Stock Index Futures Inch Higher Ahead of Powell’s Testimony

September S&P 500 E-Mini futures (ESU24) are up +0.16%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.27% this morning as market participants awaited Federal Reserve Chair Jerome Powell’s congressional testimony for insights into the U.S. interest rate outlook.

In yesterday’s trading session, Wall Street’s major indexes ended mixed, with the benchmark S&P 500 and tech-heavy Nasdaq 100 posting new record highs. Corning (GLW) surged about +12% and was the top percentage gainer on the S&P 500 after the glass and advanced optics maker raised its Q2 core sales guidance. Also, chip stocks gained ground, with Intel (INTC) climbing over +6% to lead gainers in the Dow and Nasdaq 100 and Advanced Micro Devices (AMD) rising nearly +4%. In addition, Morphic Holding (MORF) soared more than +75% after Eli Lilly agreed to buy the U.S. gut drug maker in a deal valued at $3.2 billion. On the bearish side, Nike (NKE) fell over -3% and was the top percentage loser on the Dow following Jim Cramer’s remarks that the company’s latest conference call was a “call of despair” and that he “can’t find anything going right for the company.”

Economic data on Monday showed that U.S. consumer credit increased by +$11.35B in May, stronger than expectations of +$10.70B and the largest increase in 4 months.

Meanwhile, Oppenheimer’s John Stoltzfus, chief investment strategist in the firm’s asset-management business, increased his year-end target for the S&P 500 to 5,900 from 5,500 on Monday, citing a strong earnings outlook and a resilient economy that could support even higher valuations. “S&P 500 earnings results over the most recent reporting seasons and economic data that has provided evidence of resilience remain at the core of our bullish outlook for stocks,” Stoltzfus noted.

Today, market participants will closely monitor Fed Chair Jerome Powell’s semi-annual monetary policy testimony before the Senate Banking Committee. Powell faces pressure from lawmakers increasingly eager for interest rate cuts and others dissatisfied with the central bank’s recent plan to raise capital requirements for Wall Street lenders.

Also, investors will likely focus on speeches from Fed Vice Chair for Supervision Michael Barr and Fed Governor Michelle Bowman, due later in the day.

Aside from Powell’s testimony, the U.S. consumer inflation report for June, scheduled for release on Thursday, will be a highlight. Market participants anticipate the latest report to show annual headline inflation easing to 3.1% in June from 3.3% in May.

“While the CPI release will be key, we will be looking for signs from Powell that the Fed is edging closer to a decision to cash in its chips and move in September provided ongoing inflation news broadly confirms that the run-rate has stepped back down,” said Krishna Guha at Evercore.

U.S. rate futures have priced in a 4.7% chance of a 25 basis point rate cut at July’s monetary policy meeting and a 73.6% chance of a 25 basis point rate cut at the conclusion of the Fed’s September meeting.

Second-quarter corporate earnings season begins in earnest on Friday, with major banks such as JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) set to report their quarterly figures. According to data compiled by Bloomberg, expectations for 12-month forward earnings are at an all-time high.

The U.S. economic data slate is largely empty on Tuesday.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.286%, up +0.47%.

The Euro Stoxx 50 futures are down -0.38% this morning as investors weighed the potential impact of political gridlock in France and looked ahead to congressional testimony from Fed Chair Jerome Powell to gauge the Fed’s monetary policy path. Energy stocks led the declines on Tuesday. All attention will be on Powell today, while comments from European Central Bank board member Piero Cipollone later in the day will also be closely watched by investors to assess the ECB’s interest rate outlook. In corporate news, Dassault Systemes (DSY.FP) slumped over -4% after the French software company lowered its full-year earnings target. Also, BP Plc (BP-.LN) dropped more than -3% after the company signaled it anticipates posting an impairment of up to $2 billion in the second quarter and warned of lower refining margins impacting its results.

The European economic data slate is empty on Tuesday.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.26%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.96%.

China’s Shanghai Composite Index recovered from early losses and closed higher today, with investors awaiting the Third Plenum meeting, where the announcement of potential stimulus measures is anticipated. Gains in semiconductor and automobile stocks led the overall market higher on Tuesday. Meanwhile, uncertainty persists among investors regarding the People’s Bank of China’s new liquidity operations unveiled on Monday. In corporate news, China National Building Material tumbled over -13% after the company said it anticipates an unaudited loss of about 2 billion yuan ($275.2 million) for the first half of the year, contrasting with a net profit of 1.40 billion yuan in the same period last year. Investor attention is now focused on key China inflation data for June, scheduled for release on Wednesday. Market participants are also anticipating the Third Plenum of the Chinese Communist Party, scheduled for next week, where some fiscal and financial reform measures are expected to be unveiled.

Japan’s Nikkei 225 Stock Index closed sharply higher today, reaching a new record closing high, while investors anxiously awaited Fed Chair Jerome Powell’s congressional testimony later in the day. Semiconductor-related stocks outperformed on Tuesday, tracking gains in their U.S. peers. Japanese government bond yields were mixed on Tuesday, with investors remaining cautious amid speculation that the Bank of Japan might raise interest rates in July while also unveiling bond purchase tapering plans. Meanwhile, the BOJ will engage directly with market participants in key meetings on Tuesday and Wednesday aimed at determining a realistic pace for reducing its bond purchases, which will be announced later this month. Japanese Finance Minister Shunichi Suzuki said Tuesday that his ministry will monitor discussions at the BOJ’s meetings with bond market participants regarding tapering plans. In corporate news, KG Intelligence slid over -3% after reporting a 23% year-over-year drop in its half-year attributable profit to 116 million yen. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +0.17% to 17.47.

Pre-Market U.S. Stock Movers

Kymera Therapeutics (KYMR) surged over +10% in pre-market trading after announcing that Sanofi plans to expand its ongoing Phase 2 trials for Hidradenitis Suppurativa and Atopic Dermatitis.

Nvidia (NVDA) gained more than +1% in pre-market trading after KeyBanc raised its price target on the stock to $180 from $130.

Monday.com (MNDY) advanced over +1% in pre-market trading after Wolfe Research initiated coverage of the stock with an Outperform rating and a $300 price target.

RH (RH) rose more than +1% in pre-market trading after Stifel initiated coverage of the stock with a Buy rating and a $315 price target.

Bank of America (BAC) gained about +0.7% in pre-market trading after Piper Sandler upgraded the stock to Neutral from Underweight with a price target of $42.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - July 9th

Helen of Troy Ltd (HELE), Smart Global (SGH), Kura Sushi (KRUS), Saratoga Investment Corp (SAR), Byrna Technologies (BYRN).

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