Stock Index Futures Move Higher Ahead of U.S. Inflation Data

Oleksandr Pylypenko - Barchart - Wed Jul 12, 2023

September S&P 500 futures (ESU23) are up +0.19%, and September Nasdaq 100 E-Mini futures (NQU23) are up +0.23% this morning as investors awaited a crucial U.S. inflation report that will heavily influence market expectations regarding the Federal Reserve’s future monetary policy actions.

In Tuesday’s trading session, the blue-chip Dow outperformed major benchmarks, underpinned by an over +4% gain in 3M Company (MMM) after Bank of America upgraded the stock to Neutral from Underperform. Also, Newell Brands (NWL) surged about +11% and was the top percentage gainer on the benchmark S&P 500 after Canaccord initiated coverage of the stock with a Buy rating. In addition, Activision Blizzard Inc (ATVI) climbed more than +10% after a district judge rejected a request from the Federal Trade Commission to block Microsoft’s $69B acquisition of the videogame company. On the bearish side, microchip stocks lost ground, with Applied Materials Inc (AMAT) slumping over -2% and Advanced Micro Devices Inc (AMD) falling about -2%.

“There is a massive eye on inflation data - it comes too late in the day for the July meeting. That hike is basically sealed and it would take something pretty weak on the inflation side to change that,” said Craig Erlam, a market strategist at OANDA.

Meanwhile, U.S. rate futures have priced in a 92.4% probability of a 25 basis point rate increase and a 7.6% chance of no hike at the Fed’s monetary policy committee meeting later this month.

Today, all eyes are focused on the U.S. consumer inflation report in a couple of hours. Economists, on average, forecast that June U.S. CPI will come in at +0.3% m/m and +3.1% y/y, compared to the previous values of +0.1% m/m and +4.0% y/y.

Also, investors will likely focus on U.S. Core CPI data. Economists anticipate Core CPI to be +0.3% m/m and +5.0% y/y in June, compared to the previous figures of +0.4% m/m and +5.3% y/y.

According to a survey conducted by 22V Research, 65% of respondents anticipate that the core CPI, which excludes volatile food and energy prices, will be lower than the consensus forecast.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be +0.483M, compared to last week’s value of -1.508M.

In addition, investors are likely to focus on speeches from Minneapolis Fed President Neel Kashkari, Cleveland Fed President Loretta Mester, and Atlanta Fed President Raphael Bostic.

In the bond markets, United States 10-Year rates are at 3.939%, down -1.03%.

The Euro Stoxx 50 futures are up +0.90% this morning, tracking overnight gains on Wall Street, as investors looked ahead to the release of key U.S. inflation data. Strength in technology and insurance stocks is lending support to the overall market. Meanwhile, the Bank of England characterized the U.K. banking sector as “resilient” following its most recent stress test. In corporate news, About You Holding Se (YOU.D.DX) surged over +26% after the company reaffirmed its annual revenue forecast. Also, Nordic Semiconductor ASA (NOD.O.DX) climbed more than +4% after an earnings beat.

Spain’s CPI data was released today.

The Spanish June CPI has been reported at +0.6% m/m and +1.9% y/y, in line with expectations.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.78%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.81%.

China’s Shanghai Composite today closed lower as investors waited for more robust stimulus measures to revive an ailing economy. The offshore yuan strengthened against the greenback for a fifth day after China’s central bank extended support for the currency through a stronger-than-expected daily reference exchange rate. Meanwhile, Hong Kong stocks gained ground on Wednesday after data showed that China’s new bank loans rose more than expected in June, driven by the central bank’s endeavors to bolster the economy. In other news, according to an announcement on the official WeChat account of the National Development and Reform Commission, China's primary economic planner, they recently visited companies such as Alibaba, Tencent, and Meituan, commending their prominent role in driving innovation and facilitating high-quality development. On the ground of this, Hong Kong-listed heavyweight technology stocks advanced, with Baidu Inc rising about +2% and Tencent Holdings Ltd gaining more than +1%.

Japan’s Nikkei 225 Stock Index closed lower and hit a 1-month low today as a sharply rising yen and weak economic data weighed on sentiment. Government data showed on Wednesday that the country’s core machinery orders unexpectedly declined in May, signaling a notable decrease in capital spending on machinery and equipment. Another data set showed that the Japanese wholesale inflation slowed for a sixth straight month in June due to falling fuel and commodity prices. Meanwhile, chip-related stocks slumped on Wednesday, with Tokyo Electron and Renesas Electronics Corp falling over -3%. Also, a surge in the yen amid expectations of the Bank of Japan policy adjustment weighed on export-oriented stocks. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.22% to 20.66.

The Japanese May Core Machinery Orders stood at -7.6% m/m and -8.7% y/y, weaker than expectations of +1.0% m/m and -0.2% y/y.

The Japanese June PPI came in at -0.2% m/m and +4.1% y/y, weaker than expectations of +0.1% m/m and +4.3% y/y.

Pre-Market U.S. Stock Movers

Holley Inc (HLLY) soared about +5% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral.

Fresenius Medical Care Corporation (FMS) climbed over +4% in pre-market trading after Goldman Sachs initiated coverage of the stock with a Buy rating.

Cinemark Holdings Inc (CNK) gained more than +4% in pre-market trading after B. Riley upgraded the stock to Buy from Neutral.

Carvana Co (CVNA) rose over +2% in pre-market trading after JMP Securities raised its price target on the stock to $50 from $25.

Terex Corporation (TEX) gained more than +1% in pre-market trading after the company raised its quarterly dividend by 13.3%.

Elevance Health Inc (ELV) slid about -0.8% in pre-market trading after Wolfe Research downgraded the stock to Peer Perform from Outperform.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - July 12th

DNB Bank ASA (DNBBY), Washington Federal (WAFD), MillerKnoll (MLKN), AngioDynamics (ANGO), Theratechnologies (THTX).

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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.