Stock Indexes Meander as Bond Yields Retreat, U.S. Inflation Data Awaited

Oleksandr Pylypenko - Barchart - Tue Apr 9, 4:36AM CDT

The S&P 500 Index ($SPX) (SPY) is up +0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.07%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.32%, with investors awaiting Wednesday’s release of a key U.S. inflation report.

In yesterday’s trading session, Wall Street’s major indexes closed mixed. Paramount Global (PARA) plunged over -7% and was the top percentage loser on the S&P 500 after holder Matrix Asset Advisors expressed concerns regarding the proposal that would see the company sell its voting stock and merge with Skydance Media. Also, Kroger (KR) slid more than -3% after Exane BNP Paribas downgraded the stock to Underperform from Neutral with a $48 price target. On the bullish side, Tesla (TSLA) climbed nearly +5% and was the top percentage gainer on the Nasdaq 100 after CEO Elon Musk said in a post on X Friday that the company will unveil its long-promised Robotaxi on August 8th. In addition, Ducommun (DCO) surged about +15% after confirming the board of directors got an unsolicited non-binding indication from private direct investment firm Albion River to acquire all outstanding shares for $60 per share in cash.

Minneapolis Fed President Neel Kashkari said Monday that the U.S. central bank cannot “stop short” on the inflation fight. “The inflation rate is running around 3%, and the Fed has to get back down to 2%,” Kashkari said. Also, Chicago Fed President Austan Goolsbee emphasized the need for the U.S. central bank to consider how much longer it can sustain its current interest rate stance without damaging the economy. “You’ve got to pay attention to how long you want to be that restrictive. If you’re there too long, the unemployment rate is going to start going up,” Goolsbee said in an interview with Chicago radio station WBEZ. In addition, former St. Louis Fed President James Bullard said that three rate cuts remain “the base case” for this year as inflation trends toward the central bank’s target and the economy remains resilient.

U.S. rate futures have priced in a 0.1% chance of a 25 basis point rate cut at the conclusion of the Fed’s May meeting and a 51.1% chance of a 25 basis point rate cut at the June FOMC meeting.

Meanwhile, the focus remains on the March reading of the U.S. Consumer Price Index, scheduled for release on Wednesday, which is expected to show an increase in headline inflation to +3.4% y/y from +3.2% y/y in February.

“This week’s CPI update will offer investors a key piece to the policy puzzle though we’re doubtful the information will be sufficient to convincingly resolve the ongoing debate around the timing of rate cuts in 2024,” said Ian Lyngen and Vail Hartman at BMO Capital Markets.

First-quarter corporate earnings season begins in earnest on Friday, with banking giants such as JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) scheduled to report their quarterly figures.

The U.S. economic data slate is largely empty on Tuesday.

In the bond markets, United States 10-year rates are at 4.386%, down -0.88%.

The Euro Stoxx 50 futures are down -0.58% this morning as investors exercised caution and refrained from taking large positions in anticipation of this week’s U.S. inflation data and a European Central Bank monetary policy decision. Travel and construction stocks underperformed on Tuesday, while mining stocks gained ground. Meanwhile, an ECB survey revealed on Tuesday that Eurozone banks relaxed mortgage approval criteria last quarter for the first time in over two years, although demand for credit continued to decline amid high borrowing costs and a sluggish economy. In corporate news, BP Plc (BP-.LN) rose over +1% after the oil major said it expects upstream production in oil and gas to increase quarter-on-quarter in Q1. Also, Renault (RNO.FP) gained more than +1% after Barclays upgraded the stock to Overweight from Equal Weight.

The European economic data slate is mainly empty on Tuesday.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.05%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.08%.

China’s Shanghai Composite Index closed slightly higher today as investors exercised caution in anticipation of a key U.S. inflation report and a slew of domestic economic data scheduled for later this week. Lithium and healthcare stocks outperformed on Tuesday, while bank stocks lost ground. Meanwhile, according to state media, China’s Premier Li Qiang said during a symposium on Monday with economic experts and businessmen that the nation will enhance the consistency of macro policies and focus on precise policy implementation. In other news, Chinese officials have dismissed concerns expressed by U.S. Treasury Secretary Janet Yellen regarding the need to curtail industrial production, asserting that the nation is managing its economic development appropriately and cautioning against the use of protectionism. In corporate news, China Coal Xinji Energy rose over +3% after the company reported a 1.5% increase in coal sales revenue to 2.60 billion yuan for the first three months of the year. Investor attention this week is centered on the release of China inflation, trade, and credit lending data for March.

Japan’s Nikkei 225 Stock Index closed higher today. Chip-related and real estate stocks led the gains on Tuesday. Export-oriented stocks also advanced, thanks to a weak yen. The Cabinet Office reported Tuesday that Japan’s consumer confidence index rose in March. Meanwhile, Bank of Japan Governor Kazuo Ueda reaffirmed Tuesday that the central bank would uphold accommodative monetary conditions for the time being while also not ruling out the possibility of additional policy adjustments. In other news, the IFR reported on Tuesday that Warren Buffett’s Berkshire Hathaway had mandated Bank of America and Mizuho to lead a yen-denominated bond sale. In corporate news, Shin-Etsu Chemical climbed over +4% after the company said it would spend around 83 billion yen ($546 million) to build a microchip materials plant in Japan by 2026. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -5.27% to 20.12.

The Japanese March Household Confidence came in at 39.5, weaker than expectations of 39.6.

Pre-Market U.S. Stock Movers

Maxeon Solar Technologies (MAXN) plunged over -8% in pre-market trading after the company reported weaker-than-expected preliminary Q4 revenue and provided below-consensus Q1 revenue guidance.

Bloom Energy (BE) gained more than +1% in pre-market trading after announcing that it was awarded up to $75M in federal tax credits to expand the Fremont capacity.

American Express (AXP) fell about -0.8% in pre-market trading after Barclays downgraded the stock to Equal Weight from Overweight with a price target of $221.

ChargePoint (CHPT) slumped more than -4% in pre-market trading after Goldman Sachs downgraded the stock to Sell from Neutral with a price target of $1.50.

Ally Financial (ALLY) rose over +1% in pre-market trading after BofA upgraded the stock to Buy from Neutral with a price target of $46.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - April 9th

WD-40 (WDFC), Neogen (NEOG), PriceSmart (PSMT), Tilray (TLRY), Smart Global (SGH), Cognyte Software (CGNT), RCI Hospitality (RICK), Aehr Test Systems (AEHR).

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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.