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Stock Index Futures Move Lower as Investors Cautiously Await U.S. Big Bank Earnings, Retail Sales Data

Barchart - Fri Apr 14, 2023

June S&P 500 futures (ESM23) are down -0.14%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.39% this morning after three major U.S. benchmark indices rallied on Thursday as economic data showed further cooling in inflationary pressures and signs of easing in the resilient labor market, while investors braced for big bank earnings.

In Thursday’s trading session, Wall Street’s main indexes ended solidly in the green, with the benchmark S&P 500 and the blue-chip Dow climbing to 2-month highs. Also, the tech-heavy Nasdaq 100 notched the biggest one-day gain in nearly a month and snapped a three-day losing streak, boosted by an over +4% rise in Amazon (AMZN) on positive investor reactions to the e-commerce giant’s annual CEO letter and its new tools to be used for artificial intelligence.

Data on Thursday showed U.S. producer price index unexpectedly fell -0.5% m/m and rose +2.7% y/y in March, weaker than expectations of +0.1% m/m and +3.0% y/y. Also, the Labor Department report showed claims for state unemployment benefits rose +11K to a seasonally adjusted 239K last week, higher than the expected figure of 232K, pointing to a loosening labor market.

“Inflation is going to come down faster than the Fed thinks it will, but ironically the banking crisis is bullish for a Fed pause, which is bullish for the market, particularly tech stocks,” said Jay Hatfield, a chief executive officer at Infrastructure Capital Management.

U.S. rate futures have priced in a 69.2% probability of a 25 basis point rate increase and a 30.8% chance of no hike at the next central bank meeting in May.

Meanwhile, big banks, including JPMorgan Chase & Co (JPM), Wells Fargo & Company (WFC), Citigroup (C), along with health insurance giant UnitedHealth (UNH), kick off the first-quarter earnings season today. Analysts estimate aggregate S&P 500 earnings to fall 5.2% year-over-year in Q1, compared with an expected growth of 1.4% at the start of the quarter.

Today, all eyes are focused on U.S. Retail Sales data in a couple of hours. Economists, on average, forecast that March Retail Sales will stand at -0.4% m/m, compared to the previous value of -0.4% m/m.

Also, investors are likely to focus on U.S. Core Retail Sales data, which was at -0.1% m/m in February. Economists foresee the new figure to be -0.3% m/m.

U.S. Industrial Production data will be reported today. Economists foresee this figure to stand at +0.2% m/m in March, compared to the previous number of +0.3% m/m.

U.S. Export and Import Price Indexes for March will also be in focus today. Economists anticipate Export Price Index to be at -0.1% m/m and Import Price Index to stand at -0.1% m/m.

U.S. Michigan Consumer Sentiment preliminary reading will come in today. Economists expect April’s figure to be 62.0, compared to the previous value of 62.0.

U.S. Michigan Consumer Expectations will be reported today as well. Economists estimate the preliminary figure to stand at 60.0 in April, compared to 59.2 in March.

In addition, investors will likely focus on a speech from Federal Reserve Governor Christopher Waller.

In the bond markets, United States 10-Year rates are at 3.441%, down -0.29%.

The Euro Stoxx 50 futures are up +0.19% this morning as a cooler-than-expected U.S. wholesale inflation reading bolstered bets that the Federal Reserve and other central banks could soon reach a peak in their rate-hiking cycle. Also, luxury stocks extended their rally, with Hermes Intl (RMS.FP) climbing over +1% after the company’s sales rose 23% in the first quarter, above market expectations, amid strong demand from Chinese customers. Meanwhile, European Central Bank Governing Council member Robert Holzmann said Thursday that a 50 basis point increase “could be in the ballpark next time, what happens afterward depends, as always, on the conditions.”  In other corporate news, Dechra Pharmaceuticals Plc (DPH.LN) surged over +35% after the British veterinary pharmaceuticals producer announced Thursday that it had entered talks with Swedish private equity group EQT to discuss a possible all-cash takeover.

Germany’s WPI, France’s CPI, and Spain’s CPI data were released today.

The German March WPI has been reported at +0.2% m/m and +2.0% y/y, weaker than expectations of +2.5% m/m and +4.4% y/y.

The French March CPI stood at +0.7% m/m and +5.7% y/y, compared to expectations of +0.8% m/m and +5.6% y/y.

The Spanish March CPI came in at +0.4% m/m and +3.3% y/y, in line with expectations.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.60%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.20%. 

China’s Shanghai Composite today closed higher, led by gains in semiconductor and resource stocks. Also, People’s Bank of China Governor Yi Gang said Friday that the country would achieve this year’s growth target, boosting investor sentiment. In addition, the Monetary Authority of Singapore became the latest central bank to pause its monetary policy tightening, which also propped sentiment in the region. Meanwhile, the Chinese economic outlook brightened after data on Thursday showed a surprisingly strong trade performance in March.

“The stronger-than-expected March China export gain suggests that the economic recovery is more broadly-based than our expectations, and we have revised up our 1Q GDP forecast,” wrote analysts at JPMorgan in a note.

Japan’s Nikkei 225 Stock Index closed higher for a sixth straight session, its longest winning streak since July, boosted by a strong rally on Wall Street overnight and a more than +8% jump in Uniqlo-owner Fast Retailing. Also, a rise in crude oil prices to multi-month high levels supported energy stocks, with Itochu and Marubeni rising more than +3%. Meanwhile, shares of Fast Retailing Co. surged over +8% after the owner of Uniqlo apparel stores reported strong quarterly earnings and lifted its annual profit forecast. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 1.67% to 16.49.

Pre-Market U.S. Stock Movers

Boeing Co (BA) plunged over -4% in pre-market trading after the company warned that deliveries of some 737 Max models might be delayed due to issues with a part supplied by Spirit AeroSystems.

Express Inc (EXPR) climbed more than +14% in pre-market trading after the company and WHP Global announced a definitive agreement to acquire menswear brand Bonobos, Inc. from Walmart (WMT).

Lucid Group Inc (LCID) slid over -5% in pre-market trading after the company reported production of 2,314 vehicles during the first quarter of 2023 and deliveries of 1,406 cars during the same period.

Tesla Inc (TSLA) dropped about -1% in pre-market trading after the carmaker cut prices of its Model 3 and Model Y vehicles in Singapore between 4.3% and 5% and lowered the price of its Model 3 in Germany by 4.5%.

Hartford Financial Services Group (HIG) fell more than -1% in pre-market trading after the insurer projected Q1 core earnings that fell short of expectations. 

Rivian Automotive Inc (RIVN) sank over -3% in pre-market trading after Piper Sandler downgraded the stock to neutral from overweight.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Friday - April 14th

UnitedHealth (UNH), JPMorgan (JPM), Hermes International SA (HESAY), Wells Fargo&Co (WFC), BlackRock (BLK), Citigroup (C), PNC Financial (PNC), First Republic Bank (FRC), Eaton Vance Tax Advantaged Glb Div (ETG), TomTom ADR (TMOAY), Hingham Institution (HIFS), SNDL Inc (SNDL), Mesabi Trust (MSB), Byrna Technologies (BYRN).

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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.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.