June S&P 500 futures (ESM23) are up +0.02%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.11% this morning as market participants awaited crucial U.S. inflation data that could influence the Federal Reserve’s monetary policy stance.
Over the weekend, U.S. Treasury Secretary Janet Yellen warned of a “constitutional crisis” if Congress does not raise the federal debt limit. Also, Yellen reiterated a warning to lawmakers that the government could pay its bills only through early June. U.S. President Joe Biden will meet with Republican and Democratic leaders at the White House on Tuesday to discuss the debt ceiling and federal spending ahead of the June 1st deadline.
“It’s Congress’s job to do this. If they fail to do it, we will have an economic and financial catastrophe that will be of our own making,” Janet Yellen said in an interview on Sunday.
In Friday’s trading session, Wall Street’s major averages closed sharply higher as Apple’s upbeat quarterly earnings results and strong U.S. jobs data brightened the economic outlook, with the tech-heavy Nasdaq 100 notching an 8-1/2 month high.
The U.S. Labor Department’s report on Friday showed that nonfarm payrolls rose by 253K jobs last month, stronger than expectations of 180K. Also, the U.S. unemployment rate unexpectedly fell to a 54-year low of 3.4% in April, stronger than expectations of 3.6%. In addition, U.S. average hourly earnings came in at +0.5% m/m and +4.4% y/y in April, stronger than expectations of +0.3% m/m and +4.2% y/y.
In the coming week, U.S. CPI data for April will be the main highlight as market participants evaluate whether the U.S. Federal Reserve could pause interest rate increases next month. Also, investors will be eyeing a spate of economic data, including U.S. Core CPI, Crude Oil Inventories, Federal Budget Balance, Core PPI, PPI, Initial Jobless Claims, Export Price Index, Import Price Index, Michigan Consumer Expectations (preliminary), and Michigan Consumer Sentiment (preliminary).
In addition, several Fed officials will be making appearances in the next few days, including Governor Philip Jefferson, New York Fed President John Williams, Governor Christopher Waller, Governor Michelle Bowman, and St. Louis Fed President James Bullard.
First-quarter earnings season, meanwhile, continues in full force, with investors anticipating fresh reports from major companies, including PayPal Holdings Inc (PYPL), Duke Energy (DUK), Airbnb (ABNB), Walt Disney Company (DIS), and Li Auto Inc (LI).
Today, all eyes are focused on the Federal Reserve’s survey of loan officers as investors seek to assess the impact of regional banking stress on lending.
Also, investors will likely focus on U.S. Wholesale Inventories data, which stood at +0.1% m/m in February. Economists foresee the March figure to be +0.1% m/m.
U.S. Wholesale Trade Sales data will be reported today as well. Economists foresee this figure to stand at +0.5% m/m in March, compared to the previous number of +0.4% m/m.
In the bond markets, United States 10-Year rates are at 3.435%, down -0.32%.
The Euro Stoxx 50 futures are up +0.28% this morning as investors braced for the release of key U.S. inflation data due later in the week for more cues on the outlook for interest rates. Healthcare and energy stocks are outperforming today, with drugmaker Novo Nordisk A/S (NOVOB.C.DX) climbing more than +4%. Meanwhile, Governing Council member Klaas Knot said Sunday that the European Central Bank needs to continue raising interest rates amid “too high” underlying inflation. In corporate news, shares of Postnl NV (PNL.A.DX) surged over +9% after the company reported better-than-expected revenue in the first quarter.
Germany’s Industrial Production and Eurozone’s Sentix Investor Confidence data were released today.
The German March Industrial Production stood at -3.4% m/m, weaker than expectations of -1.3% m/m.
Eurozone May Sentix Investor Confidence index has been reported at -13.1, weaker than expectations of -8.0.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +1.81%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.71%.
China’s Shanghai Composite today closed higher as sentiment towards Chinese stocks slightly improved following upbeat travel and consumer spending data from the Golden Week holiday. Also, Chinese bank stocks gained ground on Monday after mid-sized lenders China Bohai Bank, China Zheshang Bank, and Hengfeng Bank on Friday lowered deposit rates by between 10 basis points and 30 basis points, following a similar move by smaller lenders last month. This move will boost margins and assist with Beijing’s broader economic goals. A set of new guidelines over bond issuance for state-owned firms also lifted investor sentiment. Focus is now squarely on Chinese trade and inflation data due later in the week.
