S&P Futures Tick Lower Ahead of FOMC Meeting, U.S. Inflation Data Awaited

June S&P 500 E-Mini futures (ESM24)are trending down -0.31% this morning as market participants geared up for the start of the Federal Reserve’s two-day policy meeting while also awaiting Wednesday’s release of a key U.S. inflation report.

In yesterday’s trading session, Wall Street’s major indexes ended higher. Southwest Airlines (LUV) advanced over +7% following a report from the Wall Street Journal indicating that activist investor Elliott Investment Management had built an almost $2 billion stake in the airline. Also, CrowdStrike (CRWD) climbed more than +7% after S&P Dow Jones Indices announced that the company would replace Comerica in the S&P 500 index, effective June 24th. In addition, Walmart (WMT) rose over +1% after JPMorgan upgraded the stock to Overweight from Neutral with a price target of $81. On the bearish side, Huntington Bancshares (HBAN) slumped more than -6% and was the top percentage loser on the S&P 500 after cutting its full-year net interest income guidance. Also, Advanced Micro Devices (AMD) fell over -4% and was the top percentage loser on the Nasdaq 100 after Morgan Stanley downgraded the stock to Equal Weight from Overweight.

The Federal Reserve kicks off its two-day meeting later in the day, with investors widely anticipating the U.S. central bank to hold borrowing costs steady on Wednesday for the seventh consecutive gathering. Investor attention will center on the Fed’s new “dot plot” in its Summary of Economic Projections, which displays Federal Open Market Committee member projections regarding the trajectory of interest rates. Market participants will also pay close attention to Fed Chair Jerome Powell’s post-decision press conference for hints about when the Fed might cut interest rates.

Meanwhile, a 41% plurality of economists anticipate the Fed signaling two cuts in the closely watched “dot plot,” while an equal number expect the forecasts to indicate just one or no cuts at all, according to the median estimate in a Bloomberg survey.

Investor focus also rests on the May reading of the U.S. Consumer Price Index, set for release on Wednesday, which is expected to show that headline inflation remained steady from April at +3.4% y/y. At the same time, U.S. May underlying inflation is expected to ease slightly to +3.5% y/y from +3.6% y/y in April.

“The interest-rate guessing game goes on,” said Chris Larkin at E*Trade from Morgan Stanley. “Even the friendliest inflation numbers probably won’t push the Fed to act any sooner than September.”

U.S. rate futures have priced in an 8.8% chance of a 25 basis point rate cut at July’s monetary policy meeting and a 50.0% chance of a 25 basis point rate cut at the September meeting.

On the earnings front, Texas-based software giant Oracle (ORCL) is scheduled to report its Q4 earnings results today.

The U.S. economic data slate is mainly empty on Tuesday. 

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.433%, down -0.85%.

The Euro Stoxx 50 futures are down -0.74% this morning, extending Monday’s losses as concerns over political upheaval in France persisted. Bank stocks led the declines on Tuesday. The Office for National Statistics reported on Tuesday that wages in the U.K. continued their robust growth in the three months to April, while Britain’s unemployment rate unexpectedly climbed to a 2-1/2 year high of 4.4% in the quarter to April. Meanwhile, European Central Bank President Christine Lagarde stated in an interview published Tuesday that the central bank might keep its key rate unchanged for more than one meeting while it awaits confirmation that inflation is moving toward its target. “We’ve made the appropriate decision, but it doesn’t mean interest rates are on a linear declining path. There might be periods where we hold rates again,” Lagarde said. At the same time, ECB policymaker Francois Villeroy de Galhau stated on Tuesday that the ECB should neither hasten nor delay future interest-rate cuts following a “decisive orientation” to begin loosening last week. “As regards our next rate cuts, I plead for a ‘pragmatic gradualism,’ both on the timing, without haste nor procrastination,” Villeroy said. In corporate news, Oxford Instruments Plc (OXIG.LN) climbed over +11% after the nanotechnology tools maker reported stronger-than-expected full-year results.

