S&P Futures Tick Higher on Fed Rate Cut Bets, U.S. ADP Jobs Report Looms

June S&P 500 E-Mini futures (ESM24) are trending up +0.25% this morning following a positive session on Tuesday as a decline in U.S. job openings firmed up Federal Reserve rate-cut bets, with investors’ focus now turning to the ADP National Employment numbers due later in the day.

In yesterday’s trading session, Wall Street’s main stock indexes closed in the green. Carnival Corporation (CCL) climbed over +5% and was the top percentage gainer on the S&P 500 after Peel Hunt upgraded the stock to Buy from Hold. Also, Honeywell International (HON) rose more than +2% and was the top percentage gainer on the Dow after raising its full-year adjusted EPS forecast. In addition, Healthequity (HQY) gained over +2% after the company reported upbeat Q1 results and raised its full-year guidance. On the bearish side, Bath & Body Works (BBWI) plunged more than -12% and was the top percentage loser on the S&P 500 after the specialty retailer issued below-consensus Q2 EPS guidance.

A Labor Department report on Tuesday showed that U.S. JOLTs job openings fell to a 3-year low of 8.059M in April, weaker than expectations of 8.370M. At the same time, U.S. April factory orders rose +0.7% m/m, in line with expectations.

“The evidence is accumulating that the Fed should begin easing,” said Ronald Temple, chief market strategist at Lazard.

Meanwhile, U.S. rate futures have priced in a 0% chance of a 25 basis point rate cut at June’s policy meeting and a 16.5% probability of a 25 basis point rate cut at the July meeting. Also, U.S. rate futures have priced in a 55.3% chance of a 25 basis point rate cut at the conclusion of the Fed’s September meeting.

On the earnings front, notable companies like Lululemon Athletica (LULU), Dollar Tree (DLTR), Campbell Soup (CPB), and Five Below (FIVE) are set to report their quarterly figures today.

Today, all eyes are focused on the U.S. ADP Nonfarm Employment Change data in a couple of hours. Economists, on average, forecast that the May ADP Nonfarm Employment Change will stand at 173K, compared to the previous number of 192K.

Also, investors will focus on the U.S. ISM Non-Manufacturing PMI, which arrived at 49.4 in April. Economists foresee the May figure to be 51.0.

The U.S. S&P Global Composite PMI will come in today. Economists expect the May figure to be 54.4, compared to April’s value of 51.3.

The U.S. S&P Global Services PMI will also be closely watched today. Economists foresee this figure to arrive at 54.8 in May, compared to 51.3 in April.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -2.100M, compared to last week’s value of -4.156M.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.346%, up +0.30%.

The Euro Stoxx 50 futures are up +0.69% this morning, propelled by weaker-than-expected U.S. labor data, which fueled expectations for Fed rate cuts this year, while investors looked ahead to the European Central Bank’s interest rate decision on Thursday. Retail stocks led the gains on Wednesday, with Industria DE Diseno Textil Sa (ITX.E.DX) climbing over +4% after the Zara owner reported 7% sales growth in the first quarter. A private survey released Wednesday indicated that Eurozone business activity accelerated at its fastest pace in a year in May, driven by robust growth in the dominant services industry, which outpaced the contraction in manufacturing. Meanwhile, investors are bracing for an expected cut in the ECB’s key lending rate from a record high of 4% on Thursday. However, uncertainty persists regarding the extent of rate cuts that the ECB will endorse for the remainder of the year following a May inflation print in the Eurozone that was slightly higher than expected. In other corporate news, Volvo Ab (VOLVB.S.DX) rose more than +2% following an increase in sales to 68,034 cars in May, marking a 13% rise from the previous year.

Spain’s Services PMI, Italy’s Services PMI, France’s Services PMI, Germany’s Services PMI, Eurozone’s Composite PMI, Eurozone’s Services PMI, and Eurozone’s PPI data were released today.

The Spanish May Services PMI arrived at 56.9, stronger than expectations of 56.5.

The Italian May Services PMI came in at 54.2, weaker than expectations of 54.4.

The French May Services PMI stood at 49.3, weaker than expectations of 49.4.

