Stock Index Futures Muted After Post-CPI Rally, U.S. PPI and Retail Sales Data Awaited

Oleksandr Pylypenko - Barchart - Wed Mar 13, 4:35AM CDT

March S&P 500 E-Mini futures (ESH24)are down -0.02%, and March Nasdaq 100 E-Mini futures (NQH24) are down -0.11% this morning after three major U.S. benchmark indices ended the regular session higher despite a slightly hotter-than-expected U.S. consumer inflation report, with investors looking ahead to U.S. retail sales numbers and producer inflation data later in the week.

In Tuesday’s trading session, Oracle Corporation (ORCL) surged over +11% and was the top percentage gainer on the S&P 500 after reporting Q3 earnings that topped analysts’ expectations. Also, 3M Company (MMM) climbed more than +4% and was the top percentage gainer on the Dow after the industrial conglomerate named aerospace veteran William Brown as its new CEO. In addition, International Business Machines (IBM) gained over +3% following a report by CNBC indicating that the company informed employees in its marketing and communications division on Tuesday about staff reductions. On the bearish side, Southwest Airlines Company (LUV) tumbled more than -14% and was the top percentage loser on the S&P 500 after the U.S. carrier said it would have to cut its capacity plans and reevaluate its financial forecasts for the year due to lower aircraft deliveries from Boeing.

The Labor Department’s report on Tuesday showed consumer prices rose +0.4% m/m in February, matching the consensus figure. On an annual basis, headline inflation rose +3.2% in February, accelerating from January’s +3.1% reading. Economists had expected a rise of +3.1% y/y. Also, U.S. core CPI cooled to +3.8% y/y in February from +3.9% y/y in January but was slightly stronger than expectations of +3.7% y/y.

“Inflation came in a little hot, but the bulls aren’t ready to throw in the towel yet. Investors remain optimistic that shelter costs will come down. We still have three more reports before that key Fed meeting in June to confirm or reverse that hope,” said David Russell, a global head of market strategy at TradeStation.

Investor attention now shifts to additional cues on inflation from producer price index data scheduled for release on Thursday, while retail sales figures for February are also expected to provide further insights into the state of consumer spending.

Meanwhile, U.S. rate futures have priced in a 1.0% chance of a 25 basis point rate cut at the March FOMC meeting and an 8.9% probability of a 25 basis point rate cut at the May meeting. Also, U.S. rate futures have priced in a 69.1% chance of at least a 25 basis point rate cut at June’s policy meeting.

On the earnings front, notable companies like Lennar (LEN), Dollar Tree (DLTR), and Williams-Sonoma (WSM) are set to report their quarterly figures today.

On the economic data front, investors will likely focus on U.S. Crude Oil Inventories data due later in the day. Economists estimate this figure to be 0.900M, compared to last week’s value of 1.367M.

In the bond markets, United States 10-year rates are at 4.158%, up +0.05%.

The Euro Stoxx 50 futures are up +0.14% this morning as investors digested upbeat corporate earnings reports and dovish comments from European Central Bank policymakers. Retail and utilities stocks outperformed on Wednesday, while healthcare and telecom stocks lost ground. Data released by the Office for National Statistics on Wednesday showed that the U.K. economy expanded in line with expectations at the start of the year. Separately, the European Union’s statistics office, Eurostat, said on Wednesday that Eurozone industrial production slumped in January. Meanwhile, ECB Governing Council member Martins Kazaks said on Wednesday that if the economy “roughly follows” the central bank’s forecasts, “then the decision to start reducing interest rates could be made within the next few meetings.” In addition, Bank of France Governor Francois Villeroy de Galhau stated that the ECB could reduce borrowing costs in the spring, with June being more probable than April for a first move. In corporate news, Zalando Se (ZAL.D.DX) surged over +14% after the German online retailer reported better-than-expected Q4 profit, provided upbeat forecasts, and announced a share buyback program for a total purchase price of up to 100 million euros ($109.3 million). Also, E.On Se (EOAN.D.DX) climbed more than +5% after raising its five-year investment target to 42 billion euros ($45.90 billion) and issuing above-consensus 2024 profit guidance. In addition, BNP Paribas Sa (BNP.P.DX) gained more than +2% following its pledge to return $21 billion to shareholders over three years.

