Stock Index Futures Mixed on Pressure from Rising Bond Yields, Oil Prices Rise After Saudi Output Cuts
June S&P 500 futures (ESM23) are up +0.01%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.25% this morning as market participants digested the U.S. debt ceiling agreement, while U.S. Treasury yields climbed following a robust May jobs report.
Saudi Arabia said Sunday it would make an additional voluntary cut of 1M barrels per day of crude oil starting in July, taking its production to the lowest level for several years. The rest of the OPEC+ oil producers agreed to extend earlier cuts in supply until the end of 2024. On the ground of this, oil prices rose by more than +2% on Monday.
U.S. President Joe Biden signed into law on Saturday a bill that suspends the U.S. government’s $31.4 trillion debt ceiling through January 1st, 2025, and restricts government spending, averting an unprecedented default on the federal government’s debt. In a concise statement, Biden commended McCarthy and his team of negotiators for operating in good faith and all congressional leaders for ensuring the prompt approval of the legislation.
In Friday’s trading session, Wall Street’s major indexes ended with solid gains, with the benchmark S&P 500 notching a 9-1/2 month high, the blue-chip Dow rising to a 4-week high, and the tech-heavy Nasdaq 100 climbing to a 13-1/2 month high. Lululemon Athletica Inc (LULU) climbed more than +11% after the company reported upbeat Q1 results and raised its FY23 net revenue guidance. Also, 3M Company (MMM) surged over +8% and was the top percentage gainer on the Dow after Bloomberg News reported the company agreed to a tentative settlement of at least $10 billion with various U.S. cities and towns to resolve water pollution claims tied to “forever chemicals.” On the negative side, telecom stocks retreated following a report that Amazon (AMZN) was mulling offering mobile service to its U.S. Prime customers.
The U.S. Labor Department’s report on Friday showed that the U.S. economy added 339K jobs last month, stronger than expectations of 180K. At the same time, the U.S. unemployment rate rose to a 7-month high of 3.7% in May, weaker than expectations of 3.5%. In addition, U.S. May average hourly earnings came in at +0.3% m/m and +4.3% y/y, compared to expectations of +0.4% m/m and +4.3% y/y.
“While it appears to be a hot number on the actual number of people employed, the wage rate is not increasing as fast. That is a softening effect, and is this the mythical soft landing? Looks like that,” said Kim Forrest, a chief investment officer at Bokeh Capital Partners.
Meanwhile, U.S. rate futures have priced in an 82.8% probability of no hike and a 17.2% chance of a 25 basis point rate increase at the June meeting.
In other news, the Wall Street Journal said Monday that the largest U.S. banks might soon face revised capital rules following the collapse of smaller regional lenders earlier this year.
In the coming week, investors will be monitoring a spate of economic data, including the U.S. Exports, Imports, Trade Balance, Crude Oil Inventories, Initial Jobless Claims, Wholesale Inventories, and Wholesale Trade Sales.
Today, all eyes are focused on the U.S. ISM Non-Manufacturing PMI in a couple of hours. Economists, on average, forecast that the May ISM Non-Manufacturing PMI will stand at 51.8, compared to the previous value of 51.9.
Also, investors are likely to focus on the U.S. Services PMI, which was at 53.6 in April. Economists foresee the May figure to be 55.1.
U.S. S&P Global Composite PMI will also be closely watched today. Economists foresee this figure to stand at 54.5 in May, compared to the previous number of 53.4.
U.S. ISM Non-Manufacturing Prices will come in today. Economists expect the May figure to be 57.8, compared to the previous number of 59.6.
U.S. Factory Orders data will be reported today as well. Economists expect April’s figure to be +1.1% m/m, compared to the previous value of +0.9% m/m.
In the bond markets, United States 10-Year rates are at 3.742%, up +1.47%.
The Euro Stoxx 50 futures are down -0.14% this morning as investors digested a slew of European economic activity data. Data on Monday showed that Eurozone business growth fell to a 3-month low in May amid a deepening decline in the manufacturing sector. Meanwhile, European Central Bank President Christine Lagarde is scheduled to speak at a hearing before the Committee on Economic and Monetary Affairs later today. Morgan Stanley said on Monday that it expected the ECB to conclude its cycle of interest rate hikes in July at 3.75%. In corporate news, shares of Volvo Car Ab (VOLCB.S.DX) climbed over +4% after the automaker reported a 31% increase in monthly sales figures year-on-year, saying it had sold 60,398 vehicles in May.
