Stock Index Futures Plunge as Economic Outlook Darkens, PMI Data in Focus

Oleksandr Pylypenko - Barchart - Fri Jun 23, 2023

September S&P 500 futures (ESU23) are down -0.49%, and September Nasdaq 100 E-Mini futures (NQU23) are down -0.64% this morning as a series of interest rate hikes by central banks intensified fears of a global economic downturn.

In Thursday’s trading session, the tech-heavy Nasdaq 100 outperformed the other two major averages, primarily fueled by gains in mega-cap technology stocks. Amazon.com Inc (AMZN) gained over +4%, while Apple Inc (AAPL) and Microsoft Corporation (MSFT) rose more than +1%. Also, NRG Energy Inc (NRG) climbed about +3% and was among the top percentage gainers on the benchmark S&P 500 after the company boosted its share buyback plan. On the bearish side, Boeing Co (BA) slumped about -3% and was the top percentage loser on the blue-chip Dow after its biggest supplier, Spirit AeroSystems (SPR), was forced to suspend its production due to a strike. In addition, Alcoa Corp (AA) plunged over -4% after Morgan Stanley downgraded the stock to Underweight from Equal Weight.

The Labor Department’s report on Thursday showed claims for state unemployment benefits were unchanged at a 20-month high of 264K last week, higher than the expected figure of 260K, pointing to a slight cooling in the labor market. Another data set showed U.S. Existing Home Sales rose slightly to 4.30M in May, stronger than expectations of 4.25M.

Federal Reserve Chair Jerome Powell continued his two-day testimony on Thursday, presenting before the Senate Banking Committee after delivering his report to the House Financial Services Committee on the previous day. Mr. Powell reiterated his message that additional rate hikes are likely in the months ahead, emphasizing that the central bank’s primary objective is to bring down inflation.

Fed Governor Michelle Bowman said Thursday that “additional policy rate increases will be necessary to bring inflation down to our target over time.”

Meanwhile, U.S. rate futures have priced in a 76.9% probability of a 25 basis point rate increase and a 23.1% chance of no hike at the conclusion of the Fed’s July meeting.

Today, all eyes are focused on the U.S. Manufacturing PMI preliminary reading in a couple of hours. Economists, on average, forecast that the June Manufacturing PMI will stand at 48.5, compared to the previous value of 48.4.

U.S. Services PMI preliminary reading will be reported today as well. Economists foresee this figure to stand at 54.0 in June, compared to the previous number of 54.9.

In addition, investors will likely focus on speeches from Atlanta Fed President Raphael Bostic and Cleveland Fed President Loretta Mester.

In the bond markets, United States 10-Year rates are at 3.737%, down -1.64%.

The Euro Stoxx 50 futures are down -0.37% this morning as investors digested a slew of important regional economic data, while hawkish signals from central banks continued to weigh on sentiment. Losses in energy and bank stocks are leading the overall market lower. Data on Friday showed that Eurozone business growth nearly came to a halt in June as the downturn in manufacturing deepened while the services industry in the region showed only marginal expansion. Meanwhile, the Bank of England raised interest rates by 50 basis points Thursday following Wednesday’s red-hot U.K. inflation data, while central banks of Switzerland and Norway also hiked rates. In corporate news, shares of Siemens Energy Ag (ENR.D.DX) tumbled over -31% after the company took back its annual profit guidance due to mounting issues at its Spanish wind-turbine unit.

U.K.’s Retail Sales, U.K.’s Core Retail Sales, Spain’s GDP, France’s Manufacturing PMI (preliminary), France’s S&P Global Composite PMI (preliminary), France’s Services PMI (preliminary), Germany’s Composite PMI (preliminary), Germany’s Manufacturing PMI (preliminary), Germany’s Services PMI (preliminary), Eurozone’s Manufacturing PMI (preliminary), Eurozone’s S&P Global Composite PMI (preliminary), Eurozone’s Services PMI (preliminary), U.K.’s Composite PMI (preliminary), U.K.’s Manufacturing PMI (preliminary), and U.K.’s Services PMI data were released today.

