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S&P Futures Tick Lower Ahead of FOMC Meeting Minutes

Barchart - Wed Aug 16, 4:37AM CDT

September S&P 500 futures (ESU23) are trending down -0.07% this morning as market participants looked ahead to the release of the Federal Reserve’s July policy meeting minutes.

In Tuesday’s trading session, Wall Street’s major averages closed in the red, with the blue-chip Dow and benchmark S&P 500 dropping to 1-month lows. Discover Financial Services (DFS) tumbled over -9% and was the top percentage loser on the S&P 500 after the consumer finance company announced the departure of its president and CEO, Roger Hochschild. Also, bank stocks retreated following a downgrade warning from rating agency Fitch Ratings, with Zions Bancorporation (ZION) plunging over -4% and KeyCorp (KEY) dropping more than -3%. In addition, Sea Ltd (SE) slumped over -28% after the Singapore-based internet company posted weaker-than-expected Q2 revenue. On the bullish side, DR Horton Inc (DHI) climbed more than +2%, and Lennar Corporation (LEN) rose over +1% after Warren Buffett’s Berkshire Hathaway revealed new positions in the stocks.

The Commerce Department’s report on Tuesday showed U.S. retail sales rose +0.7% m/m in July, stronger than expectations of +0.4% m/m, adding to concerns that the Fed would have to keep interest rates elevated for longer than expected. Also, U.S. July Core Retail Sales came in at +1.0% m/m, stronger than expectations of -0.3% m/m. In addition, U.S. NY Empire State Manufacturing Index stood at -19.00 in August compared to the forecasted -1.00 level.

“Given the fact that we are so hyper-vigilant about the Fed and what their next step will be in September, it isn’t surprising that the market reacted with jitters, given that the retail sales number might indicate that the Fed would continue to raise rates,” said Peter Anderson, founder of Andersen Capital Management.

Meanwhile, Minneapolis Fed President Neel Kashkari remarked at a conference on Tuesday that even though inflation has been receding, “it’s still too high.” “I want to see convincing evidence that inflation is well on its way back down to 2%, and then we can allow it some time to run,” Kashkari said.

U.S. rate futures have priced in a 90.5% probability of no hike and a 9.5% chance of a 25 basis point rate increase at the conclusion of the Fed’s September meeting.

On the earnings front, major global companies like Cisco (CSCO), TJX (TJX), Synopsys (SNPS), and Target (TGT) are set to report their quarterly results today. 

Today, investors will be paying close attention to the release of the Federal Reserve’s minutes from the July meeting for clues on the central bank’s next move. 

Also, investors will likely focus on the U.S. Building Permits preliminary data, which was at 1.441M in June. Economists foresee the July figure to be 1.463M.

U.S. Housing Starts data will be reported today. Economists foresee this figure to stand at 1.448M in July, compared to the previous value of 1.434M.

U.S. Industrial Production data will come in today. Economists expect July’s figure to be +0.3% m/m, compared to the previous number of -0.5% m/m.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -2.320M, compared to last week’s value of +5.851M.

In the bond markets, United States 10-Year rates are at 4.188%, down -0.85%.

The Euro Stoxx 50 futures are up +0.40% this morning as investors digested important Eurozone growth data while awaiting further clues on the U.S. Federal Reserve’s interest rate trajectory. Gains in insurance and retail stocks are leading the overall market higher. Data from Eurostat showed on Wednesday that the Eurozone economy grew by +0.3% q/q in the second quarter of 2023, matching the initial estimates. Also, the Office for National Statistics said Wednesday that U.K. annual headline inflation cooled sharply in July while the closely watched core rate held steady. In corporate news, Admiral Group Plc (ADM.LN) soared about +5% after the British motor and home insurer reported a slight increase in its first-half pre-tax profit. 

U.K.’s CPI, U.K.’s Core CPI, Eurozone’s GDP (preliminary), and Eurozone’s Industrial Production data were released today.

U.K. July CPI has been reported at -0.4% m/m and +6.8% y/y, compared to expectations of -0.5% m/m and +6.8% y/y.

U.K. July Core CPI stood at +0.3% m/m and +6.9% y/y, stronger than expectations of +0.2% m/m and +6.8% y/y.

Eurozone GDP came in at +0.3% q/q and +0.6% y/y in the second quarter, in line with expectations.

Eurozone June Industrial Production arrived at +0.5% m/m, stronger than expectations of -0.1% m/m.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.82%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.46%.

China’s Shanghai Composite today closed lower as disappointing economic data and the absence of substantial stimulus measures from Beijing continued to weigh on sentiment. Data showed on Wednesday that Chinese new-home prices in 70 cities, excluding state-subsidized housing, dropped for a second month in July, underscoring the worsening property downturn that’s exerting pressure on the world’s second-largest economy. Meanwhile, JPMorgan Chase & Co. slashed its full-year growth forecast for the country to 4.8% from 6.4% following a slew of disappointing data for July. Also, Barclays further lowered its growth prediction for the country’s 2023 gross domestic product to 4.5%. In other news, a report from Goldman Sachs indicated that global hedge funds “aggressively” sold Chinese stocks recently amid heightened worries regarding the country’s property sector and a series of lackluster economic data.

“Chinese stocks may be in a holding pattern. Investors may not come back until economic data starts to improve sequentially or when broad-based stimulus measures are announced, such as a household fiscal transfer or a meaningful relaxation of property restrictions in tier-1 cities,” said David Chao, a global market strategist for Asia Pacific at Invesco.

Japan’s Nikkei 225 Stock Index closed sharply lower today, ending at a more than 2-month low as more signs of deteriorating economic conditions in China and renewed concerns about a hawkish U.S. Federal Reserve stance weighed on risk appetite. Meanwhile, Japanese bank stock fell on Wednesday following a report suggesting that rating agency Fitch might downgrade multiple U.S. banks, with Mitsubishi UFJ Financial Group slumping over -2% and Mitsui Financial Group dropping more than -1%. Energy-related stocks also lost ground. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +5.94% to 19.97.

Pre-Market U.S. Stock Movers

Dlocal Ltd (DLO) surged over +26% in pre-market trading after the company reported upbeat Q2 results and appointed former MercadoLibre CFO Pedro Arnt as its co-Chief Executive Officer.

AngioDynamics Inc (ANGO) climbed more than +9% in pre-market trading after the company announced that it had received breakthrough device designation from the FDA for its AngioVac System.

CAVA Group Inc (CAVA) gained over +12% in pre-market trading after reporting stronger-than-expected Q2 results. 

Mercury Systems Inc (MRCY) plunged about -10% in pre-market trading after the company posted downbeat Q4 results and issued below-consensus FY24 guidance.

SM Energy Co (SM) rose more than +1% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral.

Chevron Corp (CVX) gained about +1% in pre-market trading after Mizuho upgraded the stock to Buy from Neutral.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - August 16th

Cisco (CSCO), TJX (TJX), Synopsys (SNPS), Target (TGT), Performance Food Group Co (PFGC), Wolfspeed (WOLF), Avnet (AVT), StoneCo (STNE), Alvotech (ALVO), ZIM Integrated Shipping Services (ZIM), Brinker (EAT), Navigator Holdings (NVGS), Kimball Electronics (KE), Kamada (KMDA).

More Stock Market News from Barchart

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.