Stock Index Futures Soar After CPI Report Shows Inflation is Slowing

June S&P 500 E-Mini futures (ESM24) are up +0.89%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.92% after this morning's CPI report was released.

The Consumer Price Index (CPI), a key inflation measure, stayed flat in May compared to April. This suggests inflation is moderating slightly, with annual inflation at 3.3% instead of the expected 3.4%.

In yesterday’s trading session, Wall Street’s main stock indexes closed mixed, with the S&P 500 and Nasdaq 100 notching new record highs. Apple (AAPL) climbed over +7% and was the top percentage gainer on all three major Wall Street averages following the company’s annual Worldwide Developers Conference, where it unveiled several features related to artificial intelligence and announced a partnership with ChatGPT maker OpenAI. Also, FMC Corp. (FMC) rose +4% after Fermium Research LLC upgraded the stock to Buy from Hold with a price target of $60. In addition, General Motors (GM) gained over +1% after the automaker’s board approved a new $6 billion share repurchase program. On the bearish side, Paramount Global (PARA) slumped more than -7% and was the top percentage loser on the S&P 500 after the Wall Street Journal reported that Shari Redstone’s NAI had decided to end talks with Skydance Media about acquiring the company. Also, PayPal Holdings (PYPL) slid over -3% and was the top percentage loser on the Nasdaq 100 after Apple introduced an innovative feature called ‘Tap to Cash’ that allows quick payments between individuals.

Today, all eyes are focused on the Federal Reserve’s monetary policy decision later in the day. With the Fed widely anticipated to hold borrowing costs at a two-decade high for a seventh straight meeting, the focus will shift to policymakers’ quarterly rate projections, known as the “dot plot,” and Chair Jerome Powell’s post-decision press conference. According to the median estimate in a Bloomberg survey, a 41% plurality of economists anticipate the Fed signaling two cuts in the closely watched “dot plot,” while an equal number expect the forecasts to indicate just one or no cuts at all.

“We expect Fed Chair Powell and company to maintain a position that stresses potential rate cuts remain contingent on the committee seeing further progress made on bringing down price pressures,” said Anthony Saglimbene at Ameriprise.

U.S. rate futures have priced in an 8.8% chance of a 25 basis point rate cut at the conclusion of the Fed’s July meeting and a 48.3% chance of a 25 basis point rate cut at September’s policy meeting.

On the earnings front, California-based semiconductor giant Broadcom (AVGO) is slated to report its Q2 earnings results today.

On the economic data front, investors will direct their attention to the U.S. consumer inflation report. Economists, on average, forecast that the U.S. May CPI will come in at +0.1% m/m and +3.4% y/y, compared to the previous numbers of +0.3% m/m and +3.4% y/y.

The U.S. Core CPI data will also be closely watched today. Economists anticipate the Core CPI to be +0.3% m/m and +3.5% y/y in May, compared to the previous figures of +0.3% m/m and +3.6% y/y.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -1.200M, compared to last week’s value of 1.233M.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.396%, down -0.16%.

The Euro Stoxx 50 futures are up +0.36% this morning, with investors pivoting their focus towards the upcoming Federal Reserve’s rate decision and the latest U.S. inflation reading. Bank stocks led the gains on Wednesday following three sessions of losses. At the same time, automobile stocks underperformed amid anticipation of potential lawsuits in Britain regarding emissions tests, which could result in costs exceeding $7.5 billion for companies. The Office for National Statistics reported Wednesday that the U.K.’s economic growth stalled in April. Separately, data from the Federal Statistical Office showed Wednesday that Germany’s annual inflation rate accelerated in May, confirming preliminary data. Meanwhile, investors are eagerly awaiting crucial U.S. inflation data and the Federal Reserve’s interest rate decision later in the day. In corporate news, Umicore (UMI.BB) slumped over -5% after the Belgian metal recycling group cut its 2024 profit guidance.

U.K.’s GDP, U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Monthly GDP 3M/3M Change, and Germany’s CPI data were released today.

