Stock Index Futures Tread Water as Key U.S. Inflation Data Looms

September S&P 500 E-Mini futures (ESU24) are up +0.02%, and September Nasdaq 100 E-Mini futures (NQU24) are down -0.09% this morning as market participants held back from making any big bets ahead of the release of the U.S. consumer inflation report.

In yesterday’s trading session, Wall Street’s major indexes closed higher, with the benchmark S&P 500 and tech-heavy Nasdaq 100 notching 1-1/2 week highs and the blue-chip Dow posting a 1-week high. Starbucks (SBUX) soared over +24% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after naming Chipotle Mexican Grill’s Brian Niccol as its next CEO effective September 9th, succeeding Laxman Narasimhan, who is stepping down as CEO effective immediately. Also, chip stocks gained ground, with Nvidia (NVDA) advancing more than +6% and Intel (INTC) rising over +5% to lead gainers in the Dow. In addition, Dell Technologies (DELL) climbed more than +4% after Barclays upgraded the stock to Equal Weight from Underweight. On the bearish side, Chipotle Mexican Grill (CMG) slumped over -7% and was the top percentage loser on the S&P 500 after CEO Brian Niccol departed the company to take up the role of CEO at Starbucks.

Economic data on Tuesday showed the U.S. July producer price index for final demand rose +0.1% m/m and +2.2% y/y, better than expectations of +0.2% m/m and +2.3% y/y. Also, the U.S. core PPI, which excludes food and energy prices, increased +2.4% y/y in July, less than the +2.7% y/y consensus and cooling from the +3.0% y/y pace in June.

“Muted PPI is more good data,” said Paul Ashworth at Capital Economics. “It is nevertheless consistent with the Fed’s preferred core PCE prices measure increasing at a below 2% annualized pace.”

Atlanta Fed President Raphael Bostic stated Tuesday that he is seeking “a little more data” before endorsing a reduction in interest rates. “We want to be absolutely sure,” Bostic said. “It would be really bad if we started cutting rates and then had to turn around and raise them again.”

Meanwhile, U.S. rate futures have priced in a 49.5% chance of a 25 basis point rate cut and a 50.5% chance of a 50 basis point rate cut at the next central bank meeting in September.

On the earnings front, notable companies like Cisco Systems (CSCO), Cardinal Health (CAH), and Brinker International (EAT) are set to report their quarterly figures today.

Today, all eyes are focused on the U.S. consumer inflation report, set to be released in a couple of hours. Economists, on average, forecast that the U.S. July CPI will arrive at +0.2% m/m and +3.0% y/y, compared to the previous numbers of -0.1% m/m and +3.0% y/y.

The U.S. Core CPI will also be closely watched today. Economists anticipate the Core CPI to be +0.2% m/m and +3.2% y/y in July, compared to the previous figures of +0.1% m/m and +3.3% y/y.

A survey conducted by 22V Research revealed that 52% of investors anticipate the market reaction to the consumer inflation report will be “risk-on.”

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -1.900M, compared to last week’s value of -3.728M.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.855%, down -0.05%.

The Euro Stoxx 50 futures are up +0.59% this morning as investors digested regional economic data and a series of positive corporate updates while also anticipating key inflation data from the U.S. later in the day. Travel and leisure stocks led the gains on Wednesday, while mining stocks lost ground. Data released Wednesday by the Office for National Statistics showed that U.K. annual consumer price inflation increased 2.2% in July following a 2% rise in each of the two previous months, a slightly smaller uptick than economists anticipated, and services inflation, closely monitored by the Bank of England, decelerated sharply. Separately, the European Union’s data agency Eurostat reported on Wednesday that Eurozone industrial output declined for the third consecutive month in June. In addition, Eurostat’s second estimate confirmed the Euro Area’s GDP growth at 0.3% q/q for the second quarter, while flash data indicated that employment growth in the Eurozone slowed to 0.2% q/q in the three months up to June. In corporate news, UBS Group Ag (UBSG.Z.EB) rose over +2% after Switzerland’s largest bank reported better-than-expected Q2 net profit, driven by strong client inflows and investment banking revenue. Also, Flutter Entertainment Plc (FLTR.LN) gained more than +8% after the world’s largest online betting firm posted upbeat Q2 results and lifted its annual guidance.

U.K.’s CPI, U.K.’s Core CPI, France’s CPI, Eurozone’s Employment Change (preliminary), Eurozone’s GDP (preliminary), and Eurozone’s Industrial Production data were released today.

U.K. July CPI has been reported at +2.2% y/y, weaker than expectations of +2.3% y/y.

