Stocks Slip Before the Open as U.S.-Iran Flare-Up Lifts Oil and Bond Yields, PCE Inflation Data in Focus

June S&P 500 E-Mini futures (ESM26) are down -0.26%, and June Nasdaq 100 E-Mini futures (NQM26) are down -0.54% this morning, pointing to a lower open on Wall Street as oil prices and bond yields rose after fresh attacks in the Middle East cast doubt on whether an end to the war is imminent.

The price of WTI crude rose nearly +3% on Thursday amid renewed tensions in the Iran war. U.S. officials said American forces shot down Iranian drones and struck a drone-control facility near Bandar Abbas. The strikes followed Tehran’s launch of drones at American and commercial vessels in the Strait of Hormuz. U.S. authorities characterized the attacks as defensive. Meanwhile, Iran said it had targeted a U.S. airbase.

Treasuries fell as higher oil prices fueled inflation concerns, with the benchmark 10-year yield rising one basis point to 4.50%.

Investors are now awaiting a flurry of U.S. economic data, with a particular focus on the Fed’s favorite inflation gauge and the second estimate of first-quarter GDP, comments from Federal Reserve officials, and earnings reports from cult retailer Costco and tech hardware maker Dell Technologies.

In yesterday’s trading session, Wall Street’s main stock indexes ended mixed. AppLovin (APP) surged over +10% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after Morgan Stanley reiterated an Overweight rating and a $720 price target on the stock. Also, travel stocks climbed as oil prices declined, with United Airlines (UAL) and Norwegian Cruise Line Holdings (NCLH) rising more than +6%. In addition, MGM Resorts International (MGM) advanced over +9% after JPMorgan and Truist both upgraded the stock. On the bearish side, Zscaler (ZS) tumbled more than -31% and was the top percentage loser on the Nasdaq 100 after the cybersecurity company issued below-consensus FQ4 revenue guidance.

Economic data released on Wednesday showed that the U.S. Richmond Fed manufacturing index rose to a 4-1/2-year high of 13 in May, stronger than expectations of 4.

Fed Governor Lisa Cook said on Wednesday that inflation is moving in the wrong direction and she would be ready to raise interest rates if disinflation does not appear in a timely manner. “After five years of above-target inflation, I am particularly attuned to the risk that elevated inflation will become embedded in price- and wage-setting behavior,” Cook said.

Fed Vice Chair Philip Jefferson said on Thursday that the current policy stance leaves the central bank well positioned to respond to the balance of risks to its dual mandate. “I expect inflation to decline later this year as the effects of tariffs and the energy shock wane, but I view risks around my inflation outlook as tilted to the upside,” Jefferson said.

Meanwhile, U.S. rate futures have priced in a 99.1% chance of no rate change and a 0.9% chance of a 25 basis point rate hike at June’s monetary policy meeting.

Today, all eyes are on the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, which is set to be released in a couple of hours. Economists, on average, forecast that the core PCE price index will stand at +0.3% m/m and +3.3% y/y in April, compared to +0.3% m/m and +3.2% y/y in March.

The U.S. Commerce Department’s second estimate of first-quarter gross domestic product will also be closely monitored today. Economists expect the U.S. economy to expand at an annual rate of 2.0% in the first quarter, in line with an initial estimate.

U.S. Personal Spending and Personal Income data will be released today. Economists project April Personal Spending to rise +0.5% m/m and Personal Income to grow +0.4% m/m, compared to the March figures of +0.9% m/m and +0.6% m/m, respectively.

U.S. Durable Goods Orders and Core Durable Goods Orders data will come in today. Economists expect April Durable Goods Orders to climb +4.0% m/m and Core Durable Goods Orders to rise +0.5% m/m, compared to the prior numbers of +0.8% m/m and +0.9% m/m, respectively.

U.S. New Home Sales data will be reported today. Economists forecast April new home sales at 661K, compared to 682K in March.

U.S. Initial Jobless Claims data will be released today as well. Economists expect this figure to be 211K, compared to last week’s number of 209K.

In addition, market participants will hear perspectives from New York Fed President John Williams, St. Louis Fed President Alberto Musalem, and Richmond Fed President Tom Barkin throughout the day.

On the earnings front, prominent companies such as Costco Wholesale (COST), Dell Technologies (DELL), Autodesk (ADSK), and MongoDB (MDB) are set to report their quarterly figures today.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.50%, up +0.20%.

The Euro Stoxx 50 Index is down -0.33% this morning as a fresh escalation in the Middle East undermined hopes for a near-term peace deal, weighing on risk appetite. Luxury, pharmaceutical, and financial stocks were among the biggest losers on Thursday. At the same time, technology stocks climbed, with Soitec (SOI.FP) jumping over +19% after the semiconductor materials supplier posted better-than-expected annual sales. Defense stocks also advanced as countries such as Canada and Norway pursued agreements with European defense firms. The European Commission said on Thursday that confidence among Eurozone businesses and consumers improved slightly in May as selling-price expectations eased despite the ongoing Middle East conflict. Meanwhile, Eurozone government bond yields rose on Thursday as the latest flare-up between the U.S. and Iran pushed oil prices higher, stoking inflation worries. Investor focus now turns to the accounts of the European Central Bank’s April policy meeting due later in the session. In other corporate news, BT Group Plc (BT-A.LN) fell more than -3% after the Financial Times reported that the British government would oppose any effort by Indian billionaire Sunil Bharti Mittal to raise his stake in the company.

