S&P Futures Tick Higher After Key U.S. Inflation Data is Released

June S&P 500 E-Mini futures (ESM24) are trending up +0.26% this morning after the release of the Fed’s first-line inflation gauge.

U.S. inflation data for April came in mostly as expected, with both core and headline inflation rising at moderate rates. The Federal Reserve closely watches the Personal Consumption Expenditures (PCE) price index, which excludes food and energy prices. This core measure increased by 0.2% in April, which matched analysts' predictions.

Overall inflation, including food and energy prices, rose 0.3% in April and 2.7% year-over-year. These figures were also in line with expectations.

The news keeps financial markets on edge, as they wait for signs of when the Federal Reserve might begin to lower interest rates. The Fed has been raising rates to combat inflation, but this could slow economic growth.

In yesterday’s trading session, Wall Street’s major indices closed lower, with the benchmark S&P 500 dropping to a 2-week low, the blue-chip Dow falling to a 4-week low, and the tech-heavy Nasdaq 100 sliding to a 1-1/2 week low. Salesforce (CRM) plunged over -19% and was the top percentage loser on the S&P 500 and Dow after the enterprise software giant reported weaker-than-expected Q1 revenue and provided below-consensus Q2 and FY25 revenue guidance. Also, Kohl’s (KSS) tumbled more than -22% after the department store chain reported an unexpected Q1 loss and slashed its full-year guidance. In addition, UiPath (PATH) plummeted about -34% after the software company gave a disappointing FY25 revenue outlook and announced the resignation of CEO Rob Enslin. On the bullish side, HP Inc. (HPQ) surged more than +16% and was the top percentage gainer on the S&P 500 after reporting better-than-expected Q2 results.

The U.S. Department of Commerce’s second estimate of Q1 GDP growth was revised downward to +1.3% (q/q annualized) from the initial estimate of +1.6%. Also, the Q1 core PCE price index was unexpectedly revised lower to +3.6% (q/q annualized) from +3.7%. In addition, U.S. pending home sales sank -7.7% m/m in April, weaker than expectations of -1.1% m/m and the biggest drop in more than three years. Finally, the number of Americans filing for initial jobless claims in the past week rose +3K to 219K, compared with 218K expected.

“The name of the game is still inflation and interest rates, and despite an expected downward revision to GDP, there wasn’t much in [the] data to shake up the status quo,” said Chris Larkin at E*Trade from Morgan Stanley.

New York Fed President John Williams said Thursday that he anticipates inflation to keep declining in the second half of this year, adding that high borrowing costs are holding back the economy. “The behavior of the economy over the past year provides ample evidence that monetary policy is restrictive in a way that helps us achieve our goals,” Williams said. In a moderated discussion following his remarks, the New York Fed chief stated that he couldn’t predict when he’d support a rate cut, stressing that it hinged on the information provided by incoming data regarding the economy. “I don’t feel any urgency or need that we have to make a decision now,” he said. Also, Dallas Fed President Lorie Logan remarked that high interest rates might not be curbing the economy to the extent that policymakers expect. “It also may be that policy is just not as restrictive as we think it might have been relative to the level of interest rates before the pandemic,” Logan said. “It’s really important to keep all options on the table and that we continue to be flexible.”

Meanwhile, U.S. rate futures have priced in a 0% chance of a 25 basis point rate cut at June’s monetary policy meeting and a 12.3% chance of a 25 basis point rate cut at the July meeting.

Today, all eyes are focused on the U.S. core personal consumption expenditures price index, the Fed’s preferred price gauge, in a couple of hours. Economists, on average, forecast that the core PCE price index will come in at +0.3% m/m and +2.8% y/y in April, compared to the previous figures of +0.3% m/m and +2.8% y/y.

Also, investors will focus on the U.S. Chicago PMI, which stood at 37.9 in April. Economists foresee the May figure to be 41.1.

U.S. Personal Spending and Personal Income data will be closely monitored today as well. Economists forecast April Personal Spending to be at +0.3% m/m and April Personal Income to stand at +0.3% m/m, compared to the March numbers of +0.8% m/m and +0.5% m/m, respectively.

In addition, market participants will be anticipating a speech from Atlanta Fed President Raphael Bostic.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.568%, up +0.35%.

The Euro Stoxx 50 futures are down -0.04% this morning as investors digested regional inflation data and looked ahead to a crucial U.S. inflation report. Technology and travel stocks underperformed on Friday, while telecom and energy stocks gained ground. Data from the Federal Statistical Office showed Friday that Germany’s retail sales fell more than expected in April from the previous month. Separately, preliminary data from Eurostat showed Friday that the Eurozone’s annual inflation rate accelerated to 2.6% in May from 2.4% in April. Also, the region’s annual core inflation rate climbed to 2.9% in May from 2.7% in April. Meanwhile, investors now shift their focus to the release of the Fed’s preferred measure of inflation, the core Personal Consumption Expenditures price index, scheduled for later in the day. In corporate news, Jd Sports Fashion Plc (JD-.LN) slumped over -6% after the British sportswear retailer posted a 6.4% drop in like-for-like Q1 U.K. sales.

