June S&P 500 E-Mini futures (ESM24) are up +0.44%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.52% this morning as market participants wagered that tensions in the Middle East won’t escalate following Iran’s unprecedented attack on Israel over the weekend, with the focus shifting to Wall Street’s earnings season, key economic data releases, and a parade of Fed speakers.
Iran launched a wave of more than 300 drones and cruise and ballistic missiles toward Israel late on Saturday in apparent retaliation for a strike in Syria that resulted in the deaths of top Iranian military officers. A military spokesman, Rear Adm. Daniel Hagari, said that Israel and its allies intercepted most of the attack drones and missiles launched by Iran, calling the outcome “a very significant strategic success.” Meantime, speculation about the conflict remaining contained arose after Iran stated, “the matter can be deemed concluded,” and President Joe Biden reportedly told Israeli Prime Minister Benjamin Netanyahu that the U.S. would not back an Israeli counterattack.
In Friday’s trading session, Wall Street’s major averages closed lower, with the benchmark S&P 500 dropping to a 4-week low and the blue-chip Dow falling to a 2-1/2 month low. Arista Networks (ANET) plunged over -8% and was the top percentage loser on the S&P 500 after Rosenblatt Securities double-downgraded the stock to Sell from Buy with a price target of $210. Also, chip stocks retreated after the Wall Street Journal reported that Chinese officials directed the country’s biggest telecom carriers earlier this year to replace foreign chips in their core networks by 2027, with Intel (INTC) slumping more than -5% and Advanced Micro Devices (AMD) falling over -4%. In addition, JPMorgan Chase (JPM) dropped more than -6% and was the top percentage loser on the Dow after the U.S.’s largest bank by assets reported weaker-than-expected Q1 net interest income and provided below-consensus annual net interest income guidance.
Economic data on Friday showed that the University of Michigan’s U.S. consumer sentiment index edged down to 77.9 in April, weaker than expectations of 79.0. Also, the University of Michigan’s April year-ahead inflation expectations unexpectedly rose to 3.1%, higher than expectations of no change at 2.9%, while 5-year implied inflation expectations ticked up to 3.0% in April from 2.8% in March.
Kansas City Fed President Jeff Schmid stated Friday that he prefers a “patient” approach to rate cuts, emphasizing the importance of waiting for “clear and convincing” evidence indicating that inflation is headed back to the 2% target before reducing interest rates rather than adjusting policy preemptively. Also, San Francisco Fed President Mary Daly said that there’s “absolutely no urgency to adjust the policy rate.” In addition, Boston Fed President Susan Collins expressed her belief that two rate cuts are more probable than three in the current economic environment. Finally, Atlanta Fed President Raphael Bostic reiterated his view for one interest-rate cut this year while maintaining flexibility to make adjustments as necessary. “I think inflation is going to continue to fall, but much slower than I think many would like. If something surprising happens, I’d adjust the outlook based on that,” Bostic said.
U.S. rate futures have priced in a 2.6% probability of a 25 basis point rate cut at the next FOMC meeting in May and a 20.4% chance of a 25 basis point rate cut at June’s policy meeting.
Earnings season picks up steam this week, with results expected from several more big banks, including Goldman Sachs (GS), Bank of America (BAC), and Morgan Stanley (MS). Also, notable companies, including Netflix (NFLX), UnitedHealth (UNH), Johnson & Johnson (JNJ), United Airlines (UAL), Abbott Laboratories (ABT), CSX (CSX), Kinder Morgan (KMI), Blackstone (BX), Intuitive Surgical (ISRG), Procter & Gamble (PG), and American Express (AXP), are slated to post quarterly updates this week.
Investors will also be monitoring a spate of economic data releases this week, including U.S. Building Permits (preliminary), Housing Starts, Industrial Production, Manufacturing Production, Crude Oil Inventories, Initial Jobless Claims, Philadelphia Fed Manufacturing Index, Existing Home Sales, and Leading Index.
Meanwhile, Federal Reserve Chairman Jerome Powell is scheduled to participate in a “fireside chat” with Bank of Canada Governor Tiff Macklem at the Washington Forum on the Canadian Economy on Tuesday. A host of other Fed officials will be making appearances throughout the week, including Williams, Daly, Jefferson, Barkin, Mester, Bowman, Bostic, and Goolsbee.
