Five things you need to know before the market opens on Wednesday June 14:
1. -- Stock Futures Mixed Ahead of Key Fed Rate Decision
U.S. equity futures were mixed Wednesday, while the dollar held steady against its global peers and Treasury yields nudged higher, as investors prepared for what could be a critical interest rate decision from the Federal Reserve later in the session.
Stocks closed at a fresh 14-month high last night, lifting the S&P 500 firmly past the 4,300 point mark and extending the benchmark's year-to-date gain to around 13.8%, thanks in part to sustained upside moves from the tech sector. Chipmaker Nvidia closed with a market cap of $1 trillion for the first time in its history and a record 13-day run of gains for carmaker Tesla, which saw nearly 41 billion worth shares change hands during the Tuesday session.
A muted May inflation reading from the Commerce department, which showed headline CPI falling to a fresh 2-year low of 4%, added to the bullish thesis and solidified bets that the Fed will likely skip a rate hike this month as it publishes new economic projections and monitors the impact of the spring regional banking crisis on broader credit markets.
Global stocks were also catching the U.S. tailwind, with Japan's Nikkei 225 rising another 1.47% to close at a fresh 33-year high of 33,502.42 points, taking its year-to-date gain past 30%, while Europe's Stoxx 600 added 0.5% to extend its gain from last year's lows to around 21%.
Fixed income markets were slightly more cautious, however, as the May inflation reading continues to suggest core price pressures that could elicit a summer Fed rate hike, and manufacturing data points to a marked economic slowdown over the back half of the year.
This week's slate of nearly $300 billion in bond and Treasury bill sales have also weighed heavy on markets, lifting benchmark 10-year note yields to 3.802% in overnight trading as 2-year paper gained 5 basis points to 4.652%.
An $18 billion auction of 30-year bonds, however, drew the best demand figures in more than three years, pushing markets yields down to 3.916% in overnight trading.
The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.19% lower at 103.131 ahead of today's Fed decision in Washington.
On Wall Street, futures contracts tied to the S&P 500 were priced of a 5 point opening bell gain while those linked to the Dow Jones Industrial Average was looking at a 53 point move to the downside. The tech-focused Nasdaq is looking at a 33 point gain decline thanks in part upside moves from Tesla and Advanced Micro Devices in pre-market trading.
2. -- Fed Poised To 'Skip' June Rate Hike, But Summer Moves Still In Play
The Federal Reserve will likely leave its key lending rate on hold when it wraps-up its two day policy meeting this afternoon in Washington, with investors focused on both the new economic projections from Fed officials and commentary from Chairman Jerome Powell as to the central bank's next move.
A modestly softer-than-expected reading for May inflation yesterday, which showed the eleventh consecutive monthly decline for headline CPI, pegged at 4%, largely cemented the market's assumption that the Fed would 'skip' a rate hike at this meeting as it assess the impact of its 500 basis points of policy tightening on the broader economy.
New projections from the Fed, known as the 'dot plots', will provide a better understanding as to how the various voting and non-voting members see the economy evolving over the coming months, particularly with respect to core inflation pressures, which remained elevated in yesterday's CPI report from the Commerce Department.
"The macro forecasts likely will be little changed, but we expect the core PCE inflation projection for the end of this year to be increased by 0.3 percentage points, to 3.9%," said Ian Shepherdson of Pantheon Macroeconomics. "That shift, plus the strength of payrolls and the substantial upside surprise to the first quarter employment costs numbers, will explain the Fed’s willingness to raise rates further."
The CME Group's FedWatch suggests a 95.3% chance that the Fed will hold the Fed Funds rate steady at between 5% and 5.25% today, with bets on a July rate hike of 25 basis points currently pegged at 63.1%.
3. -- AMD Unveils New AI Chip, Amazon Reportedly A Potential Buyer
Advanced Micro Devices (AMD) shares moved higher in pre-market trading after the chipmaker revealed its latest AI chip in move it hopes will challenge the market leadership or its trillion-dollar rival Nvidia (NVDA).
CEO Lisa Su told an audience in San Francisco yesterday that the chips, called MI300X and MI300A, will hold significantly more memory that will allow customers to design and maintain large-language AI systems similar to ChatGPT for less money.
"The generative AI, large language models have changed the landscape," Su said. "The need for more compute is growing exponentially, whether you're talking about training or about inference."
Reuters also reported that Amazon (AMZN) could be a potential customer for the new chips, adding them to its Web Services Division,
AMD shares were marked 1.8% higher in pre-market trading to indicate an opening bell price of $126.70 each. Nvidia shares, which closed with a market value of $1 trillion for the first time ever last night, added 0.77% to $413.39 each.
4. -- Tesla Shares Extend Record Run Amid New Price Hikes, Charging Station Deal
Tesla (TSLA) shares powered higher in pre-market trading, potentially extending the stock's record winning streak to a fourteenth consecutive session, after the carmaker tweaked some U.S. prices for the third time in as many months.
Tesla added $250 to the base price of its Model Y sedan, taking it to $47,740, the third modest increase since mid-April. Overall prices remain down for the year, however, following CEO Elon Musk's comments that the carmaker would be willing to sacrifice profit margins as it looks to grow market share and fend-off increasing competition.
Separately, the French-Italian automaker Stellantis (STLA) said late Tuesday it's considering using Tesla's charging standard, a move that would add to similar decisions from U.S. automakers Ford (F) and General Motors (GM).
Tesla shares were marked 2.05% higher in pre-market trading to indicate an opening bell price of $263.98 each.
5. -- Lennar Earnings On Deck As Homebuilding Sentiment Begins To Improve
Lennar (LEN) shares edge higher in pre-market trading ahead of the homebuilder's second quarter earnings prior to the opening bell.
Analysts expect Lennar's bottom line to fall nearly 50% from last year to $2.32 per share amid a slump in home construction linked to higher interest rates and falling property prices, Group revenues are forecast to fall 14.2% to $7.17 billion.
Homebuilder sentiment, however, hit a 10-month high last month and a pick-up in construction demand, according to the National Association of Home Builders/Wells Fargo Housing Market index, with the share of builders reducing their prices falling to 27% from 30%.
Lennar shares were marked 0.35% higher in pre-market trading to indicate an opening bell price of $116.42 each.
