial cut in the five-year rate. U.S. President Joe Biden Tuesday referred to Chinese President Xi Jinping as a dictator and highlighted that Xi had experienced considerable embarrassment when a Chinese balloon strayed off course and ended up in the United States earlier this year. Meanwhile, artificial intelligence and healthcare stocks underperformed on Wednesday. Hong Kong-listed technology stocks also fell, with Alibaba Group plunging over -4% even after the firm appointed a new CEO. On the positive side, Chinese automobile stocks rose after the country announced an extension of a purchase tax break on new energy vehicles to bolster its struggling electric-vehicle industry, with NIO climbing about +4% and Xpeng gaining over +2%.
“Policy easing is imminent and necessary to shift investment back to being a countercyclical rather than pro-cyclical force. If policymakers do not make concerted efforts to revive private sector dynamism, we think longer-term growth rates could slip even more than we are currently projecting,” Morgan Stanley said in a note.
Japan’s Nikkei 225 Stock Index closed higher today, primarily fueled by the expectation of the Bank of Japan maintaining the accommodative monetary policy. The minutes of the Bank of Japan’s April meeting showed that the majority of the board members, nine out of ten, expressed no plans to make any immediate adjustments to the ultra-loose monetary policy, and even the one dissenting member suggested the bank wait before considering any policy changes. Meanwhile, SoftBank Group gained over +3% and was among the top percentage gainers on the Nikkei after founder Masayoshi Son said that the technology conglomerate would adopt an offensive strategy, aiming to capitalize on the flourishing artificial intelligence boom. Chip-related stocks also gained ground, with Advantest rising over +1% and Tokyo Electron climbing more than +2%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.14% to 20.09.
Pre-Market U.S. Stock Movers
FedEx Corporation (FDX) slid about -3% in pre-market trading after the company reported mixed Q4 results and posted weaker-than-expected full-year profit guidance.
Peloton Interactive Inc (PTON) fell more than -3% in pre-market trading after Wolfe Research assumed coverage and downgraded the stock to Underperform from Peer Perform with a price target of $6.00.
Purecycle Technologies Holdings Corp (PCT) surged over +13% in pre-market trading after announcing that it successfully produced the first run of Ultra-Pure Recycled resin from post-industrial recycled material at its Ironton plant in Ohio.
EXACT Sciences Corporation (EXAS) climbed about +8% in pre-market trading after the company announced results from the BLUE-C study.
Arbor Realty Trust (ABR) rose more than +5% in pre-market trading after entering the S&P SmallCap600 index.
Beauty Health Co (SKIN) plunged over -5% in pre-market trading after Stifel downgraded the stock to Hold from Buy.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - June 21st
KB Home (KBH), Patterson (PDCO), Winnebago Industries (WGO), Enerpac Tool Group (EPAC), Avid Bioservices (CDMO), Steelcase (SCS).
More Stock Market News from Barchart
- Is Now the Time to Pickup These 3 Buy Rated Dividend Stocks With Huge Upside Potential?
- Stocks End Moderately Lower Ahead of Powell’s Testimony to Congress
- 2 Not-So-Obvious Ways to Play America’s Housing Shortage
- Will Toyota Have the Last Laugh on Tesla?
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.
/Micron%20Technology%20Inc_%20logo%20on%20building-by%20vzphotos%20vis%20iStock.jpg)
