Stocks Set to Open Higher as Investors Await U.S. Inflation Data and Retail Earnings, Fed Speak on Tap

June S&P 500 E-Mini futures (ESM24) are up +0.15%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.26% this morning as market participants looked ahead to the release of U.S. inflation data, quarterly earnings reports from retail heavyweights, and a parade of Fed speakers.

In Friday’s trading session, Wall Street’s major averages closed mixed. Mettler-Toledo International (MTD) surged over +17% and was the top percentage gainer on the S&P 500 after the company reported upbeat Q1 results and raised its full-year adjusted EPS guidance. Also, McDonald’s (MCD) climbed more than +2% and was the top percentage gainer on the Dow following a report from Bloomberg suggesting that the fast-food chain is considering the launch of a $5 meal deal in the U.S. In addition, chip stocks gained ground, with Micron Technology (MU) advancing nearly +3% and Applied Materials (AMAT) rising over +1%. On the bearish side, Akamai Technologies (AKAM) slumped -11% and was the top percentage loser on the S&P 500 after the content delivery provider posted mixed Q1 results and offered below-consensus Q2 guidance.

Economic data on Friday showed that the University of Michigan’s U.S. consumer sentiment index fell to a 6-month low of 67.4 in May, weaker than expectations of 76.0. Also, the University of Michigan’s May year-ahead inflation expectations unexpectedly rose to 3.5%, higher than expectations of no change at 3.2%, while 5-year implied inflation expectations ticked up to 3.1% in May from 3.0% in April.

“[Friday’s] lower-than-expected consumer sentiment numbers are a warning sign that the consumer shouldn’t be taken for granted. In addition, inflation expectations have been rising as well - which is a double whammy for the Fed,” said Chris Zaccarelli at Independent Advisor Alliance.

Dallas Fed President Lorie Logan stated on Friday that it remains premature to contemplate reducing borrowing costs given disappointing inflation data in the first few months of the year. “I need to see some of these uncertainties resolved about the path that we’re on and we need to remain very flexible to policy and continue to look at the data that’s coming in and watch how financial conditions are evolving,” Logan said at an event in New Orleans. Also, Fed Governor Michelle Bowman expressed her view that it would not be appropriate for the Fed to implement interest rate cuts in 2024, citing persistent inflation witnessed during the first months of the year. “I’ve sort of had an even expectation of staying where we are for longer. And that continues to be my base case,” Bowman said in a Bloomberg News interview. At the same time, Chicago Fed President Austan Goolsbee remarked that he doesn’t observe substantial evidence indicating inflation is stuck above the central bank’s target, yet he refrained from specifying when rate cuts might become appropriate. “It doesn’t make sense to be tying our hands, even partly, when we know we’re going to get tons of data,” Goolsbee said at an event hosted by the Economic Club of Minnesota.

U.S. rate futures have priced in a 3.5% chance of a 25 basis point rate cut at the next FOMC meeting in June and a 24.6% probability of a 25 basis point rate cut at July’s policy meeting.

First-quarter earnings season winds down, but several notable companies are due to report this week, including Walmart (WMT), Home Depot (HD), Cisco Systems (CSCO), Monday.com (MNDY), Applied Materials (AMAT), Deere (DE), Copart (CPRT), and Take-Two Interactive (TTWO).

On the economic data front, the U.S. consumer inflation report for April will be the main highlight in the coming week. Also, market participants will be eyeing a spate of other economic data releases, including the U.S. Core CPI, PPI, Core PPI, Retail Sales, NY Empire State Manufacturing Index, Business Inventories, Crude Oil Inventories, Building Permits (preliminary), Housing Starts, Export Price Index, Import Price Index, Initial Jobless Claims, Philadelphia Fed Manufacturing Index, Industrial Production, Manufacturing Production, and Leading Index.

Meanwhile, Federal Reserve Chairman Jerome Powell is scheduled to participate in a moderated discussion with De Nederlandsche Bank President Klaas Knot at the Annual General Meeting of the Foreign Bankers’ Association on Tuesday. A host of other Fed officials will be making appearances throughout the week, including Mester, Jefferson, Cook, Kashkari, Bowman, Barr, Harker, Bostic, and Waller.

The U.S. economic data slate is largely empty on Monday.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.492%, down -0.24%.

