S&P Futures Steady as Bonds Stabilize After Selloff, FOMC Minutes on Tap

September S&P 500 E-Mini futures (ESU26) are down -0.02% this morning, steadying after yesterday’s drop as the global bond rout eased, while investors await the release of the Federal Reserve’s July meeting minutes.

Bonds stabilized across regions on Wednesday. The 10-year T-note yield slipped one basis point to 4.70%. However, the factors behind this week’s bond selloff, which pushed yields to multi-year highs, have not disappeared.

The price of WTI crude rose about +1% on Wednesday amid the absence of a clear path toward resolving the Middle East conflict. Regional tensions escalated as the United Arab Emirates said it was severing all economic ties with Iran after accusing Tehran of firing ballistic missiles at its territory. Meanwhile, U.S. President Donald Trump insisted on Tuesday that no talks were underway with Tehran. Higher oil prices keep the risk of persistent inflation alive, limiting a rebound in Treasuries.

In yesterday’s trading session, Wall Street’s major indexes closed lower. Chip and AI infrastructure stocks sank, with Sandisk (SNDK) tumbling over -9% and Marvell Technology (MRVL) slumping more than -7%. Also, Fabrinet (FN) plunged over -19% as investor concerns about some of the company’s business segments overshadowed its strong FQ4 results and FQ1 guidance. In addition, Klarna (KLAR) cratered more than -22% after the company cut its full-year revenue guidance and abruptly announced the departures of its chief financial officer and chief marketing officer. On the bullish side, software stocks climbed, with Intuit (INTU) rising over +4% to lead gainers in the Nasdaq 100 and Adobe (ADBE) advancing more than +3%.

“The combination of higher energy costs and higher long-term borrowing costs is becoming increasingly uncomfortable. Equity investors have finally started to respond by going a bit defensive,” said Fawad Razaqzada at Forex.com.

Economic data released on Tuesday spanned manufacturing, housing, and inflation. U.S. industrial production rose +0.2% m/m in July, weaker than expectations of +0.3% m/m, and manufacturing production rose +0.2% m/m, in line with expectations. Also, U.S. July housing starts slumped -12.4% m/m to 1.239 million, weaker than expectations of 1.340 million, while building permits, a proxy for future construction, rose +5.0% m/m to a 5-month high of 1.443 million, stronger than expectations of 1.370 million. In addition, U.S. pending home sales unexpectedly fell -2.3% m/m in July, weaker than expectations of +0.1% m/m. Finally, the U.S. import price index unexpectedly fell -0.4% m/m in July, weaker than expectations of +0.1% m/m.

Today, market participants will closely watch the release of the minutes from the Fed’s July 28-29 meeting. The Federal Open Market Committee last month voted 9-3 to leave rates unchanged, with three members dissenting in favor of a quarter-point rate hike to rein in above-target inflation. The minutes may give investors a clearer picture of the extent to which officials were growing impatient with high inflation.

“Markets are worried about, what’s the reaction function of the Fed? The market really doesn’t really love the fact that we don’t have forward guidance,” according to Kay Herr, CIO of U.S. GFICC at JPMorgan Asset Management.

U.S. rate futures have priced in a 67.4% chance of no rate change and a 32.6% chance of a 25-basis-point rate hike at the September FOMC meeting.

Investors will also monitor earnings reports from several high-profile companies. Retailers Target (TGT), The TJX Companies (TJX), and Lowe’s Companies (LOW), along with chipmaker Analog Devices (ADI) and cosmetics company Estee Lauder (EL), are scheduled to report their quarterly results today.

On the economic data front, investors will focus on the EIA’s weekly crude oil inventories report, set to be released in a couple of hours. Economists expect this figure to be 0.2 million barrels, compared with last week’s value of 17.4 million barrels.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.70%, down -0.21%.

The Euro Stoxx 50 Index is up +0.05% this morning, steadying as global bond markets found some footing after a recent rout. Construction stocks outperformed on Wednesday, buoyed by a more than +6% gain in Geberit AG (GEBN.Z.IX) after it reported better-than-expected Q2 results. Mining stocks also advanced, tracking gains in gold prices. At the same time, bank stocks slid, limiting the broader market’s gains. Final data from Eurostat confirmed on Wednesday that the Eurozone’s annual inflation rate picked up to 2.9% in July. Separately, data showed that the U.K.’s annual inflation rate accelerated in July, driven by higher energy charges that could push inflation even further above the Bank of England’s target in the months ahead. In addition, data showed that the Eurozone’s current account surplus widened in June, driven by higher primary income. Meanwhile, Eurozone government bonds steadied on Wednesday, taking a breather from yesterday’s sharp selloff. Elsewhere, European Central Bank policymaker Olli Rehn said on Wednesday that wage growth and the wage outlook have remained moderate, with no clear evidence of second-round effects. “Keeping inflation expectations anchored will be essential to ensure this remains the case,” Rehn said. In other corporate news, Flsmidth & CO A/S (FLS.C.DX) climbed over +8% after the industrial company reported stronger-than-expected Q2 revenue.

