S&P Futures Climb Ahead of Key U.S. Inflation Data

September S&P 500 futures (ESU23) are trending up +0.33% this morning as market participants awaited a reading on the Federal Reserve’s preferred inflation gauge.

In Thursday’s trading session, financial stocks led the gainers as the biggest U.S. lenders passed the Fed’s stress test, with Wells Fargo & Company (WFC) climbing over +4%, JPMorgan Chase & Co (JPM) rising more than +3%, and Bank of America Corp (BAC) gaining over +2%. Also, Occidental Petroleum Corporation (OXY) rose more than +1% after Warren Buffett’s Berkshire Hathaway disclosed it bought another 2.1M shares in the company, boosting its stake to over 25%. On the bearish side, Micron Technology Inc (MU) plunged about -4% amid concerns over the company’s potential slow recovery from an inventory glut.

Economic data on Thursday showed weekly initial jobless claims unexpectedly dropped -26K to a seasonally adjusted 239K last week, stronger than expectations of 266K, suggesting that the labor market remained resilient. Also, the U.S. Department of Commerce’s third estimate of Q1 GDP was revised sharply higher to +2.0% q/q from +1.3% q/q, stronger than expectations of +1.4% q/q. At the same time, U.S. Pending Home Sales came in at -2.7% m/m in May, weaker than expectations of -0.5% m/m.

“The continued strength in the economy has given the Fed a free hand to keep increasing interest rates without causing a recession. Economic growth has been good, and there’s optimism that if the economy were to stumble, the Fed now has the ammunition to respond,” said Joseph Sroka, a chief investment officer at NovaPoint.

Atlanta Fed President Raphael Bostic said Thursday that the Federal Reserve does not need to further increase its benchmark interest rate during this cycle unless there are unexpected changes in economic conditions. “We have reached a level of the nominal federal funds rate that should be sufficient to move inflation toward the 2% target over an acceptable timeframe,” Bostic said.

Meanwhile, U.S. rate futures have priced in an 89.3% probability of a 25 basis point rate increase and a 10.7% chance of no hike at the next central bank meeting in July.

Today, all eyes are focused on the U.S. core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, in a couple of hours. Economists, on average, forecast that the Core PCE Price Index will stand at +0.3% m/m and +4.7% y/y in May, compared to the previous values of +0.4% m/m and +4.7% y/y.

Also, investors will likely focus on U.S. Chicago PMI data, which came in at 40.4 in May. Economists foresee the June figure to be 44.0.

U.S. Michigan Consumer Sentiment Index will be reported today. Economists foresee this figure to stand at 63.9 in June, compared to May’s value of 59.2.

U.S. Michigan Consumer Expectations Index will come in today. Economists expect the June figure to be 61.3, compared to 55.4 in May.

U.S. Personal Spending data will also be closely watched today. Economists forecast Personal Spending to be at +0.2% m/m in May, compared to the previous figure of +0.8% m/m.

In the bond markets, United States 10-Year rates are at 3.883%, up +0.83%.

The Euro Stoxx 50 futures are up +0.59% this morning as speculation surrounding potential policy support in China following weak factory data boosted sentiment, while investors also awaited key U.S. inflation data for more clues on the path of interest rates. Gains in mining and energy stocks are leading the overall market higher. A preliminary reading on Friday showed that Eurozone headline inflation fell for a third straight month in June while the core inflation rate ticked higher. In corporate news, shares of Engie Sa (ENGI.P.DX) rose more than +1% after the French utility boosted its full-year earnings forecast.  

U.K.’s GDP, U.K.’s Nationwide HPI, Germany’s Retail Sales, France’s Consumer Spending, France’s CPI (preliminary), Germany’s Unemployment Rate, Germany’s Unemployment Change, Eurozone’s Unemployment Rate, Eurozone’s CPI (preliminary), and Eurozone’s Core CPI (preliminary) data were released today.

U.K. GDP has been reported at +0.1% q/q and +0.2% y/y in the first quarter, in line with expectations.

