S&P Futures Climb Ahead of Key U.S. PPI Data, PepsiCo Earnings on Tap

September S&P 500 futures (ESU23) are trending up +0.39% this morning after three major U.S. benchmark indices finished the regular session higher after a report showed U.S. consumer prices slowed further in June and boosted hopes that the Federal Reserve was nearing the end of its rate-hiking campaign, while investors also awaited crucial U.S. PPI data.

In Wednesday’s trading session, the benchmark S&P 500 rose to a 14-1/2 month high, the blue-chip Dow posted a 3-1/2 week high, and the tech-heavy Nasdaq 100 notched a 17-month high. Domino’s Pizza Inc (DPZ) surged about +11% and was the top percentage gainer on the S&P 500 after the pizza chain signed a new global agreement with Uber (UBER). Also, big tech-related companies gained ground as Treasury yields fell sharply, with Alphabet Inc (GOOGL), Microsoft Corporation (MSFT), and Amazon.com Inc (AMZN) rising more than +1%. In addition, NVIDIA Corporation (NVDA) climbed over +3% following a report from the Financial Times indicating that chip designer Arm is engaged in discussions to bring the megacap company in as an anchor investor ahead of its planned listing.

The Labor Department’s report on Wednesday showed consumer prices rose +0.2% m/m in June, lower than the expected +0.3% m/m figure. On an annual basis, headline inflation dipped to +3.0% in June from +4.0% in May, the smallest increase in 2-1/4 years. Economists had expected a growth of +3.1% y/y. In addition, U.S. core CPI rose +4.8% y/y in June, which was below the anticipated number of +5.0% y/y and the +5.3% y/y gain recorded in May.

“Clearly the CPI data we got was what the bulls wanted to see, and those that have been sitting on the sidelines hoping for a pullback continue to get frustrated,” said Michael James, a managing director of equity trading at Wedbush Securities.

Richmond Fed President Thomas Barkin Wednesday reiterated the central bank’s commitment to achieving its 2% inflation target, emphasizing that despite a slowdown in June, the growth in U.S. consumer prices is still considered too rapid. “Inflation is too high. If you back off too soon, inflation comes back strong, which then requires the Fed to do even more,” Barkin said. Also, Minneapolis Fed President Neel Kashkari stated that banks must be prepared for higher interest rates if policymakers find it necessary to raise rates further to tackle entrenched inflation.

Meanwhile, U.S. rate futures have priced in a 92.4% probability of a 25 basis point rate increase and a 7.6% chance of no hike at July’s monetary policy meeting.

On the earnings front, major companies like PepsiCo Inc (PEP) and Delta Air Lines Inc (DAL) are set to report their quarterly figures today.

Today, all eyes are focused on the U.S. Producer Price Index (PPI) in a couple of hours. Economists, on average, forecast that June U.S. PPI will stand at +0.2% m/m and +0.4% y/y, compared to the previous values of -0.3% m/m and +1.1% y/y.

U.S. Core PPI reading will also be closely watched today. Economists expect June figures to be +0.2% m/m and +2.6% y/y, compared to the previous numbers of +0.2% m/m and +2.8% y/y.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 250K, compared to last week’s value of 248K.

In the bond markets, United States 10-Year rates are at 3.808%, down -1.43%.

The Euro Stoxx 50 futures are up +0.43% this morning, extending gains to the fifth straight day as consumer inflation data in the U.S. has sparked optimism that the Federal Reserve is approaching the end of its rate hike cycle. Gains in technology and mining stocks are leading the overall market higher. Data from the Office for National Statistics on Thursday showed that Britain’s economy contracted less than expected in May. In corporate news, Swatch Group Ag/The (UHR.Z.IX) climbed over +6% after the Swiss watchmaker reported better-than-expected first-half sales and profit.

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

U.K. May GDP has been reported at -0.1% m/m and -0.4% y/y, stronger than expectations of -0.3% m/m and -0.7% y/y.

U.K. May Industrial Production stood at -0.6% m/m and -2.3% y/y, compared to expectations of -0.4% m/m and -2.3% y/y.

U.K. May Manufacturing Production came in at -0.2% m/m and -1.2% y/y, stronger than expectations of -0.5% m/m and -1.7% y/y.

U.K. May Monthly GDP 3M/3M Change was at 0.0%, stronger than expectations of -0.1%.

The French June CPI stood at +0.2% m/m and +4.5% y/y, in line with expectations.

Eurozone May Industrial Production has been reported at +0.2% m/m and -2.2% y/y, weaker than expectations of +0.3% m/m and -1.2% y/y.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.26%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.49%.

China’s Shanghai Composite today closed higher after state-run media outlets reported that the government was contemplating additional stimulus measures in the forthcoming months, while indications of easing regulatory pressure on the country’s technology giants also lifted sentiment. Customs data showed on Thursday that the country’s exports fell the most in three years in June, while imports also fell more than expected, potentially strengthening the case for additional policy support. Meanwhile, consumer staples and semiconductor stocks outperformed on Thursday. Also, Hong Kong-listed heavyweight technology stocks extended their rally after Premier Li Qiang urged the companies to contribute to the support of a slowing economy, indicating a potential conclusion to the years-long crackdown on the sector, with JD.com climbing more than +6%, Baidu Inc gaining over +4%, and Alibaba Group rising more than +3%.

“Export growth dropped further as external demand weakened. The big question in the next few months is whether domestic demand can rebound without much stimulus from the government,” said Zhiwei Zhang, a chief economist at Pinpoint Asset Management.

The Chinese June Trade Balance has been reported at $70.62B, weaker than expectations of $74.80B.

The Chinese June Exports stood at -12.4% y/y, weaker than expectations of -9.5% y/y.

The Chinese June Imports came in at -6.8% y/y, weaker than expectations of -4.0% y/y.

Japan’s Nikkei 225 Stock Index closed higher today and posted its biggest gain in about two weeks, buoyed by gains in heavyweight chip-related stocks after softer-than-expected U.S. inflation data reinforced bets on a less hawkish Federal Reserve this year. Chipmaking equipment giant Tokyo Electron rose about +2% while chip-testing equipment maker Advantest soared over +3%. Meanwhile, Sony Group climbed more than +4% and was among the top percentage gainers on the Nikkei following a report indicating that the gaming and audio equipment manufacturer plans to increase research and development spending at its gaming unit by approximately 10% to 300 billion yen during this financial year. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 4.16% to 21.52.

Pre-Market U.S. Stock Movers

ViaSat Inc (VSAT) plunged over -19% in pre-market trading after the company said that an unexpected event occurred during reflector deployment that might materially impact the performance of the ViaSat-3 Americas satellite. 

MillerKnoll Inc (MLKN) slid about -5% in pre-market trading after the company posted downbeat Q1 guidance. 

EngageSmart LLC (ESMT) fell over -1% in pre-market trading after Goldman Sachs downgraded the stock to Neutral from Buy.

SoFi Technologies Inc. (SOFI) dropped more than -4% in pre-market trading after Morgan Stanley downgraded the stock to Underweight from Equal Weight.

Carvana Co (CVNA) fell over -3% in pre-market trading after JPMorgan downgraded the stock to Underweight from Neutral.

Walt Disney Company (DIS) rose more than +1% in pre-market trading after the Board of Directors announced that Robert A. Iger had agreed to continue to serve as Chief Executive Officer through December 31st, 2026.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - July 13th

PepsiCo (PEP), Cintas (CTAS), Fastenal (FAST), Delta Air Lines (DAL), ConAgra Foods (CAG), Aehr Test Systems (AEHR), Northern Technologies (NTIC).

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