June S&P 500 E-Mini futures (ESM24)are trending down -0.15% this morning as uncertainty over the Federal Reserve’s plans to cut interest rates continued to stifle market sentiment, with investors’ focus now shifting to remarks by Fed Chair Jerome Powell and ADP National Employment numbers due later in the day.

In yesterday’s trading session, Wall Street’s major indexes closed in the red, with the benchmark S&P 500, blue-chip Dow, and tech-heavy Nasdaq 100 dropping to 1-1/2 week lows. Tesla (TSLA) plunged about -5% and was the top percentage loser on the Nasdaq 100 after the electric vehicle giant’s Q1 deliveries missed already-reduced expectations. Also, health insurer stocks slumped after the industry regulator said that U.S. payments to Medicare Advantage plans will only rise by 3.7% on average in 2025, with Humana (HUM) falling more than -13% and CVS Health (CVS) sliding over -7%. In addition, PVH Corp. (PVH) tumbled more than -22% after the apparel retailer provided disappointing Q1 and FY24 guidance. On the bullish side, McCormick & Co. (MKC) gained over +2% after Argus Research upgraded the stock to Buy from Hold with a price target of $88. 

A Labor Department report on Tuesday showed that U.S. JOLTs job openings came in at 8.756M in February, slightly trailing the 8.760M consensus and rising from 8.748M in January (revised from 8.863M). Also, U.S. February factory orders rose +1.4% m/m, stronger than expectations of +1.1% m/m.

“The U.S. economy’s ability to resist headwinds has been remarkable. The timing of a rate cut remains uncertain,” said Mark Hamrick at Bankrate.

Cleveland Fed President Loretta Mester said on Tuesday that she wants to see further evidence indicating a downward trajectory in inflation before considering rate cuts. “If the economy evolves as expected, then in my view, it will be appropriate for the FOMC to begin reducing the fed funds rate later this year,” she said. Speaking with reporters after the speech, Mester affirmed her view that three rate cuts are still likely appropriate for this year but emphasized that “it’s a close call” on whether fewer cuts will be needed. In addition, San Francisco Fed President Mary Daly stated on Tuesday that three interest-rate cuts remain a reasonable expectation for 2024, though she emphasized that “there’s really no urgency to adjust the rate.”

U.S. rate futures have priced in a 0.9% chance of a 25 basis point rate cut at the May FOMC meeting and a 62.3% chance of a 25 basis point rate cut at the conclusion of the Fed’s June meeting.

Meanwhile, Federal Reserve Chair Jerome Powell is scheduled to deliver a speech at the Stanford Business, Government, and Society Forum later in the day. Also, Fed Governor Michelle Bowman, Chicago Fed President Austan Goolsbee, and Fed Governor Adriana Kugler will speak today.

On the economic data front, all eyes are focused on the U.S. ADP Nonfarm Employment Change data in a couple of hours. Economists, on average, forecast that March ADP Nonfarm Employment Change will stand at 148K, compared to the previous value of 140K.

Also, investors will likely focus on the U.S. ISM Non-Manufacturing PMI, which arrived at 52.6 in February. Economists foresee the March figure to be 52.8.

The U.S. S&P Global Composite PMI will come in today. Economists expect the March figure to be 52.2, compared to February’s value of 52.5.

The U.S. S&P Global Services PMI will also be closely watched today. Economists foresee that the S&P Global Services PMI will come in at 51.7 in March, compared to 52.3 in February.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -0.300M, compared to last week’s value of 3.165M.

In the bond markets, United States 10-year rates are at 4.383%, up +0.41%.

The Euro Stoxx 50 futures are up +0.30% this morning as investors digested a crucial Eurozone inflation report and awaited comments from U.S. Fed Chair Jerome Powell later in the day. Bank stocks gained ground on Wednesday, while real estate and mining stocks underperformed. Meanwhile, preliminary data from Eurostat showed Wednesday that the Eurozone’s annual inflation rate unexpectedly eased to 2.4% in March from 2.6% in February, with the region’s core inflation rate also cooling more than expected. In corporate news, Finecobank Banca Fineco Spa (FBK.M.DX) climbed over +5% after JPMorgan upgraded the stock to Overweight from Neutral.