U.K. June Nationwide HPI stood at +0.1% m/m and -3.5% y/y, stronger than expectations of -0.3% m/m and -4.0% y/y.

The German May Retail Sales came in at +0.4% m/m and -3.6% y/y, stronger than expectations of 0.0% m/m and -4.3% y/y.

The French May Consumer Spending was at +0.5% m/m, in line with expectations.

The French June CPI came in at +0.2% m/m and +4.5% y/y, compared to expectations of +0.2% m/m and +4.6% y/y.

The German June Unemployment Rate was at 5.7%, weaker than expectations of 5.6%.

The German June Unemployment Change stood at 28K, weaker than expectations of 13K.

Eurozone May Unemployment Rate was at 6.5%, in line with expectations.

Eurozone June CPI has been reported at +0.3% m/m and +5.5% y/y, compared to expectations of 0.0% m/m and +5.6% y/y.

Eurozone June Core CPI came in at +0.3% m/m and +5.4% y/y, weaker than expectations of +0.7% m/m and +5.5% y/y.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.62%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.14%.

China’s Shanghai Composite today closed higher amid expectations of fresh stimulus following weak factory activity data. An official factory survey on Friday showed that China’s manufacturing activity shrunk for a third consecutive month in June, albeit at a slower pace. Also, China’s services sector activity fell to its weakest level since December as momentum from an early economic recovery faded. Meanwhile, Meituan fell about -2% after the food-delivery giant announced it had agreed to acquire artificial intelligence company Light Year from its co-founder and former director Wang Huiwen for almost $234 million in cash. 

“We expect near-term market volatility to remain high as investors closely monitor the potential for further stimulus measures,” Morgan Stanley said in a note.

The Chinese June Manufacturing PMI stood at 49.0, in line with expectations.

The Chinese June Non-Manufacturing PMI came in at 53.2, weaker than expectations of 53.7.

At the same time, Japan’s Nikkei 225 Stock Index closed slightly lower today as investors held back from further buying ahead of corporate earnings season. Data on Friday showed that core inflation in Tokyo rose less than expected in June, although it remained well above the Bank of Japan’s target. Also, preliminary data showed that Japan’s industrial production fell more than estimated in May amid lower output of motor vehicles. Meanwhile, Takashimaya Co Ltd soared over +7% and was the top percentage gainer on the Nikkei after the department store operator lifted its annual operating profit guidance. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.43% to 19.70.

 “The boom for Japanese stocks has paused for now. The rally was led by expectations for better outlook of Japanese companies but investors have not seen the answers yet,” said Jun Morita, a general manager of the research department at Chibagin Asset Management.

The Japanese June Tokyo Core CPI has been reported at +3.2% y/y, weaker than expectations of +3.3% y/y.

The Japanese May Unemployment Rate was at 2.6%, in line with expectations.

The Japanese May Industrial Production stood at -1.6% m/m, weaker than expectations of -1.0% m/m.

Pre-Market U.S. Stock Movers

Nike Inc (NKE) fell over -3% in pre-market trading after the company reported mixed Q4 results and provided a gloomy full-year revenue outlook.

Accolade Inc (ACCD) climbed more than +13% in pre-market trading after the company reported upbeat Q1 results and issued solid FY24 revenue guidance.

Aurinia Pharmaceuticals Inc (AUPH) soared over +15% in pre-market trading after announcing that its Board of Directors initiated an exploration of strategic alternatives that could include a potential sale or merger.

Carnival Corporation (CCL) gained more than +2% in pre-market trading after Jefferies upgraded the stock to Buy from Hold.

NVIDIA Corporation (NVDA) rose about +1% in pre-market trading after Daiwa upgraded the stock to Outperform from Neutral.

Root Inc (ROOT) plunged over -17% in pre-market trading after the company said it had not received any actionable proposal after a report about a takeover approach last week.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - June 30th

Constellation Brands A (STZ), Sodexo PK (SDXAY), Virtus Dividend Accolade (ACCD).

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