U.K. May Retail Sales stood at +0.3% m/m and -2.1% y/y, stronger than expectations of -0.2% m/m and -2.6% y/y.

U.K. May Core Retail Sales came in at +0.1% m/m and -1.7% y/y, stronger than expectations of -0.3% m/m and -2.1% y/y.

The Spanish GDP stood at +0.6% q/q and +4.2% y/y in the first quarter, stronger than expectations of +0.5% q/q and +3.8% y/y.

The French June Manufacturing PMI has been reported at 45.5, stronger than expectations of 45.4.

The French June S&P Global Composite PMI was at 47.3, weaker than expectations of 51.0.

The French June Services PMI stood at 48.0, weaker than expectations of 52.0.

The German June Composite PMI came in at 50.8, weaker than expectations of 53.5.

The German June Manufacturing PMI has been reported at 41.0, weaker than expectations of 43.5.

The German June Services PMI was at 54.1, weaker than expectations of 56.2.

Eurozone June Manufacturing PMI came in at 43.6, weaker than expectations of 44.8.

Eurozone June S&P Global Composite PMI stood at 50.3, weaker than expectations of 52.5.

Eurozone June Services PMI was at 52.4, weaker than expectations of 54.5.

U.K. June Composite PMI has been reported at 52.8, weaker than expectations of 53.6.

U.K. June Manufacturing PMI stood at 46.2, weaker than expectations of 46.8.

U.K. June Services PMI came in at 53.7, weaker than expectations of 54.8.

Japan’s Nikkei 225 Stock Index (NIK) closed down -1.45%, while the Chinese market was closed for a holiday.

Japan’s Nikkei 225 Stock Index closed sharply lower today as investors continued to lock in profits amid expectations that domestic pension funds would adjust their portfolios by reducing positions before the quarter’s end, while stronger-than-expected Japanese inflation print also rattled sentiment. Data on Friday showed that the country’s manufacturing activity contracted in June, and service sector growth slowed for the first time in seven months due to weakened business confidence and demand. Also, government data showed that Japan’s National Core CPI grew more than expected in May, fueling suggestions that the Bank of Japan may adjust its price forecasts or tweak its ultra-loose monetary policy. Meanwhile, shares of Japanese trading firms slumped on Friday, with Mitsubishi Corp plunging over -4%, Marubeni slipping more than -3%, and Itochu falling about -4%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 0.05% to 20.24.

The Japanese May National Core CPI has been reported at +3.2% y/y, stronger than expectations of +3.1% y/y.

The Japanese June Manufacturing PMI stood at 49.8, weaker than expectations of 50.7.

The Japanese June Services PMI came in at 54.2, weaker than expectations of 56.2.

Pre-Market U.S. Stock Movers

Trupanion Inc (TRUP) soared more than +12% in pre-market trading after the pet insurance company announced that California approved a 12% rate increase and New York approved its request for an 18% rate increase.

IONQ Inc (IONQ) climbed over +7% in pre-market trading after the company said it is increasing its 2023 bookings growth forecast by 25% to a range of $45 million to $55 million.

3M Company (MMM) gained more than +3% in pre-market trading after the company agreed to pay up to $10.3 billion over 13 years in a PFAS water pollution settlement.

SoFi Technologies Inc. (SOFI) slid over -3% in pre-market trading after Compass Point initiated coverage of the stock with a Sell rating.

Planet Fitness Inc (PLNT) fell about -1% in pre-market trading after Exane BNP Paribas downgraded the stock to Underperform from Neutral.

Virgin Galactic Holdings Inc (SPCE) plunged over -18% in pre-market trading after the space tourism company filed to sell another $400 million worth of stock.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Friday - June 23rd

CarMax (KMX), Apogee (APOG), Daktronics (DAKT), Mesabi Trust (MSB), Transphorm Tech (TGAN), Yatra Online (YTRA), Bridgford (BRID), Birks Group Inc (BGI), Anixa Biosciences (ANIX).

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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.