Stocks Set for Muted Open as Investors Await U.S. Inflation Data and Big Bank Earnings, Powell’s Testimony on Tap

September S&P 500 E-Mini futures (ESU24) are down -0.06%, and September Nasdaq 100 E-Mini futures (NQU24) are down -0.05% this morning as investors looked ahead to the release of U.S. inflation data, Federal Reserve Chair Jerome Powell’s congressional testimony, and the start of the second-quarter earnings season later in the week.

In Friday’s trading session, Wall Street’s major averages closed in the green, with the benchmark S&P 500 and tech-heavy Nasdaq 100 notching new record highs. Macy’s (M) surged over +9% following a report from the Wall Street Journal that Arkhouse Management and Brigade Capital Management have increased their buyout offer for the department store chain to about $6.9 billion. Also, mega-cap technology stocks advanced, with Meta Platforms (META) climbing more than +5% to lead gainers in the S&P 500 and Alphabet (GOOGL) rising over +2%. In addition, chip stocks rallied after Samsung Electronics reported stronger-than-expected Q2 results, with ARM Holdings Plc (ARM) advancing more than +7% to lead gainers in the Nasdaq 100 and Advanced Micro Devices (AMD) gaining over +4%. On the bearish side, Nvidia (NVDA) fell nearly -2% after New Street Research downgraded the stock to Neutral from Buy.

The U.S. Labor Department’s report on Friday showed that nonfarm payrolls rose by 206K jobs last month, surpassing the 191K consensus but at a slower pace than the 218K recorded in May, which was revised down from 272K. Also, the U.S. June unemployment rate unexpectedly rose to a 2-1/2 year high of 4.1%, weaker than expectations of no change at 4.0%. In addition, U.S. average hourly earnings came in at +0.3% m/m and +3.9% y/y in June, in line with expectations.

“Get on with it. [Friday’s] employment report ought to firm up expectations of a September rate cut. Economic conditions are cooling and that makes the trade-offs different for the Fed,” said Neil Dutta at Renaissance Macro Research. 

Meanwhile, New York Fed President John Williams said Friday that although inflation has recently moderated toward the central bank’s 2% target, policymakers are still some way off from reaching their goal. “Inflation is now around 2-1/2%, so we have seen significant progress in bringing it down. But we still have a way to go to reach our 2% target on a sustained basis,” Williams said. “We are committed to getting the job done.”

U.S. rate futures have priced in a 6.7% chance of a 25 basis point rate cut at the Fed’s monetary policy committee meeting later this month and a 69.0% probability of a 25 basis point rate cut at the September FOMC meeting.

Second-quarter earnings season kicks off this week, with big banks such as JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) set to release their earnings reports on Friday. PepsiCo (PEP) and Delta Air Lines (DAL) are among other major names scheduled to deliver quarterly updates during the week.

On the economic data front, the U.S. consumer inflation report for June will be the main highlight. Also, market participants will be monitoring other economic data releases this week, including the U.S. Core CPI, PPI, Core PPI, Crude Oil Inventories, Wholesale Inventories, Initial Jobless Claims, and Michigan Consumer Sentiment Index (preliminary).

In addition, investors will focus on Fed Chair Jerome Powell’s semi-annual monetary policy testimony on Capitol Hill. Mr. Powell will testify before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. Powell is expected to tell lawmakers that Fed officials need more evidence of slowing inflation before considering interest rate cuts, despite mounting evidence of softer growth and employment. Fed Vice Chair for Supervision Michael S. Barr, Fed Governor Michelle Bowman, Chicago Fed President Austan Goolsbee, Fed Governor Lisa Cook, and Atlanta Fed President Raphael Bostic are also scheduled to speak this week.

Today, investors will likely focus on U.S. Consumer Credit data. Economists, on average, forecast that May Consumer Credit will stand at $10.70B, compared to the previous value of $6.40B.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.310%, up +0.86%.