The Euro Stoxx 50 futures are up +0.06% this morning as investors geared up for crucial U.S. inflation readings and a raft of economic data from the Eurozone later this week. Automobile stocks gained ground on Monday, while construction and materials stocks underperformed. Meanwhile, investor attention will be focused on the U.S. producer and consumer price inflation data, scheduled for Tuesday and Wednesday, and the Eurozone’s final inflation and flash first-quarter GDP data in the latter part of the week. In corporate news, Almirall Sa (ALM.E.DX) rose more than +6% after the Spanish pharmaceutical company reported better-than-expected Q1 results and reiterated its full-year profitability targets. Also, Diploma Plc (DPLM.LN) climbed over +5% after the building equipment maker reported an improved operating margin in the six months to the end of March and boosted its sales and earnings guidance.

The European economic data slate is mainly empty on Monday.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.21% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.13%.

China’s Shanghai Composite Index closed lower today as weak economic data from the country and concerns about escalating U.S.-China trade tensions outweighed news of the nation’s planned debt issuance. Lithium and energy stocks led the declines on Monday. Data released by the National Bureau of Statistics on Saturday showed that consumer prices in China rose for the third consecutive month in April, while producer prices extended declines for the 19th straight month. Separately, figures published by the People’s Bank of China on Saturday indicated that new bank lending in China declined more than anticipated in April compared to the previous month. Meanwhile, Bloomberg reported that President Joe Biden would quadruple tariffs on Chinese electric vehicles and significantly raise levies for other key industries this week. On the positive side, China’s 1 trillion yuan ($138 billion) special bond issuance program is set to commence on Friday, eventually including 20-, 30-, and 50-year debt, as outlined in a notice from the Ministry of Finance. In corporate news, Mango Excellent Media surged over +11% after its flagship program “Singer” returned to air on Friday and went viral online. Investor focus is now on the release of a series of Chinese data for April, including fixed asset investment, unemployment, industrial production, and retail sales, slated for Friday.

The Chinese April CPI has been reported at +0.1% m/m and +0.3% y/y, stronger than expectations of -0.1% m/m and +0.1% y/y.

The Chinese April PPI stood at -2.5% y/y, weaker than expectations of -2.3% y/y.

The Chinese April New Loans arrived at 730.0B yuan, weaker than expectations of 1,200.0B yuan.

Japan’s Nikkei 225 Stock Index closed slightly lower today. Losses in construction stocks led the overall market lower on Monday. Meanwhile, Japanese government bond yields climbed to multi-year highs on Monday following an unexpected move by the Bank of Japan to cut the amount of bonds it offered to buy in a regular purchase operation. In other news, Japan is witnessing conditions aligning for the central bank to normalize monetary policy, as emphasized by ruling party heavyweight Katsunobu Kato in remarks to Reuters, highlighting the increasing political backing for additional interest rate hikes. In corporate news, Mitsui Fudosan plunged over -5% after the real estate developer provided a weaker-than-expected full-year net profit forecast. At the same time, Olympus surged over +9% after the medical equipment maker said its full-year operating profit would quadruple and unveiled a share buyback. Also, Honda Motor gained over +1% after the automaker said it would repurchase up to 3.7% of its own shares valued at 300 billion yen ($1.93 billion). The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -0.22% to 18.49.

Pre-Market U.S. Stock Movers

Arm Holdings (ARM) rose over +3% in pre-market trading following a report from Nikkei Asia on Sunday stating that the company plans to launch artificial intelligence chips by next year.

Apple (AAPL) advanced about +1% in pre-market trading after Bloomberg reported that the company and OpenAI had been finalizing terms for an agreement to use ChatGPT features in Apple’s iOS 18.

Cisco Systems (CSCO) gained about +0.5% in pre-market trading after Exane BNP Paribas upgraded the stock to Neutral from Underperform with a $50 price target.

Equity Residential (EQR) fell more than -1% in pre-market trading after Evercore ISI downgraded the stock to In Line from Outperform with a $70 price target.

Applied Materials (AMAT) slid over -1% in pre-market trading after Jefferies downgraded the stock to Hold from Buy with a price target of $210.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - May 13th

Tencent Music Entertainment Group (TME), Talen Energy (TLNE), StoneCo (STNE), Burford (BUR), Fortrea Holdings (FTRE), Agilysys (AGYS), Mach Natural (MNR), American Healthcare REIT (AHR), NCR Atleos (NATL), HUYA (HUYA), Azul (AZUL), Terawulf (WULF), Bitfarms (BITF), Lifezone Metals (LZM), Allogene Therapeutics (ALLO), Dingdong (DDL), Fulcrum Therapeutics (FULC), Voyager Therapeutics Inc (VYGR), Theravance Biopharma (TBPH), UroGen Pharma (URGN), Harrow Health (HROW), Fractyl Health (GUTS), Gold Royalty (GROY), Senseonics Holdings Inc (SENS), Avita Medical (RCEL), Akoya Biosciences (AKYA), D Wave Quantum (QBTS).

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