U.K.’s GDP, U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Monthly GDP 3M/3M Change, and Eurozone’s Industrial Production data were released today.

U.K. January GDP has been reported at +0.2% m/m and -0.3% y/y, in line with expectations.

U.K. January Industrial Production stood at -0.2% m/m and +0.5% y/y, weaker than expectations of 0.0% m/m and +0.7% y/y.

U.K. January Manufacturing Production came in at 0.0% m/m and +2.0% y/y, in line with expectations.

U.K. January Monthly GDP 3M/3M Change was at -0.1%, in line with expectations.

Eurozone January Industrial Production arrived at -3.2% m/m and -6.7% y/y, weaker than expectations of -1.8% m/m and -2.9% y/y.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.40% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.26%.

China’s Shanghai Composite Index closed lower today as worries over the country’s beleaguered property sector weighed on sentiment. Real estate and insurance stocks led the declines on Wednesday. Country Garden Holdings fell nearly -5% after the Chinese property developer disclosed that it did not have sufficient funds for a 96 million yuan ($13 million) coupon payment due on Tuesday and intended to raise funds for the missed onshore coupon payment within a 30-day grace period. Also, the disposal of assets by some property developers to repay their debts contributed to concerns about the state of China’s real estate sector. China Vanke and Gemdale were reportedly compelled to sell some of their stocks and properties to prevent default. In other news, Liu Shijin, a member of the People’s Bank of China monetary policy committee, stated on Wednesday that China should rely more on structural reforms and less on economic stimulus to propel economic growth this year. In corporate news, Cathay Pacific Airways Ltd. climbed over +5% after the airline reported its highest annual operating profit on record.

Japan’s Nikkei 225 Stock Index reversed earlier gains to close lower today as speculation continued regarding the Bank of Japan’s potential shift away from its ultra-loose monetary policy as early as next week. Losses in shipping and pharmaceutical stocks led the overall market lower. Meanwhile, Toyota Motor Corp. and several other companies agreed to pay increases, indicating a sustainable wage-price cycle. This week’s union pay deals are being closely watched by investors to gauge whether the pay increases will be substantial enough for the BOJ to consider raising interest rates as soon as next week. “The outcome of this year’s annual wage negotiation is critical in deciding on the timing of an exit from massive stimulus,” BOJ Governor Kazuo Ueda told parliament on Wednesday. In other news, Reuters reported that the BOJ is expected to provide numerical guidance on how much government bonds it will purchase upon ending the negative interest rate policy and yield curve control, aiming to avoid market disruptions. In corporate news, Nissan Motor Co Ltd. gained over +1% following the company’s announcement that the Nomination Committee has chosen candidates for the board of directors, who will be proposed and voted on during the annual general meeting in June. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -0.74% to 21.36.

Pre-Market U.S. Stock Movers

Beauty Health Co (SKIN) surged about +19% in pre-market trading after the company posted better-than-expected Q4 results.

Clover Health Investments Corp (CLOV) gained over +7% in pre-market trading after the company reported stronger-than-expected Q4 revenue.

Surgepays Inc (SURG) tumbled more than -18% in pre-market trading after the company posted downbeat FY23 results.

Tesla Inc (TSLA) fell over -2% in pre-market trading after Wells Fargo downgraded the stock to Underweight from Equal Weight with a price target of $125.

Cooper Companies Inc (COO) rose more than +1% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $120.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - March 13th

Lennar (LEN), Dollar Tree (DLTR), Williams-Sonoma (WSM), UiPath (PATH), SentinelOne (S), Arcos Dorados (ARCO), ZIM Integrated Shipping Services (ZIM), Navigator Holdings (NVGS), Target Hospitality (TH), Opal Fuels (OPAL), Petco Health and Wellness (WOOF), Nextnav Acquisition (NN), Limbach Holdings (LMB), Magic (MGIC), Vaalco Energy (EGY), Global Indemnity (GBLI), Pangaea Logistic (PANL), Anika (ANIK), Sharecare (SHCR), WideOpenWest (WOW).

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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.