Stock Index Futures Climb as Investors Await Economic Data, China Stimulus Optimism Lifts Sentiment

Oleksandr Pylypenko - Barchart - Tue Jun 27, 2023

September S&P 500 futures (ESU23) are up +0.21%, and September Nasdaq 100 E-Mini futures (NQU23) are up +0.42% this morning as market participants braced for the next raft of economic data and speeches by policymakers to gain insights into the outlook for the economy and interest rates, while hopes of more policy stimulus from China helped boost market sentiment.

In Monday’s trading session, the tech-heavy Nasdaq 100 underperformed major benchmarks, pressured by a drop in communication services and technology stocks. Tesla Inc (TSLA) plunged more than -6% after Goldman Sachs downgraded the stock to Neutral from Buy. Also, Alphabet Inc (GOOGL) slid over -3% after UBS downgraded the stock to Neutral from Buy. In addition, Carnival Corporation (CCL) slumped more than -7% and was the top percentage loser on the benchmark S&P 500 after the cruise operator reported another quarterly loss and posted a weaker-than-expected Q3 earnings outlook. On the positive side, PacWest Bancorp (PACW) climbed about +4% after Ares Management said it had acquired a $3.5 billion portfolio of specialty finance loans from the lender.

“Market participants are willing to take the Fed at face value, that rates will be higher for longer. We are seeing some of the data go in the right direction, which means we could anticipate the Fed will be able to avoid another hike,” said Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management.

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.

In other news, U.S. President Joe Biden announced Monday details of a $42 billion federal investment in expanding Internet access for American households by 2030.

Today, all eyes are focused on U.S. CB Consumer Confidence data in a couple of hours. Economists, on average, forecast that June CB Consumer Confidence will stand at 104.0, compared to the previous value of 102.3.

Also, investors are likely to focus on U.S. Core Durable Goods Orders data, which was at -0.2% m/m in April. Economists foresee the May figure to be -0.1% m/m.

U.S. Durable Goods Orders data will come in today. Economists foresee this figure to stand at -1.0% m/m in May, compared to the previous number of +1.1% m/m.

U.S. Building Permits and U.S. New Home Sales data will also be closely watched today. Economists forecast May Building Permits to be at 1.491M and May New Home Sales to come in at 675K.

U.S. S&P/CS HPI Composite - 20 n.s.a. will be reported today as well. Economists expect April’s figure to be -2.6% y/y, compared to the previous number of -1.1% y/y.

In the bond markets, United States 10-Year rates are at 3.737%, up +0.49%.

The Euro Stoxx 50 futures are up +0.14% this morning, erasing most of earlier gains as hawkish comments from European Central Bank President Christine Lagarde weighed on sentiment. Automobile stocks are under pressure today after a report said that Volkswagen AG was planning to cut back production of one of its electric SUV models amid weak sales. At the European Central Bank’s annual forum in Sintra, ECB President Christine Lagarde stated that inflation remains too high, indicating that it is premature to declare triumph over consumer price rises. Also, Gita Gopinath, the first deputy managing director of the International Monetary Fund, emphasized that central banks should remain committed to taming inflation, despite the possibility of recessions arising from increasing borrowing costs. In corporate news, shares of Wise Plc (WISE.L.EB) jumped over +17% after the company reported a surge in full-year profit, driven by strong growth in its number of active customers.

Italy’s Business Confidence and Italy’s Consumer Confidence data were released today.

The Italian June Business Confidence stood at 100.3, weaker than expectations of 101.0.

The Italian June Consumer Confidence came in at 108.6, stronger than expectations of 105.5.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +1.23%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.49%.

China’s Shanghai Composite today closed sharply higher after Chinese Premier Li Qiang reaffirmed the government’s commitment to roll out more effective measures to boost demand, while investors continued to monitor U.S.-China tensions for any indications of easing. Also, Premier Li Qiang expressed confidence that China remains on track to meet its economic growth target of 5% in 2023, as set by Beijing earlier this year. The offshore yuan strengthened after China set its daily reference rate for the managed currency at a stronger-than-anticipated level for a second day. Meanwhile, mainland property shares listed in Hong Kong surged Tuesday, with NWS Holdings Ltd climbing over +11% on a buyout offer at a premium. Hong Kong-listed technology stocks also gained ground. In other news, U.S. Treasury Secretary Janet Yellen is scheduled to visit Beijing in early July for the first high-level economic discussions with her newly appointed Chinese counterpart, He Lifeng, according to a tweet by a Bloomberg reporter on Monday.

At the same time, Japan’s Nikkei 225 Stock Index ended in negative territory, dropping for a fourth straight session as investors continued to lock in profits after the index reached a 33-year high the previous week. Many of the country’s leading technology companies experienced a sell-off on Tuesday, tracking overnight declines on Wall Street. Online company CyberAgent plunged about -4% and was the top percentage loser on the Nikkei, while chip-testing equipment maker Advantest slid more than -2%. Among stocks in the green, Oriental Land Co Ltd climbed over +3% after the Tokyo Disney Resort operator announced an increase in ticket prices from October. In other news, Japan extended the term of its top currency official Masato Kanda for an additional year. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 0.62% to 20.98.

Pre-Market U.S. Stock Movers

American Equity Investment Life Holding Co (AEL) surged about +9% in pre-market trading after Bloomberg reported that Brookfield was nearing a deal to acquire the company.

Snowflake Inc (SNOW) climbed more than +3% in pre-market trading after the company announced that it had partnered with NVIDIA Corporation on generative AI in the data cloud.

Guidewire Software Inc (GWRE) gained over +2% in pre-market trading after Stifel upgraded the stock to Buy from Hold.

Kellogg Company (K) rose over +2% in pre-market trading after Goldman Sachs upgraded the stock to Buy from Neutral.

Applied Digital Corp (APLD) slid more than -5% in pre-market trading after guiding Q4 revenue below consensus.

Alphabet Inc (GOOGL) fell about -1% in pre-market trading after Bernstein downgraded the stock to Market Perform from Outperform.

Lordstown Motors Corp (RIDE) tumbled over -56% in pre-market trading after the company filed for Chapter 11 bankruptcy and sued Taiwanese electronics contract manufacturer Foxconn.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Tuesday - June 27th

Walgreens Boots (WBA), Synnex (SNX), Jefferies Financial (JEF), AeroVironment (AVAV), Novagold (NG), Schnitzer (SCHN).

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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.