Stocks Set to Open Higher as Investors Await Key U.S. Inflation Data and Fed Speak

June S&P 500 E-Mini futures (ESM24)are up +0.12%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.25% this morning as trading resumed after the Memorial Day holiday, with investors looking ahead to comments from Federal Reserve officials as well as the release of the Fed’s favorite inflation gauge later in the week for clues on the timing of interest-rate cuts.

In Friday’s trading session, Wall Street’s major averages closed higher. Deckers Outdoor (DECK) climbed over +14% and was the top percentage gainer on the S&P 500 after the footwear and apparel maker reported better-than-expected Q4 net sales. Also, Ross Stores (ROST) advanced more than +7% and was the top percentage gainer on the Nasdaq 100 after the retailer posted upbeat Q1 results and raised its full-year EPS forecast. In addition, Apple (AAPL) gained over +1% after Wedbush raised its price target on the stock to $275 from $250. On the bearish side, Workday (WDAY) tumbled more than -15% and was the top percentage loser on the Nasdaq 100 after the back-office software provider slashed its FY25 subscription revenue guidance. Also, Intuit (INTU) slumped over -8% and was the top percentage loser on the S&P 500 after the company issued below-consensus Q4 adjusted EPS guidance.

Economic data on Friday showed the University of Michigan’s gauge of consumer sentiment was revised upward to 69.1 in May, stronger than expectations of 67.4. Also, the University of Michigan’s May year-ahead inflation expectations ticked up to +3.3% from +3.2% in April but improved from a preliminary figure of +3.5%. In addition, the University of Michigan’s May five-year implied inflation expectations were revised downward to +3.0% from +3.1%, unchanged from April. At the same time, U.S. April durable goods orders unexpectedly rose +0.7% m/m, and U.S. April core durable goods orders rose +0.4% m/m, stronger than expectations of -0.9% m/m and +0.1% m/m, respectively.

“After further review, the consumer is not as pessimistic about the inflation trajectory. Consumer spending could slow, easing up inflationary pressures from the demand side of the economy,” said Jeff Roach at LPL Financial. 

Minneapolis Fed President Neel Kashkari stated in an interview with CNBC broadcast on Tuesday that the U.S. central bank should await significant progress on inflation before considering interest rate cuts. “Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back,” Kashkari said. He told CNBC that the Fed might even consider raising rates if inflation does not decrease further.

Meanwhile, U.S. rate futures have priced in a 0% chance of a 25 basis point rate cut at June’s monetary policy meeting and a 10.2% probability of a 25 basis point rate cut at the conclusion of the Fed’s July meeting.

In this holiday-shortened week, the April reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight. Also, market participants will be eyeing a spate of other economic data releases, including the U.S. GDP (second estimate), Richmond Manufacturing Index, Goods Trade Balance, Initial Jobless Claims, Wholesale Inventories (preliminary), Pending Home Sales, Crude Oil Inventories, Personal Income, Personal Spending, and Chicago PMI.

Several notable companies like Salesforce (CRM), Dick’s Sporting Goods (DKS), Chewy (CHWY), HP Inc. (HPQ), C3.ai (AI), Best Buy (BBY), Dollar General (DG), Foot Locker (FL), Costco (COST), Gap (GPS), Marvell (MRVL), Dell (DELL), and Nordstrom (JWN) are slated to release their quarterly results this week.

In addition, several Fed officials will be making appearances this week, including Cook, Daly, Williams, Bostic, and Logan.

In other news, UBS Global Research adjusted its year-end target for the benchmark S&P 500 index on Tuesday, raising it to 5,600 from the previous estimate of 5,400, representing the most optimistic forecast among major brokerages.

Today, all eyes are focused on the U.S. CB Consumer Confidence Index in a couple of hours. Economists, on average, forecast that the May CB Consumer Confidence index will stand at 96.0, compared to the previous figure of 97.0.

Also, investors will likely focus on the U.S. S&P/CS HPI Composite - 20 n.s.a., which arrived at +7.3% y/y in February. Economists foresee the March figure to be +7.3% y/y.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.453%, down -0.45%.