European Central Bank Governing Council member Robert Holzmann said in a Reuters interview on Wednesday that the ECB might begin reducing interest rates in June due to the possibility of faster-than-expected inflation decline. However, he emphasized that the central bank should not get too far ahead of its U.S. counterpart, warning that such actions would reduce the effectiveness of easing. “April is not on my radar. In June, we will have more information. If the data allows it, a decision will be made,” he said.

Eurozone’s CPI (preliminary), Eurozone’s Core CPI (preliminary), and Eurozone’s Unemployment Rate were released today. 

Eurozone March CPI has been reported at +2.4% y/y, weaker than expectations of +2.5% y/y.

Eurozone March Core CPI came in at +2.9% y/y, weaker than expectations of +3.0% y/y.

Eurozone February Unemployment Rate was at 6.5%, weaker than expectations of 6.4%.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.18% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.97%.

China’s Shanghai Composite Index closed slightly lower today despite a private sector survey indicating that the expansion in the services industry picked up pace in March. Losses in technology stocks led the overall market lower on Wednesday. A private-sector survey showed on Wednesday that China’s services activity growth accelerated in March as new business expanded at the fastest rate in three months. Meanwhile, investor sentiment turned sour as robust U.S. jobs and factory data diminished hopes for the Federal Reserve’s imminent interest rate cut, thereby dashing expectations of cheaper borrowing costs for Chinese companies, which are often heavily reliant on foreign capital. In addition, a major earthquake in Taiwan sparked concerns within the chipmaking industry, a vital sector for China’s technological advancement. In corporate news, Shandong New Beiyang Information Technology fell more than -3% following the resignation of the company’s chief engineer, Wang Chuntao, amid a staff revamp.

The Chinese March Caixin Services PMI came in at 52.7, in line with expectations.

Japan’s Nikkei 225 Stock Index closed lower today, falling further away from the 40,000 mark as disappointing sales from Fast Retailing and overnight declines on Wall Street dented risk appetite. Electronics, machinery, and game stocks led the declines on Wednesday. A business survey showed on Wednesday that Japanese service sector activity experienced its most rapid expansion in seven months in March, buoyed by robust demand, particularly for inbound tourism. Meanwhile, tsunami warnings were issued in parts of Japan, particularly in Okinawa, following Taiwan’s strongest earthquake in 25 years. In corporate news, Fast Retailing fell over -3% after reporting a 1.5% year-on-year decline in same-store sales for March. At the same time, Itochu Corp. climbed more than +6% after the company announced a plan to repurchase $1 billion worth of shares. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +5.07% to 20.12.

The Japanese March au Jibun Bank Japan Services PMI arrived at 54.1, weaker than expectations of 54.9.

Pre-Market U.S. Stock Movers

Intel Corporation (INTC) slumped over -4% in pre-market trading after the company said its foundry business recorded an operating loss of $7 billion in 2023 on sales of $18.9 billion, a wider loss than the $5.2 billion in 2022 on $27.5 billion in sales.

Dave & Buster’s Entertainment (PLAY) gained over +6% in pre-market trading after the company committed to achieving the $1 billion adjusted EBITDA target in the coming years and doubled its share repurchase authorization to $200 million.

United Parcel Service (UPS) gained nearly +1% in pre-market trading after Redburn Atlantic upgraded the stock to Buy from Neutral with a $180 price target.

Ally Financial (ALLY) fell more than -1% in pre-market trading after JPMorgan downgraded the stock to Underweight from Neutral with a price target of $39.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - April 3rd

Acuity Brands (AYI), Levi Strauss (LEVI), BlackBerry (BB), Novagold (NG), Simulations Plus (SLP), Resources Connection (RGP), Sportsmans (SPWH).

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