S&P Futures Tick Higher Ahead of Powell’s Testimony, U.S. Inflation Data and Earnings Awaited

September S&P 500 E-Mini futures (ESU24) are trending up +0.15% this morning as investors looked ahead to further testimony from Federal Reserve Chair Jerome Powell while also bracing for Thursday’s release of a key U.S. inflation report as well as the start of the earnings season.

In yesterday’s trading session, Wall Street’s main stock indexes closed mixed, with the benchmark S&P 500 and tech-heavy Nasdaq 100 notching new all-time highs. Principal Financial Group (PFG) climbed over +3% after Raymond James upgraded the stock to Strong Buy from Market Perform with a price target of $99. Also, Nvidia (NVDA) advanced more than +2% after KeyBanc Capital Markets raised its price target on the stock to $180 from $130. In addition, Kymera Therapeutics (KYMR) surged over +23% after announcing that Sanofi plans to expand its ongoing Phase 2 trials for Hidradenitis Suppurativa and Atopic Dermatitis. On the bearish side, Albemarle (ALB) slumped more than -8% and was the top percentage loser on the S&P 500 after UBS and Baird lowered their price targets on the stock.

In prepared remarks for a Senate hearing Tuesday, Fed Chair Jerome Powell said that “more good data” would bolster confidence that inflation is moving down toward the Fed’s 2% target, noting that recent readings indicate “modest further progress” on prices. Also, Powell remarked that lowering rates too soon or too much could harm inflation progress. In addition, the Fed chief described the labor market as “strong, but not overheated” and noted that the central bank’s restrictive stance is effectively balancing supply and demand.

“Powell keeps the ship steady. Chair Powell’s prepared testimony struck a balanced tone,” said Peter Williams at 22V Research. “September remains modal, if notably more tentative than priced currently. But with the Fed balancing risks, upside surprises to labor market or inflation data could delay the first cut.”

U.S. rate futures have priced in a 4.7% chance of a 25 basis point rate cut at the next central bank meeting in July and a 70.0% chance of a 25 basis point rate cut at September’s policy meeting.

Today, investors will closely monitor Federal Reserve Chair Jerome Powell’s semi-annual monetary policy testimony before the House Financial Services Committee.

Also, market participants will be looking toward speeches from Chicago Fed President Austan Goolsbee, Fed Governor Michelle Bowman, and Fed Governor Lisa Cook.

On the economic data front, investors will likely focus on U.S. Crude Oil Inventories data, set to be released in a couple of hours. Economists estimate this figure to be 0.700M, compared to last week’s value of -12.157M.

U.S. Wholesale Inventories data will be reported today as well. Economists expect May’s figure to be +0.6% m/m, compared to +0.1% m/m in April.

Meanwhile, the focus remains on the June reading of the U.S. Consumer Price Index, scheduled for release on Thursday, which is expected to show a decline in inflation to +3.1% y/y from +3.3% y/y in May.

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 results.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.286%, down -0.28%.

The Euro Stoxx 50 futures are up +0.47% this morning, following a three-day losing streak, with investors awaiting the second round of testimony from Fed Chair Jerome Powell before Congress. Real estate and travel stocks outperformed on Wednesday. Statistics agency Istat reported Wednesday that Italy’s monthly industrial production increased by 0.5% in May, rebounding from a 1% drop in April. Meanwhile, investors are now focused on the second day of Powell’s Congressional testimony. Also, Bank of England’s chief economist Huw Pill is set to address the U.K.’s Asia House think tank later in the day. In addition, market participants are awaiting June inflation data from the U.S. and Germany, scheduled for release on Thursday. In corporate news, Kongsberg Gruppen ASA (KOG.O.DX) surged over +9% after the Norwegian tech group reported a 21% year-over-year increase in operating revenue.

Italy’s Industrial Production data was released today.

The Italian May Industrial Production came in at +0.5% m/m, stronger than expectations of +0.1% m/m.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.68% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.61%.

China’s Shanghai Composite Index closed lower today as sentiment soured following sluggish inflation figures from the country. Energy and property stocks led the declines on Wednesday. Data released by the National Bureau of Statistics on Wednesday showed that China’s consumer inflation slowed in June, remaining close to zero for the fifth consecutive month, indicating that deflationary pressures continue to hinder economic recovery. Also, Chinese producer prices remained in deflation for the 21st consecutive month in June, although the rate of decline moderated compared to May. Meanwhile, China’s yuan fell to its lowest level against the dollar in nearly eight months on Wednesday following soft inflation data from the country, compounded by strength in the greenback. In corporate news, Baidu surged over +10% in Hong Kong following indications of increasing popularity for its robotaxi service, Apollo Go, in China. Also, Nongfu Spring gained more than +4% in Hong Kong after its controlling shareholder announced intentions to boost its stake in the company by up to $256 million within six months. Later this week, Chinese trade data for June is scheduled for release.

The Chinese June CPI arrived at -0.2% m/m and +0.2% y/y, weaker than expectations of -0.1% m/m and +0.4% y/y.

The Chinese June PPI stood at -0.8% y/y, in line with expectations.

Meanwhile, the Reserve Bank of New Zealand kept the Official Cash Rate unchanged at 5.5% for an eighth consecutive meeting on Wednesday, as expected, but softened its hawkish stance, hinting at a potential earlier-than-expected easing of monetary policy.

Japan’s Nikkei 225 Stock Index closed higher today, hitting a new all-time high. Financial stocks led the gains on Wednesday, driven in part by anticipation of potential rate increases from the Bank of Japan. BOJ data revealed on Wednesday that Japan’s wholesale inflation accelerated in June compared to a year earlier due to the yen’s declines, which increased the cost of raw material imports. Meanwhile, Bloomberg reported on Wednesday that Japan’s largest banks urged the BOJ to significantly reduce its monthly bond purchases during hearings of market participants at the central bank, according to people who attended. In other news, Reuters reported on Wednesday that the BOJ is expected to lower this year’s economic growth forecast in July while forecasting that inflation will remain around its 2% target in coming years. In corporate news, Recruit Holdings gained over +3% after the staffing agency revealed plans to buy back up to 600 billion yen of its shares. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.83% to 17.79.

The Japanese June PPI has been reported at +0.2% m/m and +2.9% y/y, compared to expectations of +0.4% m/m and +2.9% y/y.

Pre-Market U.S. Stock Movers

VivoPower International (VVPR) soared about +44% in pre-market trading after securing an amendment and extension to its $34 million loan financing facility agreement.

Aehr Test Systems (AEHR) surged over +14% in pre-market trading after announcing better-than-expected preliminary Q4 revenue and raising its FY24 revenue guidance.

Smart Global Holdings (SGH) climbed more than +5% in pre-market trading after the company reported stronger-than-expected Q3 adjusted EPS.

Hudson Pacific (HPP) slumped over -4% in pre-market trading after Morgan Stanley downgraded the stock to Underweight from Equal Weight with a price target of $4.25.

Super Micro Computer (SMCI) fell more than -2% in pre-market trading after Nomura downgraded the stock to Neutral from Buy.

Mastercard (MA) and Visa (V) dropped over -1% in pre-market trading after BofA downgraded the stocks to Neutral from Buy.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - July 10th

WD-40 (WDFC), Manchester United (MANU), PriceSmart (PSMT), AZZ (AZZ), E2open Parent Holdings (ETWO), Pure Cycle (PCYO), Bassett (BSET), VOXX (VOXX).

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