The Euro Stoxx 50 futures are up +0.14% this morning as market participants awaited key inflation data from both sides of the Atlantic for insights into future monetary policy. Chemical and automobile stocks outperformed on Tuesday, while travel and leisure stocks lost ground. A fresh European Central Bank survey revealed on Tuesday that median expectations among euro area consumers for inflation in the upcoming year declined from 3% to 2.9% in April, marking the lowest level since September 2021. Meanwhile, investor attention this week is directed toward the release of preliminary inflation data from the region as well as the Fed’s preferred measure of underlying inflation, both slated for release on Friday. ECB Governing Council member Klaas Knot is scheduled to speak later in the session. ECB Governing Council member Francois Villeroy de Galhau stated Monday that the central bank shouldn’t rule out reducing borrowing costs at both its June and July meetings. In corporate news, Calliditas Therapeutics AB spiked about +78% following an offer from Japan’s Asahi Kasei to acquire the pharmaceutical company for around 11.8 billion Swedish crowns ($1.1 billion).

The European economic data slate is mainly empty on Tuesday.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.46% and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.11%.

China’s Shanghai Composite Index closed lower today as investors cautiously awaited key inflation data from major economies as well as the country’s purchasing managers index data later this week. Real estate, consumer staples, and financial stocks underperformed on Tuesday. Meanwhile, Shanghai, the nation’s largest commercial city, will provide subsidies to homebuyers and permit multi-child families to purchase an additional house starting Tuesday, as part of the implementation of a nationwide rescue plan for the property market initiated earlier this month. Other easing measures announced by the Shanghai government on Monday include reductions in down payment ratios and mortgage rates, as well as a decrease in the threshold for non-locals to purchase homes. Also, major Chinese state banks have announced their intention to put a total of 114 billion yuan ($15.7 billion) into a semiconductor investment fund. In corporate news, Alibaba Health Information Technology surged over +10% after the healthcare company said its full-year net income rose 65% year-over-year to 883.48 million yuan ($122 million), beating analysts’ estimates. Market participants this week will be keeping an eye on crucial Chinese Purchasing Managers’ Index data for May, scheduled for release on Friday.

Japan’s Nikkei 225 Stock Index closed slightly lower today as investors took a cautious stance while considering the likely timing of further tightening of the Bank of Japan’s monetary policy. Losses in real estate, pharmaceutical, and chip-related stocks offset gains in financial and utilities stocks on Tuesday. Bank of Japan data released on Tuesday revealed that Japanese corporate services prices in April experienced their most rapid increase since early 2015, driven by rising labor costs in the services sector. Meanwhile, the 10-year Japanese government bond yield climbed to its highest level since April 2012 on Tuesday. Bank of Japan Governor Kazuo Ueda and his deputy indicated there is room for gradually raising interest rates now that the country has moved away from an inflation norm of 0%. “While we still have a big challenge to anchor the inflation expectations to 2%, the end of our battle is in sight,” Deputy Governor Shinichi Uchida said in a speech at the BOJ’s annual international conference Monday. In other news, Japan’s Finance Minister Shunichi Suzuki on Tuesday reiterated concerns over the weakness of the yen and reaffirmed his commitment to taking action if there are excessive movements in the currency market. In corporate news, Midac Holdings climbed over +5% after the company reported an over 13% year-over-year increase in attributable profit for the fiscal year ended March 31st. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -3.28% to 16.23.

The Japanese April Corporate Services Price Index has been reported at +2.8% y/y, stronger than expectations of +2.3% y/y.

Pre-Market U.S. Stock Movers

Apple (AAPL) rose over +2% in pre-market trading following a report from Bloomberg News indicating that iPhone shipments in China soared approximately 52% in April from a year earlier due to a wave of discounts offered by retail partners.

Micron Technology (MU) gained about +1% in pre-market trading following a report from the Japanese daily Nikkan Kogyo stating that the company plans to build a new DRAM chip-making factory in Hiroshima, Japan by the end of 2027.

CytomX Therapeutics (CTMX) climbed more than +6% in pre-market trading after Piper Sandler upgraded the stock to Overweight from Neutral with a price target of $3.50.

Duolingo (DUOL) rose over +2% in pre-market trading after JMP Securities upgraded the stock to Outperform from Market Perform with a $260 price target.

Norwegian Cruise Line (NCLH) advanced more than +2% in pre-market trading after Mizuho upgraded the stock to Buy from Neutral with a price target of $24.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - May 28th

Bank of Nova Scotia (BNS), Heico (HEI), Futu (FUTU), CAVA Group (CAVA), Box Inc (BOX), Golar (GLNG), JOYY Inc (YY), Danaos (DAC), Hello Group (MOMO), Ituran (ITRN), Nano X (NNOX), GDEV Inc (GDEV), Diana Shipping (DSX), Ooma Inc (OOMA), Baozun Inc (BZUN), So-Young (SY).

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