Today, all eyes are focused on U.S. Retail Sales data in a couple of hours. Economists, on average, forecast that March Retail Sales will stand at +0.4% m/m, compared to the previous figure of +0.6% m/m.
Also, investors will likely focus on U.S. Core Retail Sales data, which came in at +0.3% m/m in February. Economists foresee the March figure to be +0.5% m/m.
The U.S. NY Empire State manufacturing index will be reported today as well. Economists foresee this figure to stand at -5.20 in April, compared to the previous value of -20.90.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.562%, up +1.40%.
The Euro Stoxx 50 futures are up +0.96% this morning as optimism regarding imminent interest rate cuts boosted risk sentiment. Industrial, automobile, and defense stocks outperformed on Monday. Meanwhile, European Central Bank Governing Council member Francois Villeroy de Galhau said on Saturday that the central bank is likely to lower interest rates in June. “Bar a surprise, we should decide on the first cut at our next meeting on June 6th,” Villeroy de Galhau told Le Journal du Dimanche in an interview. In corporate news, Temenos Ag (TEMN.Z.IX) surged over +20% following the Swiss software company’s announcement that a “special committee” established by its board concluded that accusations in a report by Hindenburg Research were incorrect and misleading. Also, Adidas Ag (ADS.D.DX) gained more than +4% after Morgan Stanley double-upgraded the stock to Overweight from Underweight.
Eurozone’s Industrial Production data was released today.
Eurozone February Industrial Production has been reported at +0.8% m/m, in line with expectations.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +1.26%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.74%.
China’s Shanghai Composite Index closed higher today as investor sentiment was lifted by renewed regulatory support from the Chinese government. Telecommunications stocks led the gains on Monday, with China Unicom climbing more than +4% and China Mobile rising over +3%. China’s State Council on Friday vowed to tighten stock listing criteria, crack down on illegal share sales, and enhance the supervision of dividend payouts. Wu Qing, head of the China Securities Regulatory Commission, stated in an interview with Xinhua News that the guideline is designed to safeguard investors’ rights and ensure the stability of the capital market. Meanwhile, the People’s Bank of China on Monday kept the rate on 100 billion yuan ($13.82 billion) worth of one-year medium-term lending facility loans to some financial institutions unchanged at 2.50%, as widely expected. In other news, foreign investors bought over 8 billion yuan ($1.1 billion) of mainland shares on Monday. Investor attention is currently centered on the release of Chinese first-quarter GDP figures as well as a fresh batch of data for March, including fixed asset investment, unemployment, industrial production, and retail sales, scheduled for Tuesday.
Japan’s Nikkei 225 Stock Index closed lower today, tracking Friday’s slump in U.S. stocks on concerns over higher-for-longer U.S. interest rates, disappointing bank earnings, and rising geopolitical tensions in the Middle East. Technology and healthcare stocks underperformed on Monday. Cabinet Office data showed on Monday that Japan’s core machinery orders, which don’t count those for ships and electric power companies, grew much stronger than expected in February. Meanwhile, Japanese Finance Minister Shunichi Suzuki stated that officials are closely monitoring the yen as it dropped to a new 2024 low against the greenback. In corporate news, Astellas Pharma plunged nearly -8% after the company cut its full-year net profit forecast. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +4.16% to 20.80.
The Japanese February Core Machinery Orders came in at +7.7% m/m, stronger than expectations of +0.8% m/m.
Pre-Market U.S. Stock Movers
Medical Properties Trust (MPW) surged about +14% in pre-market trading after announcing the sale of its majority interests in five Utah hospitals.
Salesforce (CRM) slid more than -3% in pre-market trading after the Wall Street Journal reported that the company is in advanced talks to acquire data-management software provider Informatica.
Masimo (MASI) rose over +1% in pre-market trading after Stifel upgraded the stock to Buy from Hold with a price target of $170.
VF Corporation (VFC) advanced more than +1% in pre-market trading after Williams Trading upgraded the stock to Hold from Sell with a $13 price target.
Cisco (CSCO) gained over +2% in pre-market trading after BofA upgraded the stock to Buy from Neutral with a price target of $60.
Malibu Boats (MBUU) fell more than -2% in pre-market trading after Raymond James downgraded the stock to Market Perform from Outperform.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - April 15th
Goldman Sachs (GS), Charles Schwab (SCHW), M&T Bank (MTB), FB Financial (FBK), CrossFirst Bankshares (CFB), Guaranty Bancshares (GNTY).
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