Germany’s Trade Balance, Spain’s Services PMI, Italy’s Services PMI, France’s S&P Global Composite PMI, France’s Services PMI, Germany’s Composite PMI, Germany’s Services PMI, Eurozone’s S&P Global Composite PMI, Eurozone’s Services PMI, U.K.’s Composite PMI, U.K.’s Services PMI, Eurozone’s PPI data were released today.
The German April Trade Balance stood at 18.4B, stronger than expectations of 16.0B.
The Spanish May Services PMI came in at 56.7, weaker than expectations of 59.9.
The Italian May Services PMI was at 54.0, weaker than expectations of 56.5.
The French May S&P Global Composite PMI has been reported at 51.2, weaker than expectations of 51.4.
The French May Services PMI came in at 52.5, weaker than expectations of 52.8.
The German May Composite PMI stood at 53.9, weaker than expectations of 54.3.
The German May Services PMI was at 57.2, weaker than expectations of 57.8.
Eurozone May S&P Global Composite PMI has been reported at 52.8, weaker than expectations of 53.3.
Eurozone May Services PMI stood at 55.1, weaker than expectations of 55.9.
U.K. May Composite PMI came in at 54.0, stronger than expectations of 53.9.
U.K. May Services PMI was at 55.2, stronger than expectations of 55.1.
Eurozone April PPI has been reported at -3.2% m/m and +1.0% y/y, weaker than expectations of -3.1% m/m and +5.9% y/y.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.07%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.20%.
China’s Shanghai Composite today closed just above the flatline as U.S.-China tensions overshadowed optimism from a private survey that showed services activity in the country accelerated in May. A private-sector survey showed on Monday that Chinese services activity grew at a faster-than-expected pace in May as an increase in new orders supported a consumption-led economic recovery. Chinese Defence Minister Li Shangfu said Sunday that a conflict with the United States would result in an “unbearable disaster.” However, he emphasized that China aims for dialogue rather than confrontation with the U.S. Meanwhile, Morgan Stanley lowered their index targets for offshore-centric Chinese indices on Sunday, citing a delayed earnings recovery, a less favorable currency outlook, and geopolitical uncertainties.
The Chinese May Caixin Services PMI came in at 57.1, stronger than expectations of 55.2.
At the same time, Japan’s Nikkei 225 Stock Index ended sharply higher today, closing above the 32,000 level for the first time since July 1990. A private-sector survey showed on Monday that the country’s service sector activity expanded at a record pace in May due to a rebound in overseas demand and a surge of foreign tourists. Meanwhile, Japanese energy stocks gained ground on Monday after Saudi Arabia announced plans to cut oil production. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 2.19% to 20.06.
“The market was supported by the gains in the U.S. market on Friday. That helped keep the money flowing into risk assets in Japan,” said Shigetoshi Kamada, a general manager at the research department at Tachibana Securities.
The Japanese May Services PMI stood at 55.9, weaker than expectations of 56.3.
Pre-Market U.S. Stock Movers
Energy stocks are climbing in pre-market trading on Saudi Arabia’s pledge to make output cuts in July. Marathon Oil Corporation (MRO), Devon Energy (DVN), and Occidental Petroleum (OXY) are up more than +1%.
Digitalbridge Group Inc (DBRG) rose about +2% in pre-market trading after Keefe Bruyette upgraded the stock to Outperform from Market Perform.
Rain Therapeutics Inc (RAIN) dropped over -3% in pre-market trading after Mizuho downgraded the stock to Neutral from Buy.
Evaxion Biotech AS (EVAX) climbed about +45% in pre-market trading after the company’s clinical trial of EVX-01 met its primary endpoints of safety and tolerability.
Day One Biopharmaceuticals Inc (DAWN) surged over +36% in pre-market trading after the company announced new FIREFLY-1 data for Tovorafenib and initiated rolling NDA submission to the FDA.
Equitrans Midstream Corp (ETRN) gained more than +4% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Underweight.
You can see more pre-market stock movershere
Today’s U.S. Earnings Spotlight: Monday - June 5th
Science Applications (SAIC), Healthequity Inc (HQY), Sprott Physical Gold and Silver Trust (CEF), Sprinklr (CXM), IDT (IDT), Secureworks (SCWX), Allego US (ALLG), Joann (JOAN).
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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.
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