Five things you need to know before the market opens on Friday March 31:
1. -- Stock Futures Bump Higher Ahead of Inflation Data
U.S. equity futures bumped higher Friday, with tech stocks extending gains after closing at the highest levels since August, as investors looked to close out the first quarter while eyeing a key reading of February inflation prior to the start of trading.
Stocks are on pace for their second consecutive quarterly gain, despite the affects of relentless Federal Reserve rate hikes and a U.S. banking crisis, a move analysts suggest will define a 'bull market' for stocks that reduces the likelihood retesting last October's lows. The Nasdaq, in fact, is enjoying its best quarterly performance since 2020.
This week's gains, however, have come largely amid an absence of headline risk, with the first quarter earnings season not slated to begin until after the holiday weekend and core PCE inflation data expected only prior to the start of trading later today.
In the meantime, benchmark Treasury bond yields have been creeping steadily higher, following a weaker-than-expected auction of $42 billion in 2-year notes earlier this week, in moves that could blunt equity performance if today's inflation data continues to indicate persistent price pressures.
In Europe, a mixed reading for regional inflation over the month of March, which showed headline consumer prices easing to 6.9% with a bump higher in the so-called core reading, suggested an uneven road ahead for central banks as they attempt to manage bank sector concerns with broader price stability goals.
Benchmark 2-year note yields were marked 3 basis points higher from yesterday at 4.155% in overnight trading, while 10-year note yields bumped to 3.579%. The U.S. dollar index, which tracks the greenback against a basket of six global currencies, rose 0.24% to 102.0421 in overnight dealing.
Heading into the start of the trading day on Wall Street, future contracts tied to the S&P 500, which is up 5.5% for the quarter and for the year, are indicating a 6 point opening bell gain while those linked to the Dow Jones Industrial Average suggest a 60 point move to the upside. Futures tied to the Nasdaq are indicating a 7 point dip the nudge higher in Treasury bond yields.
Overnight in Asia, the region-wide MSCI ex-Japan index was marked 0.56% higher into the close of trading, while Japan's Nikkei 225 gained 0.93.% for the final session of the financial year in Tokyo.
In Europe, the Stoxx 600 was marked 0.22% higher in early Frankfurt hours while the FTSE 100 was marked 0.12% higher in London.
2. -- Fed Inflation Gauge May Not Provide Support For Rate Cut Bets
The Bureau of Economic Analysis will publish its PCE Price index data at 8:30 am Eastern time, with investors looking for an easing in inflation pressures that could justify bets on a near-term pause in rate hikes from the Fed as it grapples with the fallout from the collapse of SVB Financial and the broader banking sector turmoil.
Analysts expect to see a modest decline in the monthly core PCE reading, the Fed's preferred inflation gauge, which is expected to come in at 0.4%, with the year-on-year tally holding at 4.7%. Headline readings are forecast at 0.5% and 5.1% respectively.
The Fed will only have one further reading of its go-to inflation barometer, however, prior to its May policy decision, and with the domestic banking crisis appearing at least partly contained, traders are starting to bet that the Fed will continue it tightening cycle into the summer months.
The CME Groups FedWatch suggests a 54.5% chance of another Fed rate hike on May 3, taking it to a range of between 5% and 5.25%, although bets of possible policy easing in July are still robust.
"But even if the (inflation) numbers are spectacularly good, they won’t be enough, alone, to stop the Fed raising rates again," said Ian Shepherdson of Pantheon Macroeconomics. Chair Powell and other FOMC members have made it clear that they want to see a run of better numbers before they will allow themselves to be convinced that inflation is under control and no longer requires incremental tightening."
3. -- Fed Lending To Banks Eases Slightly, Balance Sheet Shrinks
The Federal Reserve boosted lending from its new backstop program designed to enhance liquidity at regional lenders last week, but overall support levels eased as the balance sheet stresses at smaller banks look to have stabilized.
Lending by the Fed's new Bank Term Funding Program rose by $10.7 billion to $64.4 billion over the week ending on March 29, according to Fed data published late Thursday, while lending at its main discount window slipped by $22 billion to $88.2 billion. So-called 'other credit' lending, which is tied to FDIC support for failed lenders, was steady at $180.1 billion.
The Fed's overall balance sheet, meanwhile, fell for the first time in four weeks, with the overall tally pegged at $8.756 trillion, compared to $8.784 trillion over the prior period.
4. -- First Republic Reportedly Probed By Massachusetts Regulators Over Stock Sales
First Republic (FRC) shares edged modestly higher in pre-market trading following a Reuters report that suggested the bank is being probed by regulators in Massachusetts over stock sales by its senior executives.
State Secretary of the Commonwealth William Galvin has reportedly issued a subpoena to both First Republic and Silicon Valley Bank seeking information on stock sales by insiders since the beginning of the year.
Silicon Valley Bank collapsed on March 10, and was quickly taken over by regulators in California, while First Republic has seen its share price fall more than 90% since the beginning of February.
Federal Deposit Insurance Corporation filings indicate First Republic CEO Michael Roffler sold around $1 million shares in January, while executive chairman James Herbert has sold $4.5 million in stock so far this year.
First Republic shares were marked 0.29% higher in pre-market trading to indicate an opening bell price of $13.73 each.
5. -- Historic Trump Indictment May Include 30 Charges Related To Business Fraud
Former President Donald Trump could face as many as 30 separate charges from a sealed indictment expected from Manhattan District Attorney Alvin Bragg over the coming days, according to media reports.
Initial reports had suggested Bragg's indictment would focus on so-called 'hush money' payments to a former adult actress, Stormy Daniels, who claimed to have an affair with Trump prior to his Presidency. CNN, however, said the number could run as high as 30, with the counts linked to fraud in various Trump businesses.
The indictment itself would mark the first time in U.S. history that a former President has faced criminal proceedings, and Bragg has said he has communicated with Trump's attorney to "coordinate his surrender" in Manhattan next week.
Trump, who is also the leading contender for the Republican Presidential nomination next year, called the coming indictment "political persecution and election interference at the highest level in history" and declared himself "completely innocent" of the charges that have yet to be revealed.
“I believe this Witch-Hunt will backfire massively on Joe Biden,” Trump said. “The American people realize exactly what the Radical Left Democrats are doing here. Everyone can see it.”