At the same time, Japan’s Nikkei 225 Stock Index closed lower today as investor concerns over U.S. banks caused a sell-off in domestic bank stocks. Also, the Japanese yen pushed higher against the U.S. dollar last week after the Federal Reserve hinted at a pause in its monetary tightening cycle, weighing on export-oriented stocks. On the economic front, a private-sector survey showed on Monday that the country’s services activity grew at a record pace in April, helped by a boost in consumer spending. Meanwhile, shares of Japanese trading houses advanced after Warren Buffet said on Saturday that he is more comfortable with Berkshire Hathaway Inc deploying capital in Japan than Taiwan. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.22% to 15.81.
The Japanese April Services PMI stood at 55.4, stronger than expectations of 54.9.
Pre-Market U.S. Stock Movers
Cryptocurrency-exposed stocks are moving lower in pre-market trading, with the price of Bitcoin down about -2%. Marathon Digital (MARA) is down more than -6%. Also, Hut 8 Mining (HUT) is down more than -5%, and Riot Blockchain (RIOT) is down over -6%.
Dropbox Inc (DBX) rose about +1% in pre-market trading after Goldman Sachs upgraded the stock to neutral from sell.
American Airlines Group (AAL) gained more than +2% in pre-market trading after JPMorgan upgraded the stock to overweight from neutral.
Southwest Airlines Company (LUV) dropped over -1% in pre-market trading after JPMorgan downgraded the stock to neutral from overweight.
Workday Inc (WDAY) slid about -2% in pre-market trading after Stifel downgraded the stock to hold from buy.
Snowflake Inc (SNOW) climbed more than +2% in pre-market trading after Stifel upgraded the stock to buy from hold.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - May 8th
PayPal Holdings Inc (PYPL), McKesson (MCK), Itau Unibanco (ITUB), KKR & Co (KKR), Hoya Corp (HOCPY), Devon Energy (DVN), IFF (IFF), Tyson Foods (TSN), Ventas (VTR), Skyworks (SWKS), Palantir (PLTR), Lucid Group (LCID), Aecom Technology (ACM), Essential Utilities (WTRG), Viatris (VTRS), Western Digital (WDC), Shockwave Medical (SWAV), DaVita (DVA), TIM Participacoes (TIMB), Primerica (PRI), Trex (TREX), BWX Tech (BWXT), Permian Resources (PR), Bellring (BRBR), ICU Medical (ICUI), Cabot Corp (CBT), Braskem A (BAK), Howard Hughes (HHC), Certara (CERT), Maravai Lifesciences (MRVI), Nelnet (NNI), Fabrinet (FN), Freshpet Inc (FRPT), Progyny (PGNY), Shoals Technologies Group (SHLS), Hillenbrand (HI), Axsome Therapeutics Inc (AXSM), Treehouse Foods (THS), American Equity Inv. Life (AEL), Kemper (KMPR), Brighthouse Financial (BHF), Hims Hers Health (HIMS), Intapp (INTA), Energizer (ENR), Golub (GBDC), Alpha Metallurgical Resources (AMR), Helios Tech (HLIO), Masonite Int (DOOR), Innovative Industrial Properties (IIPR), Delek Logistics Partners LP (DKL), Ero Copper (ERO), Six Flags (SIX), Establishment Labs (ESTA), Atlas Energy (AESI), FibroGen Inc (FGEN), Talos Energy (TALO), Treace Medical Concepts (TMCI), Apollo Medical (AMEH), Harmonic (HLIT), Service Properties (SVC), Sixth Street Specialty Lending (TSLX), Delek US Energy (DK), Syndax Pharmaceuticals (SNDX), Semrush Holdings (SEMR), PRA Group Inc (PRAA), HudBay Minerals (HBM), Pactiv Evergreen (PTVE), 3D Systems (DDD), New Mountain Finance (NMFC), Diamond Offshore Drilling (DO), Taskus (TASK), Ready Capital (RC), Kforce (KFRC), HNI (HNI), Jeld-Wen Holding (JELD), Argo Group Int (ARGO), Paymentus (PAY), Bridge Investment Group Holdings (BRDG).
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