U.K.’s Average Earnings ex Bonus, U.K.’s Claimant Count Change, U.K.’s Employment Change 3M/3M, and U.K.’s Unemployment Rate were released today.

U.K. April Average Earnings ex Bonus has been reported at 6.0%, in line with expectations.

U.K. May Claimant Count Change came in at 50.4K, weaker than expectations of 10.2K.

U.K. April Employment Change 3M/3M arrived at -140K, weaker than expectations of -100K.

U.K. April Unemployment Rate was at 4.4%, weaker than expectations of 4.3%.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.76% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.25%.

China’s Shanghai Composite Index closed lower today as trading resumed after the Dragon Boat Festival holiday, with worries about the sluggish property sector and an uncertain growth outlook weighing on sentiment. Shares linked to electric vehicle makers slid on Tuesday due to concerns that more countries might raise tariffs on cars imported from China. Tourism-related stocks also retreated amid disappointing travel demand observed during the recent Dragon Boat Festival holiday. According to a statement from the tourism ministry, spending during the Dragon Boat Festival rose 8.1% year-over-year to 40.35 billion yuan, with the number of domestic trips increasing by 6.3% from last year to 110 million. At the same time, the average spending per traveler was 12.3% lower compared to 2019 levels. Meanwhile, China’s yuan dropped to its lowest level against the U.S. dollar in nearly seven months on Tuesday following the People’s Bank of China’s decision to lower the official midpoint fixing to its weakest level in almost five months. In other news, developer Dexin China Holdings received a liquidation order from a Hong Kong court on Tuesday. On the positive side, semiconductor stocks outperformed, buoyed by positive sentiment driven by increased demand for AI chips. Investor attention is currently concentrated on Chinese inflation data for May, set to be released on Wednesday.

Japan’s Nikkei 225 Stock Index closed slightly higher today, hitting a 2-month high, while investors looked ahead to U.S. inflation data as well as policy decisions from both the Fed and the Bank of Japan later this week. Gains in machinery and chip stocks offset losses in brokerage and shipping stocks on Tuesday. Meanwhile, Japanese government bond yields retreated on Tuesday as investors anticipated the Bank of Japan’s policy meeting later in the week. The Bank of Japan is expected to keep short-term interest rates within a range of 0-0.1% on Friday, although discussions about reducing bond purchases are expected among policymakers, with some economists predicting that the central bank will also lay the groundwork for raising rates next month. In other news, Japan Finance Minister Shunichi Suzuki stated on Tuesday that it is crucial to continue efforts to achieve economic growth and attain fiscal health to maintain confidence in the country’s fiscal policy. In corporate news, Tobila Systems Inc. rose over +1% after the telecom software developer posted a 33% increase in non-consolidated profit for the fiscal first half, attributed to increased net sales. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.22% to 17.58.

Pre-Market U.S. Stock Movers

Calavo Growers (CVGW) advanced about +12% in pre-market trading after the company posted upbeat Q2 results.

Zedge (ZDGE) climbed over +10% in pre-market trading after reporting better-than-expected Q3 revenue.

Yext (YEXT) plunged more than -15% in pre-market trading after the company reported downbeat Q1 results, provided soft Q2 revenue guidance, and cut its FY25 revenue forecast.

Cleveland-Cliffs (CLF) fell over -3% in pre-market trading after JPMorgan downgraded the stock to Neutral from Overweight.

Eli Lilly (LLY) gained more than +2% in pre-market trading after its experimental Alzheimer’s drug, donanemab, received support from a panel of FDA advisors.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - June 11th

Oracle (ORCL), Caseys (CASY), Academy Sports (ASO), Lilium NV (LILM), Mama’s Creations (MAMA), Motorcar Parts (MPAA), PetMed Express (PETS), and Streamline (STRM).

More Stock Market News from Barchart

• Buy the Dip in this High-Yield Energy Stock
• Stocks Settle Higher Ahead of the Tue/Wed FOMC Meeting
• Are Analysts Giving Up on the Growth Story for This AI Stock?
• Is Pfizer Stock Underperforming the Nasdaq?