September S&P 500 futures (ESU23) are trending down -0.15% this morning as a report on potential new restrictions on the export of artificial intelligence chips to China weighed on sentiment, while investors awaited a speech from Fed Chair Jerome Powell for fresh clues on the future direction of U.S. monetary policy.
NVIDIA Corporation (NVDA) slid over -4% in pre-market trading after the Wall Street Journal reported that Washington is considering new restrictions on exports of artificial intelligence chips to China. Advanced Micro Devices Inc (AMD) fell more than -3% in pre-market trading.
In Tuesday’s trading session, Wall Street’s major averages ended solidly in the green, primarily driven by the rise in consumer discretionary and technology stocks. Microsoft Corporation (MSFT), Apple Inc (AAPL), and Amazon.com Inc (AMZN) rose more than +1%, while Meta Platforms Inc (META) gained about +3% after Citi raised its price target on the stock to $360 from $315. Also, Delta Air Lines (DAL) climbed more than +6% and was among the top percentage gainers on the benchmark S&P 500 after boosting its earnings expectations. In addition, Snowflake Inc (SNOW) gained over +4% after the company announced an artificial intelligence-related partnership with Nvidia Corp. On the bearish side, Walgreens Boots Alliance Inc (WBA) plunged more than -9% and was the top percentage loser on the S&P 500 after the pharmacy chain reported mixed Q3 results and slashed its FY23 earnings forecast. Also, Lordstown Motors Corp (RIDE) tumbled over -17% after the company filed for Chapter 11 bankruptcy and put itself up for sale.
Economic data on Tuesday showed that U.S. CB Consumer Confidence rose to a 1-1/2 year high of 109.7 in June, stronger than expectations of 104.0. Also, U.S. May Durable Goods Orders came in at +1.7% m/m, stronger than expectations of -1.0% m/m. In addition, U.S. New Home Sales unexpectedly surged to a 1-1/4 year high of 763K in May compared to an estimated figure of 675K.
“All the data we have is a confirmation to investors, as they climb this wall of worry that the economy has weakened but not collapsing,” said Robert Pavlik, a senior portfolio manager at Dakota Wealth.
U.S. rate futures have priced in a 76.9% probability of a 25 basis point rate increase and a 23.1% chance of no hike at next month’s policy meeting.
Meanwhile, major companies like Micron Technology (MU) and General Mills (GIS) are set to report their quarterly earnings today.
Today, market participants will be closely watching the speech by Federal Reserve Chair Jerome Powell at the European Central Bank’s annual forum in Sintra, Portugal, which could provide further insights into the monetary policy outlook. ECB’s Christine Lagarde, Bank of Japan’s Kazuo Ueda, and Bank of England’s Andrew Bailey will also speak on a policy panel.
Also, investors are likely to focus on U.S. Goods Trade Balance data, which was at -96.77B in April. Economists foresee the May figure to be -92.90B.
U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -1.757M, compared to last week’s value of -3.831M.
In addition, the U.S. Federal Reserve is scheduled to release the results of its annual stress test of the banking industry later today.
In the bond markets, United States 10-Year rates are at 3.746%, down -0.67%.
The Euro Stoxx 50 futures are up +0.69% this morning, tracking Wall Street’s gains overnight after a host of economic data pointed to signs of resilience in the U.S. economy. Gains in construction and technology stocks are leading the overall market higher. Meanwhile, investors will be closely monitoring a panel discussion of central bankers in Sintra, including European Central Bank President Christine Lagarde, Federal Reserve Chair Jerome Powell, and Bank of Japan Governor Kazuo Ueda. In corporate news, Carrefour (CA.FP) rose more than +3% after Morgan Stanley initiated coverage of the stock with an Overweight rating. Also, Sage Group Plc (SGE.LN) climbed more than +4% after J.P. Morgan upgraded the stock to Overweight from Neutral.
Germany’s GfK Consumer Climate, France’s Consumer Confidence, Spain’s Retail Sales, and Italy’s CPI (preliminary) data were released today.
The German July GfK Consumer Climate Index stood at -25.4, weaker than expectations of -23.0.
The French June Consumer Confidence was at 85, stronger than expectations of 84.
The Spanish May Retail Sales came in at +6.0% y/y, stronger than expectations of +0.6% y/y.
The Italian June CPI has been reported at 0.0% m/m and +6.4% y/y, better than expectations of +0.1% m/m and +6.8% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed flat, and Japan’s Nikkei 225 Stock Index (NIK) closed up +2.02%.
China’s Shanghai Composite today closed flat following the release of data indicating a decline in profits for Chinese industrial firms, while sentiment was also hit by news of the United States considering new restrictions on exports of AI chips to China. Official data released on Wednesday revealed that profits at China’s industrial firms plummeted by -18.8% year-on-year during the first five months of 2023, as companies experienced a significant squeeze in margins. Meanwhile, according to a report by the Wall Street Journal, the Biden administration is contemplating imposing new restrictions on the export of artificial intelligence chips produced by Nvidia and others to China. On the ground of this, Chinese AI-related stocks tumbled on Wednesday, with Inspur Electronic Information Industry Co Ltd plunging about -10%. Investor focus is now squarely on Chinese purchasing manager indexes for June, due on Friday.
At the same time, Japan’s Nikkei 225 Stock Index closed sharply higher today and snapped a four-day losing streak, buoyed by gains in technology and financial stocks. Chipmaking equipment giant Tokyo Electron rose more than +2% while chip-testing machinery maker Advantest climbed over +3%. Also, financial stocks received a boost from higher bond yields, with Nomura Holdings rising more than +3%. In other corporate news, Nippon Sheet Glass surged over +7% and was the top percentage gainer on the Nikkei after announcing the disposal of a Russia joint venture and a gain of 5 billion yen related to equity method investments. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 4.67% to 20.00.
Pre-Market U.S. Stock Movers
Theriva Biologics Inc (TOVX) surged about +77% in pre-market trading after announcing that its lead drug candidate VCN-01 received orphan drug status from the FDA in the treatment of pancreatic cancer.
National CineMedia Inc (NCMI) climbed over +12% in pre-market trading after the company said its planned reorganization under its bankruptcy filing had been confirmed by a U.S. court in Texas.
AeroVironment Inc (AVAV) gained more than +4% in pre-market trading after the company reported better-than-expected Q4 revenue and posted upbeat FY24 guidance.
Ast Spacemobile Inc (ASTS) plunged over -23% in pre-market trading after the company priced its upsized public offering of 12.5 million shares of Class A common stock.
Pinterest Inc (PINS) rose more than +3% in pre-market trading after Wells Fargo upgraded the stock to Overweight from Equal Weight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - June 28th
Micron (MU), General Mills (GIS), Roivant Sciences (ROIV), Concentrix (CNXC), H B Fuller (FUL), Unifirst (UNF), Worthington Industries (WOR), BlackBerry (BB), Franklin Covey (FC), Vizsla (VZLA), Culp (CULP).
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