Stock Index Futures Slip as Chip Rally Fades, SK Hynix Debut in Focus

September S&P 500 E-Mini futures (ESU26) are down -0.06%, and September Nasdaq 100 E-Mini futures (NQU26) are down -0.35% this morning, taking a breather after a chip-led rally in the prior session, with all eyes on the U.S. trading debut of SK Hynix.

Chip and AI infrastructure stocks slipped in pre-market trading as investors turned cautious ahead of SK Hynix’s debut on Wall Street. Analysts view the South Korean memory chip giant’s U.S. listing as a fresh test of investor appetite for the AI trade.

The price of WTI crude edged lower on Friday as talks between the U.S. and Iran on a permanent peace agreement continued despite two days of fighting that sharply reduced traffic through the Strait of Hormuz.

In yesterday’s trading session, Wall Street’s major indices closed higher. Chip and AI infrastructure stocks rallied, with Arm Holdings (ARM) surging over +9% and Sandisk (SNDK) gaining more than +7%. Also, shares of trucking companies advanced after Citi upgraded the sector, with FedEx Freight Holding (FDXF) climbing over +7% and Old Dominion Freight Line (ODFL) rising more than +3%. In addition, Meta Platforms (META) climbed over +4% after the company unveiled a version of its most advanced AI model featuring a new paid tier for developers. On the bearish side, Costco Wholesale (COST) slid over -4% and was the top percentage loser on the Nasdaq 100 after the retailer reported a slowdown in June comparable sales from the previous month.

The Labor Department’s report on Thursday showed that the number of Americans filing for initial jobless claims in the past week unexpectedly fell by -2K to a 6-week low of 215K, compared with the 218K expected. At the same time, U.S. existing home sales unexpectedly fell -2.4% m/m to 4.09 million in June, weaker than expectations of 4.19 million.

“The underlying trend for job creation is probably not as bad as the subdued – but positive – hiring data for June would have suggested. Conversely, the labor picture isn’t likely as strong as the previously reported nonfarm payroll gains in prior months indicated,” according to James Baird at Plante Moran Financial Services. 

New York Fed President John Williams said on Thursday that inflation poses the larger risk to the Fed’s dual mandate. Williams said that among the factors driving U.S. inflation, he is most closely watching demand driven by AI. The New York Fed chief added that if demand remains strong, it could force the central bank to raise interest rates. “If this creates a sustained impulse to demand relative to supply in inflation, I do think that’s the kind of situation where you don’t look through this,” he said.

Meanwhile, U.S. rate futures have priced in a 78.1% chance of no rate change and a 21.9% chance of a 25 basis point rate hike at the next FOMC meeting later this month.

Today, all eyes are on South Korean chip memory giant SK Hynix’s debut on Wall Street. The company sold 177.9 million American depositary receipts at $149 apiece, raising $26.51 billion in the largest U.S. share sale by a foreign issuer. Each SK Hynix ADR represents one-tenth of a common share, according to a filing with the U.S. Securities and Exchange Commission. SK Hynix’s ADRs are set to begin when-issued trading today on the Nasdaq Global Select Market under the symbol SKHYV, before switching to SKHY when they begin regular-way trading on July 13th.

Investors will also monitor an earnings report from Delta Air Lines (DAL), which kicks off the airline earnings season, with carriers expected to showcase the resilience of air travel demand in recent months despite high inflation and economic pressures stemming from the Middle East conflict.

The U.S. economic data slate is empty on Friday.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.54%, down -0.46%.

The Euro Stoxx 50 Index is down -0.19% this morning, taking a breather after yesterday’s tech-led rally. Chip and other AI-related stocks retreated on Friday as investors turned cautious ahead of SK Hynix’s U.S. debut. Limiting losses, mining stocks climbed. Also, travel stocks advanced, with easyJet Plc (EZJ.LN) surging over +14% after the airline agreed in principle to a 5.7 billion pound ($7.65 billion) takeover approach from Apollo Global. The benchmark index is on track to end the week lower. Final data released on Friday showed that Germany’s annual inflation rate slowed to 2.3% and France’s annual inflation rate eased to 1.8% in June, confirming preliminary estimates. Separately, data showed that Italy’s monthly industrial production fell more than expected in May, signaling renewed weakness in manufacturing across the Eurozone’s third-largest economy. Meanwhile, JPMorgan turned “constructive” on the European steel sector on Friday, citing new EU import restrictions. In other corporate news, Vodafone Group Plc (VOD.LN) popped more than +11% after French billionaire Xavier Niel agreed to buy a 16.2% stake in the company, making him its largest shareholder.

