S&P Futures Tick Higher Ahead of U.S. Inflation Data, FOMC Meeting

Oleksandr Pylypenko - Barchart - Tue Jun 13, 2023

June S&P 500 futures (ESM23) are trending up +0.16% this morning as market participants braced for the release of a crucial U.S. inflation report while also awaiting a pause in one of the Federal Reserve’s most aggressive tightening campaigns witnessed in decades.

In Monday’s trading session, Wall Street’s major averages ended with solid gains, with thebenchmark S&P 500climbing to a 13-1/2 month high and the blue-chip Dow rising to a 6-week high. Carnival Corporation (CCL) surged over +12% and was the top percentage gainer on the S&P 500 after JPMorgan upgraded the stock to Overweight from Neutral. Also, Catalent Inc (CTLT) climbed more than +10% after the company reported upbeat Q3 results. In addition, Broadcom Inc (AVGO) gained over +6% following a report that the chipmaker was set to win conditional European Union antitrust approval for its planned $61 billion acquisition of VMware Inc (VMW). On the bearish side, Nasdaq Inc (NDAQ) plunged over -11% after the exchange operator said it would buy a financial software firm Adenza for $10.5 billion in cash and stock. Energy stocks also retreated after the price of WTI crude slid over -4% to a 6-week low.

The Federal Reserve commences its two-day meeting later in the day, with investors widely anticipating that the U.S. central bank will implement a pause on its long-running policy tightening cycle on Wednesday. Also, investors’ focus will be on Fed Chair Jerome Powell’s post-decision press conference and the Fed’s quarterly dot plot in its Summary of Economic Projections.

“A hawkish skip would only buy the Fed a little bit of time. If the Fed decides to skip the June meeting, as I anticipate, I don’t think they have a choice but to sound hawkish given their data-dependent pledge,” said Neil Dutta, a head of economic research at Renaissance Macro Research.

Today, all eyes are focused on the U.S. consumer inflation report in a couple of hours. Economists, on average, forecast that May U.S. CPI will come in at +0.2% m/m and +4.1% y/y, compared to the previous values of +0.4% m/m and +4.9% y/y.

Also, investors will likely focus on U.S. Core CPI data. Economists anticipate Core CPI to be +0.4% m/m and +5.3% y/y in May, compared to the previous figures of +0.4% m/m and +5.5% y/y.

In the bond markets, United States 10-Year rates are at 3.721%, down -1.07%.

The Euro Stoxx 50 futures are up +0.14% this morning, led by gains in technology stocks amid growing optimism that the Federal Reserve will pause its tightening campaign, while China’s central bank decision to cut its short-term lending rate also lifted market sentiment. Data on Tuesday showed that the German headline inflation eased in May, confirming preliminary estimates, as energy prices fell further. In corporate news, shares of Hexagon Ab (HEXAB.S.DX) rose more than +4% after the Swedish industrial technology group announced a collaboration with NVIDIA Corporation.

U.K.’s Average Earnings Index +Bonus, U.K.’s Claimant Count Change, U.K.’s Employment Change 3M/3M, U.K.’s Unemployment Rate, Germany’s CPI, Spain’s CPI, Germany’s ZEW Current Conditions, Germany’s ZEW Economic Sentiment, and Eurozone’s ZEW Economic Sentiment data were released today.

U.K. April Average Earnings Index +Bonus has been reported at 6.5%, stronger than expectations of 6.1%.

U.K. May Claimant Count Change came in at -13.6K, stronger than expectations of +21.4K.

U.K. April Employment Change 3M/3M stood at +250K, stronger than expectations of +150K.

U.K. April Unemployment Rate was at 3.8%, stronger than expectations of 4.0%.

The German May CPI has been reported at -0.1% m/m and +6.1% y/y, in line with expectations.

The Spanish May CPI came in at 0.0% m/m and +3.2% y/y, compared to expectations of -0.1% m/m and +3.2% y/y.

The German June ZEW Current Conditions stood at -56.5, weaker than expectations of -40.0.

The German June ZEW Economic Sentiment was at -8.5, stronger than expectations of -13.1.

Eurozone June ZEW Economic Sentiment came in at -10.0, stronger than expectations of -11.9.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.15%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.80%.

China’s Shanghai Composite today closed slightly higher after the central bank cut a short-term policy lending rate in a bid to prop up the country’s flagging economy. The People’s Bank of China lowered its seven-day reverse repo rate by 10 basis points to 1.90% from 2% for the first time in 10 months. Also, Bloomberg reported on Tuesday that China is weighing a broad package of stimulus measures to boost sluggish economic growth and weak market confidence. Meanwhile, artificial intelligence, information technology, and media stocks outperformed Tuesday. On the negative side, the United States enforced sanctions on Tuesday on over a dozen individuals and entities from China, Hong Kong, and Iran. Investor focus is now on Chinese fixed asset investment, unemployment, industrial production, and retail sales data due on Thursday.

“The rate cut will help ease economic pressure and aid demand recovery, but it’s not enough,” said Rocky Fan, an economist at Guolian Securities.

At the same time, Japan’s Nikkei 225 Stock Index closed above the 33,000 level for the first time in 33 years, led higher by high-value technology stocks. Also, Japanese chip-exposed stocks gained ground after a Wall Street Journal report suggested that manufacturers in South Korea and Taiwan would be permitted to uphold their infrastructure in China, despite the existing U.S. sanctions against the country. Meanwhile, shares of SoftBank Group Corp climbed more than +5% following a report that chipmaker Intel Corporation is in talks to be an anchor investor in the initial public offering of the company’s chip designing unit, Arm. In other news, Toyota Motor Corp rose about +5% after the Japanese carmaker said it plans to market next-generation battery electric vehicles starting in 2026. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 4.82% to 20.55.

Pre-Market U.S. Stock Movers

Oracle Corporation (ORCL) climbed over +4% in pre-market trading after the company reported better-than-expected Q4 results.

Urban Outfitters Inc (URBN) gained more than +2% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight.

StoneCo Ltd (STNE) rose about +2% in pre-market trading after HSBC upgraded the stock to Buy from Hold.

Capri Holdings Ltd (CPRI) fell over -1% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight.

Apple Inc (AAPL) dropped about -0.8% in pre-market trading after UBS downgraded the stock to Neutral from Buy.

Devon Energy Corporation (DVN) rose more than +1% in pre-market trading after Goldman Sachs upgraded the stock to Buy from Neutral.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Tuesday - June 13th

Ashtead Gro (ASHTY), Burford (BUR), Currency Exchange Int (CURN), Motorcar Parts (MPAA), MamaMancinis (MMMB).

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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.