Germany’s Retail Sales, France’s CPI (preliminary), Italy’s GDP, Eurozone’s CPI (preliminary), and Eurozone’s Core CPI (preliminary) data were released today. 

The German April Retail Sales stood at -1.2% m/m, weaker than expectations of -0.2% m/m.

The French May CPI came in at 0.0% m/m and +2.2% y/y, weaker than expectations of +0.1% m/m and +2.4% y/y.

The Italian GDP arrived at +0.3% q/q and +0.7% y/y in the first quarter, compared to expectations of +0.3% q/q and +0.6% y/y.

Eurozone May CPI has been reported at +0.2% m/m and +2.6% y/y, compared to expectations of +0.2% m/m and +2.5% y/y.

Eurozone May Core CPI stood at +2.9% y/y, stronger than expectations of +2.7% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.16% and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.14%.

China’s Shanghai Composite Index closed lower today as investors digested soft business activity data from the country. Mining and infrastructure stocks led the declines on Friday, while software stocks outperformed. Data released by the National Bureau of Statistics on Friday revealed that a gauge of China’s manufacturing activity unexpectedly fell into contraction in May. Also, China’s non-manufacturing activity expanded at a slower-than-anticipated rate in May despite remaining in expansion territory. Meanwhile, China’s long-dated government bond yields climbed on Friday following the People’s Bank of China’s announcement on Thursday that it was closely monitoring changes in the bond market and potential risks, pledging to sell government bonds as needed. In other news, China’s Ministry of Finance announced Friday the suspension of tariff concessions granted to Taiwan on 134 items under a trade agreement, citing Taipei’s failure to implement “effective measures to lift trade restrictions on the mainland.” In corporate news, Anhui Ankai Automobile slid over -3% after it scrapped its plans to form a joint venture with Anhui Jianghuai Automobile Group, Fudi Battery, and Zhejiang Storage Energy Group due to their inability to reach an agreement.

The Chinese May Manufacturing PMI arrived at 49.5, weaker than expectations of 50.5.

The Chinese May Non-Manufacturing PMI was at 51.1, weaker than expectations of 51.5.

Japan’s Nikkei 225 Stock Index closed higher today, fueled by signs of slowing U.S. growth that raised hopes for the Fed’s rate cuts later this year, while investors turned their focus to an upcoming key U.S. inflation reading. Real estate and financial stocks led the gains on Friday. Investors also digested a raft of Japan’s economic data. Data from the Ministry of Internal Affairs showed Friday that core inflation in Japan’s capital accelerated in May, indicating that the Bank of Japan remains largely on course to contemplate a rate hike in the upcoming months. Separately, data from the Ministry of Economy, Trade, and Industry showed on Friday that the nation’s industrial production unexpectedly fell in April from the previous month. In addition, government data showed on Friday that Japan’s retail sales growth rebounded in April, while the country’s jobless rate remained unchanged. Meanwhile, money markets are pricing in about 29 basis points of rate hikes by year-end, up from 20 basis points at the beginning of May, according to data compiled by Bloomberg. In other news, Japan’s Minister of Finance, Shunichi Suzuki, stated on Friday that the country will take appropriate measures against excessive currency fluctuations. In corporate news, Megmilk Snow Brand gained nearly +1% after the company raised its dividend payout ratio to over 40% from more than 30%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -4.43% to 16.84.

The Japanese May Tokyo Core CPI has been reported at +1.9% y/y, in line with expectations.

The Japanese April Industrial Production stood at -0.1% m/m, weaker than expectations of +1.5% m/m.

The Japanese April Retail Sales arrived at +2.4% y/y, stronger than expectations of +1.8% y/y.

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

Pre-Market U.S. Stock Movers

Dell Technologies (DELL) plunged over -12% in pre-market trading after the company reported Q1 results that were largely in line with expectations and gave a soft Q2 adjusted EPS forecast.

MongoDB (MDB) plummeted about -25% in pre-market trading after the company provided below-consensus Q2 and FY25 guidance.

Marvell Technology (MRVL) slid more than -5% in pre-market trading after the specialty semiconductor company’s Q1 results and Q2 guidance failed to impress investors.

Trump Media & Technology Group (DJT) fell about -5% in pre-market trading after former President Donald Trump was found guilty on all 34 counts in a high-profile “hush money” trial.

Gap (GPS) surged over +22% in pre-market trading after the company posted upbeat Q1 results and lifted its full-year guidance.

Zscaler (ZS) climbed more than +17% in pre-market trading after the cloud security firm reported stronger-than-expected Q3 results and boosted its full-year guidance.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - May 31st

BRP Inc (DOOO), Mesa Labs (MLAB), Genesco (GCO).

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