Germany’s CPI, France’s CPI, and Italy’s Industrial Production data were released today.

The German June CPI fell -0.3% m/m and rose +2.3% y/y, in line with expectations.

The French June CPI fell -0.3% m/m and rose +1.8% y/y, compared to expectations of -0.2% m/m and +1.8% y/y.

The Italian May Industrial Production fell -0.3% m/m and rose +1.1% y/y, weaker than expectations of -0.1% m/m and +1.3% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.00%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.20%.

China’s Shanghai Composite Index reversed earlier gains and closed lower today, weighed down by weakness in the technology sector. Semiconductor and other AI-related stocks tumbled on Friday as investors took profits following a recent rally. Limiting losses, consumer and healthcare stocks gained. Also, satellite stocks jumped after China successfully tested an experimental rocket retrieval system using a net mounted on a sea platform. The benchmark index posted losses for the week. Meanwhile, the Financial Times reported on Friday that Chinese gaming and internet company Tencent was in talks to become Manus’ largest shareholder as investors sought alternatives after Beijing ordered Meta to unwind its $2 billion acquisition of the AI startup. In corporate news, MiniMax Group sank over -9% in Hong Kong after the AI company announced plans to raise $2 billion through a share placement and a convertible bond offering. Investor focus now shifts to a raft of key Chinese economic data due next week, including second-quarter GDP as well as June trade and activity figures, which will offer fresh clues on the outlook for the world’s second-largest economy.

Japan’s Nikkei 225 Stock Index closed higher today, led by gains in the tech sector. Chip-related stocks climbed on Thursday, tracking overnight advances in their U.S. peers. Also boosting the Nikkei was a more than +10% surge in tech investor SoftBank Group. In addition, sentiment was supported by easing fears about a full-blown war in Iran. Despite Friday’s gains, the benchmark index notched a weekly loss. Meanwhile, Japanese Finance Minister Satsuki Katayama said on Friday that the government aims to encourage pension funds to boost investments in domestic financial assets. The remarks sent the yen higher and spurred a rally in bonds. On the economic front, data showed on Friday that Japan’s wholesale inflation accelerated in June at its fastest pace in more than three years as firms aggressively passed on rising costs stemming from the Middle East conflict, strengthening the case for further Bank of Japan interest rate hikes. “If prices rise sharply for various goods, the BOJ may be forced to raise rates early, including in October,” said Masato Koike at Sompo Institute Plus. In corporate news, Fast Retailing dropped over -3% after the Uniqlo owner raised its full-year profit guidance but cautioned about the impact of the weak yen. CFO Takeshi Okazaki said that depreciation in the yen “could potentially have a significant impact on our performance” in the fourth quarter. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -12.98% to 38.13.

The Japanese June PPI rose +0.4% m/m and +7.1% y/y, stronger than expectations of +0.3% m/m and +6.8% y/y.

Pre-Market U.S. Stock Movers

Chip and AI infrastructure stocks slipped in pre-market trading, with Intel (INTC) falling over -3% and Sandisk (SNDK) dropping more than -2%.

WD-40 Company (WDFC) jumped over +12% in pre-market trading after the company posted stronger-than-expected FQ3 results and raised its full-year guidance.

Shopify (SHOP) rose more than +2% in pre-market trading after Stifel upgraded the stock to Buy from Hold with a price target of $150.

Toll Brothers (TOL) advanced over +2% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $176.

J.B. Hunt Transport Services (JBHT) gained about +2% in pre-market trading after Bernstein upgraded the stock to Outperform from Market Perform with a price target of $329.

You can see more pre-market stock movers here

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

Delta Air Lines (DAL), Hingham Institution for Savings (HIFS).