The German May Services PMI was at 54.2, stronger than expectations of 53.9.

Eurozone May Composite PMI arrived at 52.2, weaker than expectations of 52.3.

Eurozone May Services PMI came in at 53.2, weaker than expectations of 53.3.

Eurozone April PPI has been reported at -1.0% m/m and -5.7% y/y, weaker than expectations of -0.6% m/m and -5.1% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.83% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.89%.

China’s Shanghai Composite Index closed lower today as investors shrugged off data indicating an expansion in the services sector. Property and retail stocks underperformed on Wednesday. A private sector survey revealed on Wednesday that China’s services activity in May surged at the fastest rate in 10 months, with staffing levels expanding for the first time since January, indicating a sustained recovery in the second quarter. Meanwhile, Reuters reported Wednesday that some Chinese AI chip firms are adjusting their designs to create less powerful processors to maintain access to Taiwan Semiconductor Manufacturing Co. production amid U.S. sanctions. In other news, China’s Ministry of Finance will allocate 11.2 billion yuan in subsidies for trading in old cars and getting newer ones, as reported by People’s Daily, the official newspaper of the Central Committee of the Chinese Communist Party, citing a government notice. Investor attention is currently directed towards the China trade data for May, scheduled for release on Friday.

The Chinese May Caixin Services PMI came in at 54.0, stronger than expectations of 52.5.

Japan’s Nikkei 225 Stock Index closed lower today. Financial and electronics stocks led the declines on Wednesday. A private survey released Wednesday indicated a continued robust upturn in the Japanese services sector in May, with increases in both total activity and new business inflows. Separately, labor ministry data released Wednesday indicated that Japan’s inflation-adjusted real wages fell 0.7% in April compared to the previous year, extending a record streak of 25 consecutive monthly declines but slowing the pace of the decline. In addition, data released Wednesday showed that the average cash earnings for establishments in Japan with at least five employees grew much more than expected in April. Meanwhile, the 10-year Japanese government bond yield dropped on Wednesday, tracking the decline in Treasury yields following weaker-than-expected U.S. labor market data. The yen pulled back against the dollar on Wednesday after hitting a 3-week high overnight. In corporate news, SoftBank Group climbed over +4% following a report from the Financial Times indicating that Elliott Management rebuilt a stake worth more than $2 billion in the technology investor. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +3.62% to 17.77.

The Japanese May au Jibun Bank Japan Services PMI arrived at 53.8, stronger than expectations of 53.6.

The Japanese April Average Cash Earnings stood at +2.1% y/y, stronger than expectations of +1.7% y/y.

Pre-Market U.S. Stock Movers

CrowdStrike Holdings (CRWD) climbed over +6% in pre-market trading after the company reported upbeat Q1 results and provided strong Q2 and FY25 guidance.

Hewlett Packard Enterprise (HPE) surged more than +15% in pre-market trading after the enterprise tech company reported better-than-expected Q2 results and raised its full-year revenue growth forecast.

Stitch Fix (SFIX) advanced over +17% in pre-market trading after reporting a smaller-than-expected Q3 loss and lifting its annual revenue guidance.

3D Systems (DDD) gained more than +11% in pre-market trading after the dental products company announced it had signed a multi-year purchase agreement worth about $250 million through 2028.

Applied Materials (AMAT) rose over +2% in pre-market trading after Barclays upgraded the stock to Equal Weight from Underweight with a price target of $225.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - June 5th

Lululemon Athletica (LULU), Dollar Tree (DLTR), Brown Forman (BFb), Campbell Soup (CPB), GameStop Corp (GME), Five Below (FIVE), Thor Industries (THO), Smartsheet (SMAR), Ollie’s Bargain Outlet (OLLI), Greif Bros (GEF), Sprinklr (CXM), Semtech (SMTC), ReNew Energy Global (RNW), Victoria’s Secret Co (VSCO), Rev Group (REVG), Global Blue Group Holding (GB), Couchbase (BASE), Hibbett Sports (HIBB), IDT (IDT), United Natural Foods (UNFI), ChargePoint Holdings (CHPT), Up Fintech (TIGR), Lands’ End (LE).

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