Eurozone’s Business and Consumer Survey and Eurozone’s Consumer Confidence data were released today.

Eurozone’s May Business and Consumer Survey stood at 93.5, stronger than expectations of 92.8.

Eurozone’s May Consumer Confidence came in at -19.0, in line with expectations.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.12%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.47%. 

China’s Shanghai Composite Index closed slightly higher today, led by gains in the tech sector. Semiconductor and other AI-related stocks outperformed on Thursday. Western Securities analysts said that investor focus has shifted toward hardware technology sectors viewed as emblematic of China’s drive for advanced productive forces. At the same time, liquor stocks, seen as a barometer for domestic consumption, sank. Financial and property stocks also slid. Investors also continued to monitor developments in the Middle East. U.S. forces carried out fresh strikes against Iran on Wednesday after Tehran launched drones at commercial vessels in the Strait of Hormuz, testing an already fragile ceasefire. Meanwhile, Reuters reported on Thursday that China’s central bank has told banks to increase lending this month, highlighting Beijing’s ongoing efforts to support an economy strained by higher energy costs and persistently weak domestic demand. In other news, China has reportedly launched a sale of up to 6 billion yuan ($885.1 million) in three-year and five-year yuan-denominated green bonds in Hong Kong. In corporate news, NIO climbed over +6% in Hong Kong after launching its new ES9 sports utility vehicle at a lower-than-expected price.

Japan’s Nikkei 225 Stock Index closed lower today after fresh attacks in the Middle East dented optimism for a deal to end the war. Oil prices rose in Tokyo trading after Tehran said it had targeted a U.S. airbase following what a Washington official described as U.S. strikes on an Iranian drone operation near the Strait of Hormuz. Utility and financial stocks led the declines on Thursday. Technology stocks also slid as renewed U.S.-Iran tensions and valuation concerns prompted investors to lock in profits following a recent rally. Meanwhile, foreign investors bought a net 1.08 trillion yen ($6.77 billion) worth of Japanese stocks in the week ended May 23rd, marking the eighth consecutive week of net buying, according to Ministry of Finance data. In other news, Japan is reportedly planning to use so-called bridging bonds to help fund Prime Minister Sanae Takaichi’s investment plans, a move that comes as investors are already wary of additional debt issuance. In corporate news, Taiyo Yuden jumped +17% on optimism over booming demand for multilayer ceramic capacitors used in AI servers and AI-enabled devices. Investor focus is now squarely on a raft of Japan’s economic data, scheduled for release on Friday, which will provide clues on the impact of the Middle East conflict. The government is set to release Tokyo Core CPI for May, along with April figures for industrial production, retail sales, and employment. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -13.46% to 26.95.

Pre-Market U.S. Stock Movers

Chip stocks retreated in pre-market trading, with Intel (INTC) falling over -3% and Advanced Micro Devices (AMD) dropping about -2%.

The Trade Desk (TTD) fell nearly -2% in pre-market trading after Rothschild & Co. Redburn initiated coverage of the stock with a Sell rating and an $11 price target.

Salesforce (CRM) slid more than -1% in pre-market trading after the software-as-a-service company issued below-consensus Q2 revenue guidance.

Snowflake (SNOW) popped over +35% in pre-market trading after the data warehousing company posted upbeat Q1 results, raised its full-year product revenue guidance, and expanded its collaboration with Amazon Web Services.

Dell Technologies (DELL) gained more than +4% in pre-market trading after the Pentagon said it had awarded the company a $9.69 billion contract.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - May 28th

Costco Wholesale (COST), Dell Technologies (DELL), Autodesk (ADSK), NetApp (NTAP), MongoDB (MDB), Burlington Stores (BURL), Dollar Tree (DLTR), Okta, Inc. (OKTA), Best Buy Co. (BBY), Viasat (VSAT), Hormel Foods (HRL), The Gap (GAP), HealthEquity (HQY), SentinelOne (S), UiPath (PATH), Elastic (ESTC), Ambarella (AMBA), Photronics (PLAB), American Eagle Outfitters (AEO), ePlus inc. (PLUS), NGL Energy Partners LP (NGL), REX American Resources (REX), Asana (ASAN), Kohl's (KSS), Universal (UVV), Highlander Silver (HSLV), Reservoir Media (RSVR), PagerDuty (PD), Caleres (CAL), Build-A-Bear Workshop (BBW), Arbe Robotics (ARBE).