Five things you need to know before the market opens on Wednesday May 31:
1. -- Stock Futures Lower As Debt Ceiling Deal Heads for House Vote
U.S. equity futures edged lower Wednesday, while the dollar consolidated gains against its global peers, as investors looked to a key House vote on raising the debt ceiling later in the day.
The Republican-controlled House Rules Committee narrowly approved the deal, officially known as the 'Fiscal Responsibility Act', by a 7-6 vote late Tuesday that allows it to advance to the House floor later today. If passed, it will then go to the Senate by the end of the week.
The bill, which would effectively cut spending by around $1.5 trillion over the next ten years, while reducing public debt servicing costs by around $188 million. Once it has full House and Senate approval, it will lift the U.S. debt ceiling, which currently sits at $31.4 trillion, until January of 2025.
Global stocks are approaching the vote with caution, however, as the bill remains unpopular on both sides of the aisle and could, trigger a challenge to the rule of House Speaker Kevin McCarthy if a significant number of Republican lawmakers vote to reject it.
Softer-than-expected factory activity data from China, which showed slumped to the lowest levels in five months in May, added to the market's 'risk-off' sentiment, with oil prices falling sharply for a second consecutive session, taking WTI crude futures for July delivery $1.11 lower to $68.35 per barrel.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.34% higher at 104.524, reflecting both an overnight flight-to-quality and investor positioning ahead of what is expected to be a deluge of bond, bill and note issuance after a debt ceiling deal as part of the Treasury's effort to rebuild its depleted reserves.
Benchmark 2-year Treasury note yields eased another 3 basis points in overnight trading to 4.28% while 10-year notes fell to 3.650%, even as bets on a June rate hike jumped to around 66%, according to the CME Group's FedWatch, following comments from Cleveland Fed President Loretta Mester.
Speaking to the Financial Times of London, Mester said she saw "no compelling reason to pause" the Fed's current rate-hike cycle, adding that ""I would see more of a compelling case for bringing the rates up and then holding for a while until you get less uncertain about where the economy is going."
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 were indicating a 12.5 point opening bell dip while those linked to the Dow Jones Industrial Average were priced for a 63 point move to the downside. The tech-focused Nasdaq was looking at a 34 point decline.
European stocks were also lower, with the region-wide Stoxx 600 falling 0.26% -- after hitting a two-month low earlier in the session -- on the back of the weaker China activity data and the U.S. debt ceiling vote.
Overnight in Asia, the region-wide MSCI ex-Japan index was marked 1.38% lower into the close of trading while Japan's Nikkei 225 fell 1.4% following weaker-than-expected April factory output data from the world's third-largest economy.
2. -- JOLTS Jobs Data In Focus As Fed Rate Bets Accelerate
The Bureau of Labor Statistics will publish the first of three key job markets readings Wednesday as investors focus on wage growth and employment demand ahead of next month's Federal Reserve rate decision.
The Job Openings and Labor Turnover Survey, known as JOLTS, is expected to show that some 9.77 million positions went unfilled over the month of April, a modest uptick from the 9.59 million tally in March but down from the record 12.027 million notched in March of last year.
Still, with labor demand outstripping supply by such a notable margin, even as layoffs -- particularly in the tech sector -- accelerate, economists are worried that wage pressures will become more deeply embedded in the job market, adding to already elevated levels of inflation.
The Labor Department will publish job openings data for the month of April on Wednesday at 10:00 am eastern time, with ADP's national employment report following at 8:15 am eastern time on Thursday.
Friday's non-farm payroll report for the month of May is slated for 8:30 am eastern time on Friday, with analysts looking for job growth to slow notable from April, with 180,000 new positions created and monthly average hourly earnings easing to 0.4%.
3. -- JPMorgan CEO Dimon Urges 'Real Engagement' Between the U.S. and China
JPMorgan (JPM) CEO Jamie Dimon urged renewed engagement between Washington and Beijing during his first visit to China in more than three years Wednesday, adding that "decoupling" the world's two largest economies was not a good strategy.
"I liked the fact that Janet Yellen, Secretary of Treasury, President Biden, the National Security Adviser, and Secretary of State have been talking about derisking," Dimon said during a question-and-answer session at the JPMorgan Global China Summit in Shanghai. "Let's not try to decouple. Let's not try to hurt China, the Chinese people,"
U.S.-Sino tensions have accelerated over the past year, with lawmakers expressing criticism of Beijing's 'one-China' policy and its implications for Taiwan independence, while also keeping Trump-era trade sanctions in place and barring high-tech exports into the country by American companies.
"You're not going to fix these things if you are just sitting across the Pacific yelling at each other. So I'm hoping we have real engagement," Dimon said.
4. -- HP Shares Slide As Softer PC Demand Clouds Q2 Earnings Beat
HP Inc (HPQ) shares moved lower in pre-market trading after the PC and peripherals maker issued soft near-term sales guidance that clouded a firmer-than-expected second quarter earnings report.
HP said adjusted earnings for the three months ending in April, the group's fiscal second quarter, fell 26% from last year to 80 cents per share, but came in just ahead of Street forecasts. Group revenues, however, fell 21.8% to $12.9 billion, missing analysts' estimates of a $13.07 billion tally, amid softening PC demand.
HP said second half revenues would likely improve, but still fall shy of last year's levels, "mostly in the consumer side and driven by things like back-to-school or the holiday season sales", said CEO Enrique Lores.
"When we combine the fact that channel inventory will be normalized, and we expect to see more normal demand following seasonality pre-COVID, this makes us believe that the second half will be stronger than the first," he added.
HP shares were marked 4.17% lower in pre-market trading to indicate an opening bell price of $29.64 each..
5. -- Salesforce Earnings On Deck As CEO Marc Benioff Sees AI Boost
Salesforce (CRM) shares moved higher in pre-market trading ahead of the enterprise software group's first quarter earnings slated for after the closing bell.
Analysts expect Salesforce to post a bottom line of $1.61 per share for the three months ending in March, up 64% from the same period last year, on revenues of $8.18 billion.
Earlier this year, CEO Marc Benioff, who has faced pressure on cash flow, profits and cost-cuts from a host of activists including Dan Loeb's Third Point Hedge fund, Elliott Management, ValueAct Capital, Starboard Value, said full-year earnings should rise to between $7.12 per share and $7.14 per share.
He also noted that AI technology will be into its biggest software and cloud offerings over the coming months.
Salesforce shares were marked 0.34% higher in pre-market trading to indicate an opening bell price of $219.61 each.
