S&P Futures Climb Ahead of Key U.S. PPI Data, ECB Decision in Focus

Oleksandr Pylypenko - Barchart - Thu Sep 14, 2023

September S&P 500 futures (ESU23) are trending up +0.29% this morning after three major U.S. benchmark indices ended the regular session mixed as investors digested the latest U.S. inflation report while also bracing for crucial U.S. PPI data.

In Wednesday’s trading session, Moderna Inc (MRNA) climbed over +3% after the drugmaker said its flu vaccine mRNA-1010 met the primary goal in a late-stage trial. Also, JB Hunt Transport Services Inc (JBHT) gained more than +4% following the company’s announcement that it anticipates a gradual rise in freight, attributed to retailers largely reducing excess inventories. In addition, Ford Motor Company (F) rose over +1% after the auto giant announced plans to double the production of its hybrid F-150 pickup trucks in 2024. On the bearish side, American Airlines Group (AAL) plunged more than -5% after the carrier cut its Q3 adjusted EPS guidance amid a jump in jet fuel prices.

The Labor Department’s report on Wednesday showed consumer prices rose +0.6% m/m in August, matching the consensus figure. On an annual basis, headline inflation rose +3.7% in August, accelerating from July’s +3.2% reading. Economists had expected a growth of +3.6% y/y. At the same time, U.S. core CPI eased to +4.3% y/y in August from +4.7% y/y in July, the smallest increase in almost two years.

“Not a great CPI report, but not something that changes the basic Fed outlook. This Fed is not itching to hike again, and we think it would take significantly more to push the FOMC to actually deliver another increase - with our base case remaining, the Fed is done here,” said Krishna Guha, vice chairman at Evercore ISI.

Meanwhile, U.S. rate futures have priced in a 3.0% chance of a 25 basis point rate increase next week and a 39.0% probability of a 25 basis point rate hike at November’s monetary policy meeting.

On the earnings front, notable companies like Adobe (ADBE), Copart (CPRT), and Lennar (LEN) are set to report their quarterly figures today.

In other news, shares of Arm Holdings Plc are due to start trading on Thursday on the Nasdaq Global Select Market, having priced its initial public offering at $51 per share, the top end of the range.

Today, all eyes are focused on the U.S. Producer Price Index (PPI) in a couple of hours. Economists, on average, forecast that August U.S. PPI will stand at +0.4% m/m and +1.2% y/y, compared to the previous values of +0.3% m/m and +0.8% y/y.

Also, investors will likely focus on U.S. Retail Sales data, which came in at +0.7% m/m in July. Economists foresee the August figure to be +0.2% m/m.

U.S. Core PPI reading will also be closely watched today. Economists expect August figures to be +0.2% m/m and +2.2% y/y, compared to the previous numbers of +0.3% m/m and +2.4% y/y.

U.S. Core Retail Sales data will come in today. Economists foresee this figure to stand at +0.4% m/m in August, compared to the previous number of +1.0% m/m.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 225K, compared to last week’s value of 216K.

In the bond markets, United States 10-year rates are at 4.258%, up +0.24%.

The Euro Stoxx 50 futures are up +0.05% this morning as market participants exercised caution in anticipation of the European Central Bank’s monetary policy decision. Gains in mining and energy stocks are leading the overall market higher. At the same time, automobile stocks underperformed on Thursday following China’s strong criticism of the European Union’s investigation into electric vehicle subsidies. The ECB meets later in the session, and policymakers face the dilemma of either increasing the key interest rate to a record level or pausing the extended period of rate hikes due to the worsening economic situation in the Eurozone. Money markets are pricing in a two-thirds chance that the ECB will raise interest rates by a quarter of a percentage point. In corporate news, Deliveroo Plc (ROO.L.EB) climbed over +4% following a report from activist investor Sachem Capital, indicating their belief that the food delivery company might become a takeover target.

The European economic data slate is mainly empty on Thursday.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.11%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.41%.

China’s Shanghai Composite today closed slightly higher, with investors continuing to seek policy measures and signs of an economic recovery. According to an unnamed senior central bank official, a publication affiliated with the People’s Bank of China said on Wednesday that China’s central bank intends to stimulate demand and support a moderate price rebound. Meanwhile, mainland property developers traded in Hong Kong retreated on Thursday after Moody’s cut China’s property sector’s outlook to negative from stable, citing economic growth challenges. Investor focus is now squarely on Chinese retail sales and industrial production data for August, due on Friday.

Japan’s Nikkei 225 Stock Index closed sharply higher today, touching its highest level in a week after a series of weak economic readings bolstered bets that the Bank of Japan will need to retain negative interest rates for the foreseeable future. Also, Economic Revitalization Minister Yoshitaka Shindo emphasized the necessity for strong economic measures. Data on Thursday indicated a sharp drop in Japanese core machinery orders for July, reflecting a decline in business confidence among the country’s largest manufacturers. Separately, data showed that Japan’s industrial production declined in July, marking the third drop since the beginning of the year. Meanwhile, chip stocks gained ground on Thursday, with chip-making equipment maker Tokyo Electron climbing over +3% and chip-testing equipment maker Advantest rising about +2%. In other corporate news, H.I.S. Co Ltd plunged over -7% even after the travel agent narrowed its net loss for the nine months through July. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.49% to 16.07.

The Japanese July Core Machinery Orders came in at -1.1% m/m and -13.0% y/y, weaker than expectations of -0.9% m/m and -10.7% y/y.

The Japanese July Industrial Production stood at -1.8% m/m, stronger than expectations of -2.0% m/m.

Pre-Market U.S. Stock Movers

Purecycle Technologies Holdings Corp (PCT) plunged more than -14% in pre-market trading after declaring force majeure due to storm impact on Ironton.

MetLife Inc (MET) gained over +1% in pre-market trading after Jefferies upgraded the stock to Buy from Hold.

OKYO Pharma (OKYO) tumbled more than -20% in pre-market trading after the company filed to sell its ordinary shares in an underwritten public offering.

Carnival Corporation (CCL) rose over +1% in pre-market trading after Redburn upgraded the stock to Buy from Neutral.

First Solar Inc (FSLR) climbed more than +2% in pre-market trading after BMO Capital upgraded the stock to Outperform from Market Perform.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - September 14th

Adobe (ADBE), Copart (CPRT), Lennar (LEN), MYT Netherlands (MYTE), Innate Pharma (IPHA), eGain (EGAN).

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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.