U.K. July Core CPI arrived at +3.3% y/y, weaker than expectations of +3.4% y/y.

The French July CPI stood at +0.2% m/m and +2.3% y/y, compared to expectations of +0.1% m/m and +2.3% y/y.

Eurozone Employment Change came in at +0.2% q/q in the second quarter, in line with expectations.

Eurozone GDP has been reported at +0.3% q/q and +0.6% y/y in the second quarter, in line with expectations.

Eurozone June Industrial Production stood at -0.1% m/m and -3.9% y/y, weaker than expectations of +0.4% m/m and -2.9% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.60% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.58%. 

China’s Shanghai Composite Index closed lower today after data revealed that bank loans to the real economy contracted for the first time in 19 years. Consumer staples and real estate stocks underperformed on Wednesday. Sentiment deteriorated after China’s total social financing and new loans data fell short of expectations due to weak credit demand. According to data published Tuesday by the People’s Bank of China, yuan-denominated bank loans excluding those extended to financial institutions decreased by 77 billion yuan ($10.7 billion) at the end of July from a month earlier, marking the largest drop on record and the first decline since July 2005. Meanwhile, a newspaper affiliated with the PBOC stated late Tuesday that China’s long-dated yields have risen back toward reasonable levels, and short-term speculation is diminishing, indicating that regulators’ warnings against reckless bond-buying have been effective. In other news, economists at Nomura Global Markets Research suggested on Wednesday that China should consider increasing pension benefits to boost consumption and decrease inequality. In corporate news, WH Group climbed over +8% in Hong Kong after reporting higher first-half profit, driven by a turnaround in its U.S. business. Investor focus is now squarely on a slew of Chinese economic data due Thursday, including industrial production, retail sales, and unemployment figures.

Meanwhile, the Reserve Bank of New Zealand reduced the Official Cash Rate by a quarter percentage point to 5.25% on Wednesday, initiating an easing cycle earlier than previously indicated as the economy weakens and inflation decelerates.

Japan’s Nikkei 225 Stock Index closed higher today as expectations increased for the Fed’s rate cuts following softer-than-anticipated U.S. producer inflation data. However, the benchmark index trimmed some of its earlier gains after Prime Minister Fumio Kishida announced he would not seek a second term as leader of the long-ruling Liberal Democratic Party in September. Automobile and financial stocks outperformed on Wednesday. The latest Reuters Tankan survey released Wednesday indicated that Japanese businesses exhibited signs of declining optimism in August, with manufacturers and service providers reporting a drop in confidence due to weak demand from China. Meanwhile, Japan’s 10-year government bond yield dropped to an over 1-week low, tracking a decline in U.S. bond yields on cooler-than-expected U.S. producer inflation data. The yen weakened on Wednesday after initially strengthening toward the 146-per-dollar mark. In corporate news, Modalis Therapeutics soared about +41% after saying it will present a new method for optimizing AAV vectors using nanopore sequencing at the Nanopore Community Meeting 2024, 1st BioPharma Day, in Boston on September 18th. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -11.02% to 31.32.

Pre-Market U.S. Stock Movers

Alphabet (GOOGL) fell about -1% in pre-market trading after Bloomberg News reported that the U.S. Department of Justice is considering requesting a breakup of Google following a court ruling that the company monopolized the online search market.

Xp Inc. (XP) climbed over +8% in pre-market trading after the company posted better-than-expected Q2 results.

Serve Robotics (SERV) surged more than +12% in pre-market trading after the company reported solid Q2 results.

Ouster (OUST) plunged over -16% in pre-market trading after reporting mixed Q2 results and providing below-consensus Q3 revenue guidance.

Intuit (INTU) fell more than -1% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - August 14th

Cisco (CSCO), Cardinal Health (CAH), Performance Food Group Co (PFGC), Ast Spacemobile (ASTS), GlobalE Online (GLBE), ICL Israel Chemicals (ICL), StoneCo (STNE), Brinker (EAT), Lumentum Holdings Inc (LITE), Grupo Aval (AVAL), Dlocal (DLO), Paycor HCM (PYCR), Arcos Dorados (ARCO), Fidelis Insurance Holdings (FIHL), Smith Douglas Homes (SDHC), SFLoration Ltd (SFL), Marex (MRX), Sphere Entertainment (SPHR), Dole (DOLE), Arcutis (ARQT), Navigator Holdings (NVGS), Riskified (RSKD), Celcuity (CELC), Absci (ABSI), Consolidated Water (CWCO), Telesat (TSAT), European Wax Center (EWCZ), Kamada (KMDA), TMC the metals company (TMC).

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