Here are five things you must know for Wednesday, May 10:
1. -- Stock Futures Higher With Inflation, Volatility In Focus
U.S. equity futures moved higher Wednesday, while the dollar eased and Treasury bonds steadied, as investors looked to a key reading of domestic inflation prior to the start of trading to provide relief from the market's ongoing weakness.
April inflation pressures are expected to have eased modestly from the early 1981 highs recorded over the month of March, although it remains to be seen as to whether that will signal both a peak in U.S. inflation pressures and change in Federal Reserve's vow to bring consumer prices down through a series of interest rate hikes and bond sales that comprise the most aggressive central bank tightening in a generation.
Comments yesterday from Cleveland Fed President Loretta Mester, however, suggested that any change in strategy isn't likely to come soon, as she told Yahoo Finance that the central bank wouldn't rule out a 75 basis point rate hike "forever" and must remain committed to curbing the fastest inflation in 40 years.
Inflation readings from both Germany and China earlier today also indicated faster readings for the world's two biggest export economies, while European Central Bank President Christine Lagarde indicated that rate hikes from Frankfurt could come "a few weeks" after the wind-down of its bond purchases later this summer.
In other markets, the U.S. dollar index, which tracks the greenback against a basket of its global currency peers, fell 0.44% to 103.454 as the euro firmed in the wake of Largade's comments.
The move helped spark a mini-rebound in oil prices ahead of the Energy Department's weekly data release on crude stocks, with WTI futures for June delivery rising $3.14 to $102.90 per barrel.
The CBOE's VIX index, also known as Wall Street's 'fear gauge', eased from the highest levels since early March, but was still notably elevated at 32.12 points in European hours trading.
On Wall Street, futures contacts tied to the Dow Jones Industrial Average indicating a 285 point opening bell gain while those linked the S&P 500, which is down 16% for the year, are priced for a 41 point move to the upside. Futures linked to the tech-focused Nasdaq are looking at a 160 point opening bell gain.
2. -- April Inflation Data Eyed As Pressures Ease, Fed Vows Rate Action
Inflation data will take center-stage Wednesday as investors match the recent hawkish turn of the Federal Reserve, and the prospect of faster rate hikes, against what could be a peak in consumer price readings heading into the summer months.
The Commerce Department will publish April inflation data at 8:30 am Eastern time, with analysts expecting the first decline in the headline reading since September, which could ease from a four-decade high of 8.5% to around 8.1%, with so-called core inflation, which strips out volatile components such as food and energy, also slowing by around 50 basis points to an annual rate of 6%.
The readings will provide and important context for last week's assertion by Fed Chairman Jerome Powell that he and his colleagues are not "actively considering" a 75 basis point rate hike, given the fact that inflation conditions could moderate over the coming months.
"The April CPI report will not change the near-term policy path (but) it will trigger press headlines about falling inflation, and that will be a big change," said Ian Shepherdson of Pantheon Macroeconomics. "Fed officials will remain cautious, because they know the decline in inflation will slow in the third quarter."
"But the pressure on policymakers to continue hiking by 50 basis points per meeting won’t be sustained at its current fever-pitch when inflation is falling, especially if wage gains remain at the recent, modest pace," he added.
3. -- Philip Morris International To Pay $16 Billon For Tobacco Rival Swedish Match
Philip Morris International (PM), the maker of Marlboro cigarettes, made a recommended offer of around $16 billion for Swedish Match (SWMAY) as the tobacco giant looks for smoke-free growth prospects in global nicotine markets.
Match, which has seen deliveries of its popular tobacco-free Zyn pouches rise more than 35% in the U.S., said the PMI was both supported by union representatives and recognized "Swedish Match’s long-term growth prospects, taking into account the risks associated with the realisation of those prospects".
Philip Morris International called the deal "an exciting next step" in the "trajectory toward a smoke-free future."
"Underpinned by compelling strategic and financial rationale, this combination would create a global smoke-free champion—strengthened by complementary geographic footprints, commercial capabilities and product portfolios—and open up significant platforms for growth in the U.S. and internationally."
Philip Morris International shares closed 0.9% lower at $98.88 each in New York trading on Tuesday, trimming their year-to-date gain to around 3.3%. Match shares hit an all time high of SEK 103.80 in Stockholm trading, just shy of the SEK 106 price offered by Philip Morris.
4. -- Coinbase Shares Plunge After Q1 Revenue Miss, SEC Disclosure
Coinbase Global (COIN) shares plunged in pre-market trading after the cryptocurrency trading platform posted weaker-than-expected first quarter revenues and cautioned that activity would likely continue to slide amid the ongoing upheaval in digital currency markets.
Coinbase said revenues for the three months ending in March fell 35% from last year to $1.17 billion, well shy of Street forecasts, as retail trading volumes fell 38% to just $74 million. Overall trading volumes were only down 7%, thanks to a big jump in institutional participation, but the ongoing collapse in bitcoin prices has current quarter activity trending down by 30%.
Shares were further pressured by a separate disclosure form filed by Coinbase that suggested crypto assets held on the platform by investors could be seized by administrators in the event of bankruptcy.
Coinbase shares were marked 19.6% lower in pre-market trading to indicate an opening bell price of $59.41 each.
5. -- Disney+ Streaming in Focus Ahead of Q2 Earnings
Walt Disney Co. (DIS) shares moved higher in pre-market trading ahead of the media and entertainment group's second quarter earnings after the close of trading.
Investors are likely to focus on gains in the group's Disney+ streaming division, which added 11.8 million subscribers over the three months ending in December and continues to steal customers from its larger rival, Netflix NFLX, which recorded its first year-on-year subscriber decline in more than a decade last month.
Disney's streaming unit, which includes Hulu and ESPN+, ended the first quarter with 196.4 million subscribers, and management reiterated its view that Disney+ will grow to between 230 million and 260 million subscribers by the end of its 2024 financial year.
Disney said it expects to spend around $33 billion on Disney+ content over its 2022 financial year, around at third of which will be devoted to sports rights, as it continues to expand its direct-to-consumer business.
In terms over headline earnings, analysts are looking for a bottom line of $1.19 per share, a 34.2% increase from last year, on revenues of just over $20 billion.
Disney shares were marked 1.16% higher in pre-market trading to indicate an opening bell price of $108.93 each.