U.K. CPI, U.K. Core CPI, Eurozone’s CPI, Eurozone’s Core CPI, and Eurozone’s Current Account data were released today.

U.K. July CPI rose +0.3% m/m and +2.9% y/y, in line with expectations.

U.K. July Core CPI rose +0.2% m/m and +2.6% y/y, stronger than expectations of +0.1% m/m and +2.5% y/y.

Eurozone’s July CPI rose +2.9% y/y, in line with expectations.

Eurozone’s July Core CPI rose +2.5% y/y, in line with expectations.

Eurozone’s June Current Account came in at 35.1 billion euros, stronger than expectations of 26.8 billion euros.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -2.40%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -3.16%.

China’s Shanghai Composite Index closed sharply lower today, dragged down by a selloff in semiconductor and robotics stocks. Semiconductor and other AI-related stocks tanked on Wednesday, tracking a selloff in global technology shares amid a jump in long-term borrowing costs. Robotics stocks also tumbled, even as Unitree Robotics soared 460% in its Shanghai trading debut after raising 6.1 billion yuan ($904 million). At the same time, financial and property stocks advanced as investors grew more optimistic about the property sector after China announced revised regulations allowing more flexible use of its housing provident fund. Meanwhile, Chinese long-end bond yields fell in recent sessions as traders wagered on further economic weakness, underscoring a widening divergence from global markets, where yields climbed to multi-year highs. In corporate news, Baidu plunged over -11% in Hong Kong after the search engine provider reported weaker-than-expected Q2 results. Also, China Unicom sank more than -12% in Hong Kong after the company reported a more than 30% drop in first-half net profit and suspended dividends. Investor attention is now on the People’s Bank of China, which is set to announce the country’s benchmark lending rates on Thursday. Economists expect the one-year loan prime rate to stay unchanged at 3.00% and the five-year LPR at 3.50%.

Japan’s Nikkei 225 Stock Index closed sharply lower today, tracking a tech-led selloff on Wall Street overnight. Chip and other AI-related stocks sank on Wednesday as investors pulled back from one of the year’s hottest trades amid elevated bond yields and geopolitical uncertainty. Electronics equipment maker Furukawa Electric tanked over -13% and memory chipmaker Kioxia Holdings tumbled more than -12%. Also, tech heavyweight SoftBank Group plunged over -10% after the Nikkei newspaper reported that it plans to sell 1 trillion yen in bonds to retail investors. The slide in those stocks weighed heavily on the tech-heavy Nikkei, which posted its biggest daily percentage drop since July 27th. “Concerns that borrowing costs will rise even further are prompting investors to turn risk-off on tech stocks that are already trading at elevated valuations,” said Shoichi Arisawa at Iwai Cosmo Securities. Meanwhile, Japanese government bonds gained on Wednesday, finding some relief after a global bond selloff pushed yields to multi-decade highs. On the economic front, data released on Wednesday showed that Japan’s monthly core machinery orders, a gauge of future business investment, rebounded more than expected in June. Norinchukin Research Institute economist Takeshi Minami said the data suggest companies remain willing to invest despite geopolitical uncertainties. Investor focus for the remainder of the week is on Japan’s July National Core CPI, which is expected to show a modest pickup—a result that would keep the Bank of Japan on course to raise rates as soon as next month. Market participants will also keep a close eye on Japan’s flash PMIs and trade data for July. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +6.33% to 32.44.

The Japanese June Core Machinery Orders rose +9.7% m/m and +16.9% y/y, stronger than expectations of +7.2% m/m and +10.8% y/y.

Pre-Market U.S. Stock Movers

Moderna (MRNA) popped more than +58% in pre-market trading after the company said that its messenger RNA-based cancer therapy, intismeran autogene, which was jointly developed with Merck, succeeded in a Phase 3 trial involving patients with melanoma.

U.S.-listed shares of SK Hynix (SKHY) climbed over +4% in pre-market trading after the memory chipmaker announced plans to repurchase and cancel more than $28 billion of its shares over the next three months.

Keysight Technologies (KEYS) gained more than +2% in pre-market trading after the software and hardware maker reported better-than-expected FQ3 results and issued above-consensus FQ4 guidance.

Honeywell Aerospace (HONA) advanced over +2% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight with an unchanged price target of $205.

La-Z-Boy (LZB) plunged over -18% in pre-market trading after the furniture maker swung to a loss in FQ1 and gave downbeat FQ2 sales guidance.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - August 19th

Analog Devices (ADI), The TJX Companies (TJX), Lowe’s Companies (LOW), Target (TGT), Viking Holdings (VIK), The Estée Lauder Companies (EL), Nordson (NDSN), BILL Holdings (BILL), Webull (BULL), Ionic Digital (IOND), Coty Inc. (COTY), Opera (OPRA), Wolfspeed (WOLF), John B. Sanfilippo & Son (JBSS), Phoenix Asia Holdings (PHOE), Datavault AI (DVLT), Starfighters Space (FJET), Unifi (UFI).