Stock Index Futures Inch Higher as Investors Mull Size of Fed Rate Cut, U.S. Economic Data on Tap

September S&P 500 E-Mini futures (ESU24) are up +0.23%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.08% this morning, while Treasury yields slumped after fresh U.S. economic data left investors uncertain about the size of an anticipated interest rate cut from the Federal Reserve next week.

In yesterday’s trading session, Wall Street’s major averages ended in the green. Warner Bros. Discovery (WBD) climbed over +10% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the company announced the early renewal of its multiyear distribution partnership with Charter Communications. Also, Kroger (KR) advanced more than +7% after raising the lower end of its full-year sales guidance. In addition, Roku (ROKU) gained over +5% after Wolfe Research upgraded the stock to Outperform from Peer Perform with a price target of $93. On the bearish side, Moderna (MRNA) plunged more than -12% and was the top percentage loser on the S&P 500 and Nasdaq 100 after announcing plans to reduce its research and development budget by about 20% over the next three years, aiming for a $1.1 billion decrease in its annual R&D expenses by 2027. Also, Micron Technology (MU) slid over -3% after Exane BNP Paribas double-downgraded the stock to Underperform from Outperform with a price target of $67.

Economic data released on Thursday showed that the U.S. producer price index for final demand increased by +0.2% m/m in August, exceeding the +0.1% m/m anticipated and accelerating from 0.0% m/m in July (revised from +0.1% m/m). On an annual basis, headline PPI rose +1.7% in August, slightly below the +1.8% increase expected and slowing from the +2.1% gain in the previous month (revised from +2.2%). Also, core PPI, which excludes volatile food and energy prices, stood at +0.3% m/m and +2.4% y/y in August, compared to expectations of +0.2% m/m and +2.5% y/y. In addition, the number of Americans filing for initial jobless claims in the past week unexpectedly rose +2K to 230K, compared with the 227K expected.

“With PPI basically repeating [Wednesday’s] CPI reading and jobless claims in line with expectations, the decks have been cleared for the Fed to kick off a rate-cutting cycle,” said Chris Larkin at E*Trade from Morgan Stanley. 

Meanwhile, market participants are now anticipating a rate cut from the Federal Reserve next week, though investors remain split on whether it will be a quarter- or half-point reduction. Former New York Fed President William Dudley stated at a forum in Singapore on Friday that he sees potential for a half-point rate cut at next week’s meeting. “I think there’s a strong case for 50,” Dudley said. “I know what I’d be pushing for.”

U.S. rate futures have priced in a 57.0% chance of a 25 basis point rate cut and a 43.0% chance of a 50 basis point rate cut at next week’s monetary policy meeting.

In other news, Deutsche Bank lifted its year-end target for the benchmark S&P 500 index to 5,750 from 5,500, attributing the adjustment to rising stock buybacks, solid corporate earnings, and strong inflows.

Today, all eyes are focused on the preliminary reading of the U.S. Michigan Consumer Sentiment Index, set to be released in a couple of hours. Economists, on average, forecast that the Michigan consumer sentiment index will come in at 68.3 in September, compared to last month’s value of 67.9.

U.S. Export and Import Price Indexes for August will also be reported today. Economists anticipate the export price index to be -0.1% m/m and the import price index to be -0.2% m/m, compared to the previous figures of +0.7% m/m and +0.1% m/m, respectively.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.635%, down -1.13%.

The Euro Stoxx 50 futures are up +0.44% this morning as investors continued to focus on the monetary policy outlook. Automobile and retail stocks led the gains on Friday. Final data from statistics agency Insee released on Friday showed that France’s annual inflation rate stood at 1.8% in August, down from the preliminary estimate of 1.9% and from 2.3% in July. Separately, data from the European Union statistics agency Eurostat on Friday showed that the Eurozone’s monthly industrial production fell for the fourth consecutive month in July. Meanwhile, the European Central Bank lowered its deposit rate by 25 basis points to 3.50% on Thursday, as expected, marking its second cut this year. However, policymakers gave few clues about the next steps, stating they will maintain a data-driven, meeting-by-meeting approach. In corporate news, AstraZeneca Plc (AZN.LN) fell over -2% after Deutsche Bank downgraded the stock to Sell from Hold.

France’s CPI and Eurozone’s Industrial Production data were released today.

The French August CPI has been reported at +0.5% m/m and +1.8% y/y, weaker than expectations of +0.6% m/m and +1.9% y/y.

Eurozone July Industrial Production arrived at -0.3% m/m and -2.2% y/y, stronger than expectations of -0.6% m/m and -2.7% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.48% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.68%.

China’s Shanghai Composite Index closed lower today, hitting a new seven-month low as investors trimmed their holdings ahead of a long holiday. Consumer-related stocks led the declines on Friday. At the same time, mainland developers listed in Hong Kong surged after Bloomberg News reported on Thursday that China is set to reduce interest rates on over $5 trillion in outstanding mortgages as soon as this month. Chinese President Xi Jinping on Thursday urged government officials at all levels to meet the country’s “full-year economic and social development goals.” “All regions and departments should studiously implement all the major economic initiatives and measures introduced by the Central Committee and deliver on the economic tasks for the third and fourth quarters,” Xi said. However, analysts pointed out that he downplayed the emphasis on achieving the full-year GDP target. Meanwhile, China’s 10-year government bond yield dropped to a 22-year low on Friday, fueled by sustained strong demand for long-dated treasuries, despite regulators’ repeated warnings and interventions to curb a sharp price rally. In other news, ANZ economists said in a note that China is likely considering a stimulus package that includes fiscal and monetary easing as well as asset price intervention. Investors are now focusing on Chinese retail sales and industrial production data, set for release over the weekend.

Chinese markets will be closed Monday and Tuesday for a public holiday.

Japan’s Nikkei 225 Stock Index ended lower today as the yen strengthened against the dollar for the fourth consecutive day, raising concerns about potential negative impacts on Japanese equities and global assets. A stronger yen hurts the profit outlook for Japan’s export-driven industries and prompts investors to unwind yen carry trades. Export-oriented stocks lost ground on Friday, while chip-related stocks advanced. Data released on Friday showed that Japan’s industrial production growth for July was revised upward, primarily driven by strong rebounds in the output of electrical machinery, information and communication electronics equipment, production machinery, and electronic parts and devices. Meanwhile, five out of nine Bank of Japan board members have recently signaled their intention to raise rates again if the central bank’s inflation outlook is met. According to a Bloomberg survey, slightly more than half of BOJ watchers anticipate the next rate hike to occur in December, while none foresee a policy adjustment during next week’s meeting. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +7.82% to 28.82.

The Japanese July Industrial Production came in at +3.1% m/m, stronger than expectations of +2.8% m/m.

Japanese markets will be closed on Monday for a public holiday.

Pre-Market U.S. Stock Movers

Adobe (ADBE) slumped over -7% in pre-market trading after the company provided weaker-than-expected Q4 guidance.

RH (RH) surged more than +18% in pre-market trading after the company reported better-than-expected Q2 results and offered upbeat Q3 guidance.

Arm (ARM) gained over +1% in pre-market trading after Raymond James initiated coverage of the stock with an Outperform rating and $160 price target.

Boeing (BA) slid more than -3% in pre-market trading after its largest labor union went on strike, halting production of the company’s top-selling jets.

Oracle (ORCL) climbed over +6% in pre-market trading after issuing an upbeat long-term outlook.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - September 13th

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