The Euro Stoxx 50 futures are up +0.92% this morning as investors digested the unexpected result of the parliamentary elections in France. Construction and materials stocks led the gains on Monday. Data released by the Federal Statistics Office on Monday indicated that German exports declined in May compared to the previous month, marking the first decrease since February. Separately, a survey released Monday showed that investor confidence in the Eurozone saw a larger-than-expected decline in July, ending an eight-month streak of improvements. Meanwhile, France’s left-wing New Popular Front secured the highest number of seats in the parliamentary elections over the weekend, yet no party secured the majority needed to govern. The outcome potentially limits the influence of the left-wing coalition and Marine Le Pen’s National Rally, both advocating for increased public spending. In corporate news, Britvic Plc (BVIC.LN) climbed over +4% as the soft drinks maker announced it had agreed to be acquired by Carlsberg for 3.3 billion pounds ($4.23 billion) following an improved bid from the Danish brewer.

Germany’s Exports and Eurozone’s Sentix Investor Confidence Index were released today.

The German May Exports arrived at -3.6% m/m, weaker than expectations of -1.9% m/m.

Eurozone July Sentix Investor Confidence Index stood at -7.3, weaker than expectations of -0.6.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.93% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.32%.

China’s Shanghai Composite Index closed lower today as trade jitters continued to weigh on sentiment. Software and property stocks underperformed on Monday. Shipping stocks also lost ground due to expectations of falling freight rates following reports that Hamas had signaled approval for a cease-fire in Gaza. Sentiment towards China remained largely negative following the European Union’s imposition of steep tariffs on the import of Chinese electric vehicles, despite objections from Beijing. Next week, China’s commerce ministry will hold an anti-dumping hearing concerning imports of brandy from the bloc, signaling increasing trade tensions. Meanwhile, the People’s Bank of China took steps to increase control over market interest rates, announcing additional open market operations and narrowing the range within which short-term rates can fluctuate. The central bank announced on Monday that it would start conducting repurchase and reverse repurchase agreements in the afternoon, in addition to its regular morning operations, on each business day. The duration of this practice was not specified. In corporate news, iFlytek tumbled over -6% after providing a weak 1H forecast. 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. Later this week, Chinese inflation and trade data are scheduled for release.

Japan’s Nikkei 225 Stock Index closed lower today. Losses in automobile, electronics, and shipping stocks led the overall market lower. Government data released on Monday revealed that Japan’s inflation-adjusted real wages fell 1.4% year-on-year in May, marking the 26th consecutive month of decline and underscoring the impact of inflation on household spending. Separately, data released by the Ministry of Finance on Monday showed that Japan’s current account surplus expanded for the 15th consecutive month in May, driven by a record primary income surplus that offset the trade deficit. Meanwhile, the Bank of Japan stated on Monday that wage hikes are extending to smaller companies in regional areas as they strive to retain or hire workers, indicating confidence that these pay increases will help sustain inflation around its 2% target. In addition, the BOJ said in its quarterly regional economic report that the country’s local economies in most regions were improving. The bank revised its economic assessment upward for two of the nation’s nine regions, downgraded it in two areas, and kept it unchanged for the rest. In corporate news, Yaskawa Electric slumped over -4% after the electrical equipment maker’s first-quarter revenue fell short of expectations. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +4.06% to 17.44.

The Japanese May Average Cash Earnings stood at +1.9% y/y, weaker than expectations of +2.1% y/y.

The Japanese May Current Account n.s.a. stood at 2.850T yen, stronger than expectations of 2.450T yen.

The Japanese June Economy Watchers Current Index arrived at 47.0, stronger than expectations of 46.1.

Pre-Market U.S. Stock Movers

Morphic Holding (MORF) soared about +77% in pre-market trading after Eli Lilly agreed to acquire the biopharmaceutical company for $57 a share in cash, totaling around $3.2 billion, payable upon closing.

Paramount Global (PARA) climbed over +4% in pre-market trading after the company announced late Sunday that its board had unanimously approved a takeover offer from Skydance Media. As part of the complicated deal, Paramount Chair Shari Redstone agreed to sell her family’s National Amusements, which holds approximately 77% of Paramount’s voting stock, for $2.4 billion.

Gilead Sciences (GILD) rose more than +2% in pre-market trading after Raymond James upgraded the stock to Outperform from Market Perform with a $93 price target.

Charles Schwab (SCHW) gained about +0.8% in pre-market trading after Keefe Bruyette upgraded the stock to Outperform from Market Perform with a price target of $84.

Bumble (BMBL) slid more than -3% in pre-market trading after Wells Fargo downgraded the stock to Equal Weight from Overweight.

KeyCorp (KEY) fell over -1% in pre-market trading after UBS downgraded the stock to Neutral from Buy.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - July 8th

Greenbrier (GBX).

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