Stock Futures Ignore Higher-Than-Expected US Inflation Report

March S&P 500 E-Mini futures (ESH24) are trending up +0.42% this morning after the all-important U.S. consumer inflation report was released.

The Labor Department’s Bureau of Labor Statistics just released February's consumer price index (CPI) data which showed a monthly increase of 0.4% and 3.2% from one year ago. The monthly increase came in line with expectations but the yearly increase was slightly ahead of the 3.1% forecast. 

In yesterday’s trading session, Wall Street’s major indexes closed mixed. Boeing Co (BA) fell over -3% and was the top percentage loser on the Dow following a report from the Wall Street Journal indicating that the U.S. Justice Department has launched a criminal investigation into the recent midair blowout of a door on an Alaskan Airlines flight. Also, chip stocks retreated, with Marvell Technology (MRVL) and Advanced Micro Devices Inc (AMD) slumping more than -4%. On the bullish side, Bally’s Corp (BALY) surged more than +28% following a takeover offer by Standard General for the remainder of the company it doesn’t already own for $15 a share. 

Today, all eyes are focused on the U.S. consumer inflation report in a couple of hours. Economists, on average, forecast that the U.S. February CPI will come in at +0.4% m/m and +3.1% y/y, compared to the previous values of +0.3% m/m and +3.1% y/y.

Also, investors will likely focus on the U.S. Core CPI data. Economists anticipate the Core CPI to be +0.3% m/m and +3.7% y/y in February, compared to the previous figures of +0.4% m/m and +3.9% y/y.

“Today is another CPI day, we’ll have a lot of volatility around the data. What is important is the market has normalized expectations about interest rate cuts. We still expect inflation coming down, we still expect that the Fed cuts its rate in June,” said Claudia Panseri, Chief Investment Officer for France at UBS Global Wealth Management.

U.S. rate futures have priced in a 3.0% chance of a 25 basis point rate cut at the March FOMC meeting and an 18.6% chance of a 25 basis point rate cut at May’s monetary policy meeting. Also, U.S. rate futures have priced in a 71.7% probability of at least a 25 basis point rate cut at the conclusion of the Fed’s June meeting.

In the bond markets, United States 10-year rates are at 4.092%, down -0.39%.

The Euro Stoxx 50 futures are up +0.16% this morning as investors digested labor market data from the U.K. and final consumer price figures from Germany while looking ahead to the latest U.S. inflation reading. Gains in basic resources and bank stocks are leading the overall market higher. The Office for National Statistics reported on Tuesday that the unemployment rate in Britain unexpectedly rose for the first time since July in the three months to January, while the pace of wage growth eased. Separately, the Federal Statistics Office reported Tuesday that German inflation eased to 2.5% year-on-year in February, confirming preliminary data. In corporate news, Wacker Chemie Ag (WCH.D.DX) climbed over +5% after the chemicals maker provided better-than-expected Q1 guidance.

U.K.’s Average Earnings ex Bonus, U.K.’s Claimant Count Change, U.K.’s Employment Change 3M/3M, U.K.’s Unemployment Rate, and Germany’s CPI data were released today.

U.K. January Average Earnings ex Bonus has been reported at 6.1%, weaker than expectations of 6.2%.

U.K. February Claimant Count Change stood at 16.8K, stronger than expectations of 20.3K.

U.K. January Employment Change 3M/3M came in at -21K, weaker than expectations of 10K.

U.K. January Unemployment Rate was at 3.9%, weaker than expectations of 3.8%.

The German February CPI arrived at +0.4% m/m and +2.5% y/y, in line with expectations.

Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.41% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.06%.

China’s Shanghai Composite Index closed lower today as the momentum over the rebound of Asia’s largest economy waned following the conclusion of Beijing’s annual parliamentary meeting. Energy and communications equipment stocks underperformed on Tuesday, while property and consumer staples stocks gained ground. Automobile stocks also advanced following remarks by Li Yunze, the head of the National Financial Regulatory Administration, indicating that China is contemplating reducing the downpayment requirement for passenger vehicle loans. Meanwhile, the week-long National People’s Congress ended on Monday, with the meeting highlighting China’s manufacturing industry as its priority sector focus. Also, limited details were provided regarding support for the property sector. In other news, Moody’s on Monday announced the withdrawal of China Vanke’s “Baa3” rating, which is the lowest of Moody’s investment grade ratings. It also said that all of Vanke’s ratings would be on “review for downgrade.” At the same time, China Vanke Co Ltd. soared about +10% in Hong Kong after affirming that its “current operation and refinancing are normal and financing channels are stable,” further stating that the impact of a rating downgrade on its financing activities was “controllable.” In other corporate news, Xiaomi Corp. surged over +11% after the company announced it would start selling its long-awaited electric vehicles this month.

Japan’s Nikkei 225 Stock Index closed just below the flatline today as speculation persisted regarding the Bank of Japan’s possible shift away from its negative rate policy as early as next week. Chip-related, trading house, and bank stocks led the declines on Tuesday. Official data released on Tuesday revealed that Japan’s wholesale prices increased at a rate faster than anticipated in February compared to the previous year, marking the highest producer inflation rate since October 2023. The yen fell for the first time in six days following remarks from BOJ Governor Kazuo Ueda, who highlighted some weakness in the consumption of nondurable goods while also indicating that the BOJ remains on track to end its negative interest rate policy. Meanwhile, Japan’s 10-year bond yield reached its highest level in three months after a report from Jiji suggested that the BOJ will end negative interest rates at the upcoming meeting if wage data comes out strong. Futures now imply a 47% probability that the central bank will shift rates to zero at its meeting on March 18th-19th. Investor attention this week is directed towards wage negotiations between Japanese companies and major labor unions. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.00% to 21.52.

The Japanese February PPI stood at +0.2% m/m and +0.6% y/y, stronger than expectations of +0.1% m/m and +0.5% y/y.

Pre-Market U.S. Stock Movers

Oracle Corporation (ORCL) surged about +13% in pre-market trading after the IT giant reported better-than-expected Q3 EPS. Also, during the earnings call on Monday, the company confirmed its partnership with tech giant Nvidia and stated that it intends to release details next week.

ACADIA Pharmaceuticals (ACAD) plunged over -17% in pre-market trading after announcing that its Phase 3 study evaluating pimavanserin for the treatment of negative symptoms of schizophrenia did not meet its primary endpoint.

Vail Resorts Inc (MTN) fell more than -5% in pre-market trading after the ski resort owner posted downbeat Q2 results and cut its FY24 net income forecast.

Heritage Insurance Holdings Inc (HRTG) climbed over +22% in pre-market trading after reporting better-than-expected Q4 results.

Carvana Co (CVNA) gained more than +3% in pre-market trading after Jefferies upgraded the stock to Hold from Underperform with a price target of $85.

Boeing Co (BA) fell over -1% in pre-market trading following a report from The New York Times stating that the Federal Aviation Administration’s audit found “dozens of issues” in 737 MAX production.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - March 12th

Miniso (MNSO), IGT (IGT), Kohl’s Corp (KSS), Guild (GHLD), Westrock Coffee (WEST), Cryoport Inc (CYRX), IHS Holding (IHS), Hagerty (HGTY), Enfusion (ENFN), Loandepot (LDI), Rackspace (RXT), MaxCyte (MXCT), Latham Group (SWIM), Clover Health Investments (CLOV), Heron Therapeuti (HRTX), Bioventus (BVS), Natures Sunshine (NATR), BRT (BRT), Blade Air Mobility (BLDE).

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