September S&P 500 E-Mini futures (ESU24) are trending up +0.12% this morning, stabilizing after yesterday’s tech-led selloff, with investors looking ahead to crucial U.S. producer inflation data and earnings reports from some of the biggest U.S. banks.
In yesterday’s trading session, Wall Street’s major indexes closed mixed, with the tech-heavy Nasdaq 100 dropping to a 1-week low. Tesla (TSLA) slumped over -8% and was the top percentage loser on the S&P 500 and Nasdaq 100 after Bloomberg News reported that the company was delaying its planned robotaxi event by about two months to October. Also, Delta Air Lines (DAL) slid about -4% after the top U.S. carrier posted downbeat Q2 results and provided below-consensus Q3 adjusted EPS guidance. In addition, chip stocks retreated, with Nvidia (NVDA) falling more than -5% and Intel (INTC) dropping nearly -4% to lead losers in the Dow. On the bullish side, WD-40 (WDFC) gained over +4% after the company reported better-than-expected Q3 results.
The Labor Department’s report on Thursday showed consumer prices edged down -0.1% m/m in June, lower than the predicted figure of +0.1% m/m. On an annual basis, headline inflation eased to +3.0% in June from +3.3% in May, better than expectations of +3.1%. In addition, the core CPI, which excludes volatile food and fuel prices, eased to a 3-year low of +3.3% y/y in June, better than expectations of no change at +3.4% y/y. At the same time, the number of Americans filing for initial jobless claims in the past week fell -17K to a 6-week low of 222K, stronger than expectations of 236K.
Chicago Fed President Austan Goolsbee described the latest inflation data on Thursday as “excellent,” stating that the figures provided the evidence he has been waiting for to be confident that the central bank is on track to achieve its 2% goal. Also, San Francisco Fed President Mary Daly said, “With the information we have received to date, which include data on employment, inflation, GDP growth, and the outlook for the economy, I see it as likely that some policy adjustment will be warranted.” At the same time, St. Louis Fed President Alberto Musalem stated that the June CPI report indicated “encouraging further progress towards lower inflation,” but he would like additional evidence of easing price pressures.
“We’ll see you September! Better-than-expected inflation readings in many key sectors should allow the Fed to start talking about adjusting policy in July - and potentially allow the Fed to act in September,” said George Mateyo at Key Wealth. “That said, we still see the Fed wanting to gain further confidence before cutting aggressively unless stress materializes in the labor market.”
U.S. rate futures have priced in a 6.7% chance of a 25 basis point rate cut at the next FOMC meeting in July and an 86.4% probability of a 25 basis point rate cut at the September FOMC meeting.
Meanwhile, the second-quarter corporate earnings season gets underway, with some of the biggest U.S. banks, including JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C), slated to release their quarterly results today.
On the economic data front, all eyes are focused on the U.S. Producer Price Index, set to be released in a couple of hours. Economists, on average, forecast that the U.S. June PPI will stand at +0.1% m/m and +2.3% y/y, compared to the previous figures of -0.2% m/m and +2.2% y/y.
The U.S. Core PPI will also be closely watched today. Economists expect June’s figures to be +0.2% m/m and +2.5% y/y, compared to the previous numbers of 0.0% m/m and +2.3% y/y.
The U.S. Michigan Consumer Sentiment preliminary reading will be reported today as well. Economists estimate this figure to arrive at 68.5 in July, compared to 68.2 in June.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.222%, up +0.77%.
The Euro Stoxx 50 futures are up +0.40% this morning as investors digested upbeat earnings updates and awaited the release of U.S. producer inflation data due later in the day. Telecom stocks led the gains on Friday, with Telefonaktiebolaget Lm Ericsson (ERICB.S.DX) surging over +6% after the company reported a smaller-than-expected drop in Q2 revenue. Final data from statistics agency Insee showed Friday that the French annual inflation rate cooled less than expected to 2.2% in June. Separately, the National Statistics Institute reported on Friday that Spain’s annual inflation rate eased to 3.4% in June, confirming preliminary data. In other corporate news, Norwegian Air Shuttle ASA (NAS.O.DX) climbed more than +5% after reporting better-than-expected Q2 operating profit.