U.K. April GDP has been reported at 0.0% m/m and +0.6% y/y, in line with expectations.

U.K. April Industrial Production stood at -0.9% m/m and -0.4% y/y, weaker than expectations of -0.1% m/m and +0.3% y/y.

U.K. April Manufacturing Production came in at -1.4% m/m and +0.4% y/y, weaker than expectations of -0.2% m/m and +1.6% y/y.

U.K. April Monthly GDP 3M/3M Change was at 0.7%, in line with expectations.

The German May CPI arrived at +0.1% m/m and +2.4% y/y, in line with expectations.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.31%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.66%.

China’s Shanghai Composite Index closed higher today despite mixed inflation data from the country. Energy stocks led the gains on Wednesday. Data from the National Bureau of Statistics revealed on Wednesday that China’s consumer prices rose mildly last month. At the same time, factory prices declined for the 20th consecutive month in May, fueling concerns over persistently weak demand. Also, Bloomberg News reported on Tuesday that the Biden administration is contemplating additional restrictions on China’s access to chip technology utilized for artificial intelligence, particularly focusing on new hardware currently entering the market, raising concerns regarding deteriorating trade relations between the world’s largest economies. Meanwhile, the Chinese yuan remained near a seven-month low against the U.S. dollar on Wednesday as market participants awaited U.S. inflation data and the Federal Reserve policy decision with caution. In corporate news, WuXi Biologics surged over +14% in Hong Kong after announcing a share buyback late Tuesday. At the same time, China Evergrande New Energy Vehicle Group tumbled over -20% in Hong Kong following an order from the Chinese government to repay 1.9 billion yuan ($261.9 million) in subsidies it had received from multiple local authorities due to its failure to meet contractual obligations.

The Chinese May CPI arrived at -0.1% m/m and +0.3% y/y, weaker than expectations of 0.0% m/m and +0.4% y/y.

The Chinese May PPI came in at -1.4% y/y, stronger than expectations of -1.5% y/y.

Japan’s Nikkei 225 Stock Index closed lower today as caution prevailed ahead of U.S. inflation data and the Fed rate decision due later in the day. Real estate and brokerage stocks led the declines on Wednesday, while energy stocks outperformed. Data from the Bank of Japan on Wednesday indicated that the country’s producer prices rose at the fastest annual rate in nine months in May, fueling concerns that this could translate into a higher level of consumer inflation. Meanwhile, the 10-year Japanese government bond yield dropped below the psychological 1% mark for the first time this week, tracking a decline in Treasury yields, as investors braced for U.S. inflation data and key central bank policy decisions. The Bank of Japan will wrap up its two-day policy meeting on Friday, where it is expected to keep interest rates unchanged and consider providing clearer guidance on how it plans to reduce its substantial balance sheet. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +0.17% to 17.61.

The Japanese May PPI has been reported at +0.7% m/m and +2.4% y/y, stronger than expectations of +0.4% m/m and +2.0% y/y.

Pre-Market U.S. Stock Movers

Oracle Corporation (ORCL) climbed over +8% in pre-market trading as the IT services giant’s signing of key artificial intelligence-centric deals with OpenAI and Google overshadowed weaker-than-expected Q4 results.

Casey’s General Stores (CASY) advanced more than +6% in pre-market trading after the company posted upbeat Q4 results, raised its quarterly dividend by 16.3% to $0.50 per share, and said it expects its EBITDA to increase by at least 8% in fiscal 2025.

Beamr Imaging (BMR) surged about +30% in pre-market trading after announcing that its product, Beamr Cloud, was now available in the Oracle Cloud Marketplace.

Darling Ingredients (DAR) rose more than +1% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a $48 price target.

Pure Storage (PSTG) fell over -2% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight with a $60 price target.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - June 12th

Broadcom (AVGO), Dave & Buster’s Entertainment (PLAY), Oxford Industries (OXM), Torrid Holdings (CURV), Vera Bradley (VRA), Cango (CANG), Coda Octopus (CODA).

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