Five things you need to know before the market opens on Wednesday April 12:
1. -- Stock Futures Edge Higher Ahead Of March Inflation Report
U.S. equity futures edged higher Wednesday, while Treasury bond yields held steady and the dollar drifted lower against its global peers, as investors braced for a crucial March inflation report that could define the Federal Reserve's rate path into the summer months.
Markets are primed for a faster-than-expected reading of core consumer price pressures when the data is released at 8:30 am Eastern time, following on from last week's mixed jobs report that continued to show resilience with respect to both hiring and wage growth, with benchmark 2-year Treasury note yields holding firmly over the 4% mark and futures prices pointing to at least one more rate hike from the Fed next month in Washington.
Philadelphia Federal Reserve Bank President Patrick Harker, an FOMC voting member, told the Wharton Initiative on Financial Policy and Regulation conference last night that he was "in the camp of getting up above 5 {percent] and then sitting there for a while".
Minutes from the Fed's last policy meeting in March will also be published at 2:00 pm Eastern time, with investors focused on both the central bank's assessment of the recent weakening in private sector job creation and the impact from last month's collapse of Silicon Valley Bank and the subsequent trembles it sent through bank lending markets around the world.
The CME Group's FedWatch is pricing in at least a 74% chance of a May rate hike, which would take the Fed Fund rate to a range of between 5% and 5.25%, next month in Washington, with the odds of a hold in June pegged at around 70%.
Stocks were muted in overnight trading ahead of the CPI data, with futures tied to the S&P 500 indicating an 8 point opening bell gain and those linked to the Dow Jones Industrial Average priced for an 87 point move to the upside. Contacts tied to the tech-focused Nasdaq are indicating a 21 point advance.
Overnight in Asia, the MSCI ex-Japan index was marked 0.27% lower into the close of trading while the Nikkei 225 added 0.57% in Tokyo.
Europe's Stoxx 600, meanwhile, was marked 0.18% higher in Frankfurt while Britain's FTSE 100 gained 0.6% in London.
2. -- Core CPI In Focus As Traders Bet On One Final Fed Hike
The Federal Reserve is likely near the end of its rate-hiking cycle, with traders expecting one final increase to the benchmark Fed Funds rate next month in Washington in a move that likely won't be affected by Wednesday's much-anticipated March inflation report.
Economists expect a modest cooling in inflation pressures for the month, with the headline CPI rate easing to 0.2% -- about half the pace of gains recorded in February -- and 5.1% on the year, extending its run of declines to a sixth consecutive month.
So-called core inflation, which strips out volatile food and energy components, is expected to be a bit more 'sticky', easing by only a small amount from the previous month -- and edging higher from last year's levels -- to 0.4% and 5.5% respectively.
Both the annual and monthly core readings will likely provide the most significant clues as to the Fed's inflation assessment, with a focus on the slowdown in the 'core services ex-rent' portion of the index.
An undershoot in March core CPI inflation would not alone be enough to persuade the Fed not to hike in May; officials want to see a run of slowing increases," said Ian Shepherdson of Pantheon Macroeconomics. "But their resolve on that score is yet to be tested by real softness in the activity data, especially the labor market."
3. -- Elon Musk Says Twitter Advertisers Returning, Sees Positive Cash Flows
Elon Musk said Wednesday that advertisers are starting to return to Twitter following last year's exodus, and that could help the microblogging website he purchased for around $44 billion turn cash-flow positive in the coming months.
In an interview with the BBC, broadcast live on Twitter spaces, Musk said he's slashed staffing levels at Twitter by around 80%, taking the overall tally down to about 1,500 employees, and has largely turned the corner on technical glitches following the shutdown of three key data centers earlier this year.
Musk also insisted that he only completed the Twitter purchase because he was legally required to do so, following a suit filed by the company's board, but added that he wasn't interested in selling the site either, claiming his larger ambition was to develop a platform for news and "truth" based on both user demands for information and credible reporting sources to deliver it.
Musk also admitted that his penchant for late-night Tweets, often focused on controversial subjects, has done him few favors.
"Have I shot myself in the foot with tweets multiple times? Yes.," Musk said, adding that he may need "bullet-proof shoes". "I think I should not tweet after 3 am," Musk said.
4. -- JPMorgan, Other Big Banks, Will Set Aside Millions To Cover First Republic Risk
Major U.S. banks involved in stabilizing the balance sheet and deposit base of struggling lender First Republic (FRC) will likely need to set aside hundreds of millions of dollars to cover potential losses, according to multiple media reports heading into the start of the first quarter earnings season.
JPMorgan (JPM) lead a group of 11 lenders, including Wells Fargo (WFC), Citigroup (C) and Bank of America (BAC) in an effort to boost First Republic's deposit base by around $30 billion last month. Each of the four banks, reports suggest, will likely set aside around $100 million each against their first quarter earnings as a result.
JPMorgan will publish its first quarter earnings on Friday, alongside Wells Fargo and Citigroup, with Bank of America reporting on April 18.
First Republic, which paused common stock dividends last month and suspended its preferred share payout earlier this week, will published first quarter earnings on April 24.
First Republic shares were marked 0.64% lower in pre-market trading to indicate an opening bell price of $14.04 each.
5. -- EPA Unveils Sweeping Emissions Changes In U.S. Auto Shake-Up
The U.S. Environmental Protection Agency unveiled significant changes to its guidelines for domestic car emissions over the next decade Wednesday in one of the biggest proposals for domestic transportation on record.
The EPA says its new model rules for the years 2027 to 2032 would require carmakers to cut their annual emissions by around 15% a year and effectively mean that two of every three cars sold will be all-electric within the next ten years.
The new rules would likely cost American carmakers an extra $1,200 per vehicle while saving owners some $9,000 on repair, fuel and maintenance costs over an eight year period. Overall benefits, however, could reached $1.6 trillion by 2055, the EPA said.
"A lot has to go right for this massive - and unprecedented - change in our automotive market and industrial base to succeed," the Alliance for Automotive Innovation. "Factors outside the vehicle, like charging infrastructure, supply chains, grid resiliency, the availability of low carbon fuels and critical minerals will determine whether EPA standards at these levels are achievable."
Ford Motor Co. (F) shares were marked 0.23% higher in pre-market trading to indicate an opening bell price of $12.90 each, while General Motors (GM) shares edged 0.14% higher to $35.46 each. Tesla (TSLA), by far the country's largest EV maker, slipped 0.36% to $186.12 each.