France’s CPI and Spain’s CPI data were released today.
The French June CPI came in at +0.1% m/m and +2.2% y/y, compared to expectations of +0.1% m/m and +2.1% y/y.
The Spanish June CPI stood at +0.4% m/m and +3.4% y/y, compared to expectations of +0.3% m/m and +3.4% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.03%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.45%.
China’s Shanghai Composite Index closed just above the flatline today as investors digested mixed trade data from the country and looked ahead to the key political economy meeting, the Third Plenum. Property stocks outperformed on Friday as investors anticipated additional stimulus for the property sector in the upcoming plenum meeting. Customs data released on Friday revealed that China’s exports grew more than expected in June, marking the fastest growth in outbound shipments since March 2023, while imports unexpectedly fell in another sign of subdued domestic demand. Meanwhile, all eyes are now on the Third Plenum of the Chinese Communist Party, set to commence on Monday, where some fiscal and financial reform measures are expected to be unveiled. In corporate news, Beijing Yanjing Brewery climbed over +6% after announcing it anticipates a 55% year-on-year increase in its first-half attributable net profit to a range between 719.5 million yuan and 796.5 million yuan.
The Chinese June Trade Balance came in at $99.05B, stronger than expectations of $85.10B.
The Chinese June Exports stood at +8.6% y/y, stronger than expectations of +8.0% y/y.
The Chinese June Imports arrived at -2.3% y/y, weaker than expectations of +2.8% y/y.
Japan’s Nikkei 225 Stock Index closed sharply lower today, posting its steepest decline in over two and a half months, as overnight losses on Wall Street and the threat of currency intervention prompted profit-taking. Electronics and financial stocks led the declines on Friday following a rout in U.S. technology stocks overnight, which led to a sharp drop in bond yields. Data from the Ministry of Economy, Trade, and Industry on Friday showed that Japan’s industrial production was revised upward in May. Separately, a quarterly Bank of Japan survey revealed on Friday that nearly 90% of Japanese households anticipate prices will rise a year from now, a sign of heightening inflation expectations that would support the case for a near-term interest rate hike. Meanwhile, the Japanese yen hovered around 159 per dollar on Friday and is expected to remain volatile after rebounding sharply in the previous session due to a suspected intervention from Japanese authorities following cooler-than-anticipated U.S. inflation data. The Nikkei newspaper also reported that the BOJ conducted so-called rate checks with banks on the euro against the yen on Friday, a move often regarded as a precursor to intervention. Japan’s top currency diplomat, Masato Kanda, said Friday that authorities will take action as needed in the foreign exchange market but refrained from commenting on whether the government intervened to support the yen on Thursday. In corporate news, SoftBank Group slumped over -4% after announcing the acquisition of artificial intelligence chipmaker Graphcore. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.38% to 18.37.
The Japanese May Industrial Production came in at +3.6% m/m, stronger than expectations of +2.8% m/m.
Pre-Market U.S. Stock Movers
Tesla (TSLA) fell over -1% in pre-market trading after UBS downgraded the stock to Sell from Neutral with a price target of $197.
Array Technologies (ARRY) climbed about +7% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $14.
Carvana (CVNA) gained more than +1% in pre-market trading after BTIG initiated coverage of the stock with a Buy rating and a $155 price target.
Booking Holdings (BKNG) rose nearly +1% in pre-market trading after Benchmark upgraded the stock to Buy from Hold with a $4,700 price target.
ASP Isotopes (ASPI) tumbled over -18% in pre-market trading after the company announced that it had commenced an underwritten public offering of shares of its common stock.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - July 12th
JPMorgan (JPM), Wells Fargo&Co (WFC), Citigroup (C), Bank of NY Mellon (BK), Fastenal (FAST).
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