Stock Index Futures Slip Ahead of U.S. JOLTs Report and Powell’s Remarks

September S&P 500 E-Mini futures (ESU24) are down -0.43%, and September Nasdaq 100 E-Mini futures (NQU24) are down -0.53% this morning as investors awaited the latest reading on U.S. job openings as well as comments from Federal Reserve Chair Jerome Powell.

In yesterday’s trading session, Wall Street’s major indexes ended in the green. Tesla (TSLA) climbed over +6% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after Wells Fargo added the stock to its “Tactical Ideas List” for the third quarter. Also, Merck & Co. (MRK) advanced more than +3% and was the top percentage gainer on the Dow after converting its co-exclusive license for prostate cancer drug candidate Opevesostat with Orion into an exclusive global license for Merck. In addition, Spirit AeroSystems (SPR) rose over +3% after Boeing agreed to acquire the supplier of fuselages for around $4.7 billion, or $37.25 per share, in an all-stock deal. On the bearish side, cruise line stocks retreated as Hurricane Beryl approached the Caribbean, with Norwegian Cruise Line Holdings (NCLH) slumping nearly -6% to lead losers in the S&P 500 and Carnival (CCL) sliding more than -5%.

Economic data on Monday showed that the U.S. ISM manufacturing index unexpectedly fell to a 4-month low of 48.5 in June, weaker than expectations of an increase to 49.2. Also, the U.S. June ISM price paid sub-index fell to a 6-month low of 52.1, weaker than expectations of 55.8. In addition, U.S. construction spending unexpectedly fell -0.1% m/m in May, weaker than expectations of +0.3% m/m. At the same time, the U.S. June S&P Global manufacturing PMI increased to 51.6, falling slightly short of the 51.7 expected level.

“While manufacturing is contracting, the rest of the economy is in decent shape ... the Fed wants the economy to keep running in low gear near-term. They will see ongoing softness in manufacturing as contributing to their goal of less inflation,” said Bill Adams, chief economist at Comerica Bank.

Meanwhile, Fed Chair Jerome Powell is scheduled to participate in a policy panel discussion with European Central Bank President Christine Lagarde at the ECB’s annual forum in Sintra, Portugal, later today, with investors eagerly awaiting to see if he will offer any new insights on interest rates.

U.S. rate futures have priced in an 8.8% chance of a 25 basis point rate cut at July’s monetary policy meeting and a 59.9% probability of a 25 basis point rate cut at the conclusion of the Fed’s September meeting.

On the economic data front, all eyes are focused on the U.S. JOLTs Job Openings data, set to be released in a couple of hours. Economists, on average, forecast that the May JOLTs Job Openings will come in at 7.960M, compared to the previous figure of 8.059M.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.459%, down -0.45%.

The Euro Stoxx 50 futures are down -1.05% this morning, giving up the previous session’s gains as investors weighed the likelihood that the ECB would delay further interest rate cuts. Insurance and automobile stocks led the declines on Tuesday, while energy stocks gained ground. Preliminary data released by Eurostat on Tuesday indicated that the Eurozone’s annual inflation rate eased to 2.5% in June from 2.6% in May, while the region’s annual core inflation rate unexpectedly remained steady at 2.9%. Meanwhile, ECB President Christine Lagarde indicated on Monday that there isn’t enough evidence suggesting that inflation threats have subsided, bolstering expectations that officials will refrain from cutting interest rates this month. Also, ECB Chief Economist Philip Lane stated that inflation data for June will not address the central bank’s remaining uncertainties regarding underlying price pressures. According to LSEG data, money market pricing indicates that the ECB will lower rates by 25 basis points twice more by the end of the year. In corporate news, Sodexo (SW.FP) slumped over -5% after the French food caterer reported slightly weaker-than-expected Q3 sales.

Eurozone’s CPI (preliminary), Eurozone’s Core CPI (preliminary), and Eurozone’s Unemployment Rate were released today.

Eurozone June CPI came in at +2.5% y/y, in line with expectations.

Eurozone June Core CPI arrived at +2.9% y/y, stronger than expectations of +2.8% y/y.

Eurozone May Unemployment Rate was at 6.4%, in line with expectations.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.08%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.12%.

China’s Shanghai Composite Index closed just above the flatline today as investors awaited signals on stimulus measures in upcoming policy meetings. Semiconductor stocks underperformed on Tuesday. At the same time, Hong Kong-listed property stocks advanced after private data indicated that yearly sales declines for major property developers continued to narrow in June. Meanwhile, China’s yuan dropped to a new seven-month low against the dollar on Tuesday, driven by the dollar’s strength following a climb in U.S. yields. Concerns over the Chinese economy have led to a surge in demand for government debt, pushing the nation’s 10-year benchmark bond yield to a record low on Monday. The People’s Bank of China announced on Monday that it would borrow government bonds from primary dealers to ensure the stable operation of the bond market. In corporate news, Li Auto Inc. climbed about +5% after announcing the delivery of 47,774 units in June, marking a substantial 46.7% year-over-year increase. Investor focus in July revolves around the Third Plenum of the Chinese Communist Party, which aims to outline policies for deepening reforms and advancing China’s modernization efforts.

Japan’s Nikkei 225 Stock Index ended higher today, closing above the 40,000 mark for the first time since March 29th. Bank and insurance stocks outperformed on Tuesday as the nation’s 10-year government bond yield continued to rise above 1%, fueled by expectations that the Bank of Japan will raise policy rates. Meanwhile, the likelihood of a BOJ interest rate hike later this month increased after the central bank’s closely watched “tankan” survey on Monday showed improved confidence among the country’s large manufacturers compared to three months earlier. In other news, a survey conducted by Reuters showed that Japanese bond market participants expect the central bank to reduce bond purchases by approximately $100 billion in the first year as part of a quantitative tightening plan set for release this month. In corporate news, Daiseki Eco. Solution rose over +2% after announcing plans to maintain a dividend of 7 yen per share for the current fiscal year. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +0.06% to 16.05.

Pre-Market U.S. Stock Movers

Roadzen (RDZN) surged about +50% in pre-market trading after releasing financial results for its first fiscal year as a public company. The company reported record revenue and announced its inclusion in the Russell 2000, Russell 3000, and Russell Microcap indices, effective as of the market close on June 28th.

Paramount Global (PARA) gained over +4% in pre-market trading following a report from the New York Times indicating that billionaire Barry Diller is contemplating a bid to take control of the company.

Incyte (INCY) fell more than -3% in pre-market trading after BMO Capital downgraded the stock to Underperform from Market Perform with a price target of $48.

CrowdStrike Holdings (CRWD) slid nearly -2% in pre-market trading after Piper Sandler downgraded the stock to Neutral from Overweight.

DR Horton (DHI) and Lennar (LEN) dropped over -1% in pre-market trading after Citi downgraded the stocks to Neutral from Buy.

PayPal Holdings (PYPL) rose more than +1% in pre-market trading after Susquehanna upgraded the stock to Positive from Neutral with an unchanged price target of $71.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - July 2nd

MSC Industrial Direct (MSM), Simulations Plus (SLP), Radius Recycling (RDUS).

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