S&P Futures Tread Water Ahead of FOMC Meeting Minutes, U.S. Economic Data on Tap

September S&P 500 E-Mini futures (ESU24)are trending up +0.05% this morning as market participants looked ahead to the release of the Federal Reserve’s June policy meeting minutes while also gearing up for a slew of U.S. economic data to gain insights into the policy outlook.

In yesterday’s trading session, Wall Street’s major indices closed higher. Tesla (TSLA) surged over +10% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after reporting stronger-than-expected Q2 vehicle deliveries. Also, Paramount Global (PARA) climbed more than +5% after the New York Times reported that billionaire Barry Diller was considering making a bid to take control of the company. In addition, Bank of America (BAC) gained over +2% after Seaport Global Securities upgraded the stock to Buy from Neutral with a price target of $48. On the bearish side, CrowdStrike Holdings (CRWD) fell more than -1% and was the top percentage loser on the Nasdaq 100 after Piper Sandler downgraded the stock to Neutral from Overweight.

A Labor Department report on Tuesday showed that U.S. JOLTs job openings unexpectedly rose to 8.140M in May, stronger than expectations of 7.960M.  

Federal Reserve Chair Jerome Powell said Tuesday that recent economic data indicate inflation is returning to a downward trajectory, but stressed that policymakers require additional evidence before reducing interest rates. While Powell refrained from offering any specific guidance on the timing of the first rate cut, he acknowledged that the central bank has made “quite a bit of progress” in lowering inflation. He added that he would like to see that progress continue. “Because the U.S. economy is strong and the labor market is strong, we have the ability to take our time and get this right,” Powell said. “And that’s what we’re planning to do.”

U.S. rate futures have priced in an 8.8% chance of a 25 basis point rate cut at the next central bank meeting in July and a 59.9% probability of a 25 basis point rate cut at the September FOMC meeting.

Meanwhile, the U.S. stock markets will close early at 1 p.m. Eastern Time today and remain closed on Thursday for the Independence Day holiday.

Today, investors will closely monitor the release of the Federal Reserve’s minutes from the June meeting, which may provide further insights into the policymakers’ views on inflation, interest rates, and the economy. 

On the economic data front, all eyes are focused on the U.S. ADP Nonfarm Employment Change data, set to be released in a couple of hours. Economists, on average, forecast that the June ADP Nonfarm Employment Change will stand at 163K, compared to the previous number of 152K.

Also, investors will focus on U.S. Initial Jobless Claims data. Economists estimate this figure to arrive at 234K, compared to last week’s number of 233K.

The U.S. ISM Non-Manufacturing PMI and the U.S. S&P Global Services PMI will be closely watched today. Economists forecast the June ISM Non-Manufacturing PMI to stand at 52.6 and the June S&P Global Services PMI to be 55.1, compared to the previous values of 53.8 and 54.8, respectively.

U.S. Factory Orders data will come in today. Economists foresee this figure to stand at +0.2% m/m in May, compared to the previous figure of +0.7% m/m.

U.S. Crude Oil Inventories data will be reported today as well. Economists estimate this figure to be -0.400M, compared to last week’s value of 3.591M.

In addition, market participants will be anticipating a speech from New York Fed President John Williams.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.435%, up +0.02%.

The Euro Stoxx 50 futures are up +1.03% this morning, rebounding from losses in the previous session as investor sentiment improved following dovish comments from Fed Chair Jerome Powell. Mining and technology stocks outperformed on Wednesday. A survey released on Wednesday indicated that overall business growth across the Eurozone slowed significantly in June, with a robust expansion in the dominant services industry failing to offset a further decline in manufacturing. Meanwhile, market participants are gearing up for two national parliamentary elections, with the U.K. going to the polls on Thursday and France on Sunday. Surveys indicate a potential victory for the U.K.’s opposition center-left Labour Party, an outcome analysts believe would be positively received by markets, whereas the French election is fraught with more uncertainty. In corporate news, Bpost (BPOST.BB) plunged more than -7% after the Belgian postal operator provided weaker-than-expected full-year earnings guidance.

Spain’s Services PMI, Italy’s Services PMI, France’s Services PMI, Germany’s Services PMI, Eurozone’s Composite PMI, Eurozone’s Services PMI, and Eurozone’s PPI data were released today.

The Spanish June Services PMI stood at 56.8, stronger than expectations of 56.5.

The Italian June Services PMI arrived at 53.7, weaker than expectations of 53.9.

The French June Services PMI came in at 49.6, stronger than expectations of 48.8.

The German June Services PMI was at 53.1, weaker than expectations of 53.5.

Eurozone June Composite PMI arrived at 50.9, stronger than expectations of 50.8.

Eurozone June Services PMI stood at 52.8, stronger than expectations of 52.6.

Eurozone May PPI has been reported at -0.2% m/m and -4.2% y/y, weaker than expectations of -0.1% m/m and -4.1% y/y.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.49% and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.26%.

China’s Shanghai Composite Index closed lower today as investors digested data that showed a slowdown in the nation’s service activity momentum. Software stocks led the declines on Wednesday. A private sector survey released on Wednesday indicated that China’s services activity expanded at its slowest pace in eight months in June, with confidence hitting a four-month low, driven by slower growth in new orders, mirroring the trend observed in official data. Meanwhile, the offshore yuan hovered near an eight-month low against the dollar on Wednesday following weak economic data from the country and the People’s Bank of China’s decision to set its midpoint rate at a seven-month low of 7.1312 per dollar. In other news, according to a document initially reported by Reuters, U.S. President Joe Biden revoked eight licenses that had permitted companies to export to Chinese telecommunications giant Huawei. The approved licenses encompassed exercise equipment, office furniture, and low-tech components like touchscreen sensors. In corporate news, Alibaba Group rose over +2% after the company announced it had repurchased shares worth $5.8 billion in the second quarter, marking its largest single-quarter buyback ever. Also, China Tourism Group Duty Free Corp. surged about +10% as investors saw a potential consumption tax in China as a positive catalyst for the company.

The Chinese June Caixin Services PMI stood at 51.2, weaker than expectations of 53.4.

Japan’s Nikkei 225 Stock Index closed sharply higher today on optimism regarding U.S. interest-rate cuts following Fed Chair Jerome Powell’s remarks that inflation is returning to a downward path. Electronics and heavy industry stocks led the gains on Wednesday. A private sector survey showed on Wednesday that Japanese service activity contracted for the first time in nearly two years in June amid cooling domestic demand. Meanwhile, Japan’s 10-year government bond yield surged to its highest level since 2011 on Wednesday as investors increased bets that the Bank of Japan could further normalize monetary policy settings at its upcoming meeting later this month amid a steep decline in the yen. The central bank indicated that a weak yen increases import costs, which adds to inflationary pressures and negatively impacts household consumption. The yen weakened to a new 38-year low against the dollar on Wednesday, keeping markets alert to the possibility of another government intervention. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.62% to 16.47.

The Japanese June au Jibun Bank Japan Services PMI came in at 49.4, weaker than expectations of 49.8.

Pre-Market U.S. Stock Movers

Paramount Global (PARA) climbed over +7% in pre-market trading after the Wall Street Journal reported that Skydance Media had reached a preliminary agreement to buy National Amusements, the movie theater chain and holder of the Redstone family’s 77% stake in Paramount. It then plans to merge Skydance with Paramount Global, the report said.

Desktop Metal (DM) advanced more than +6% in pre-market trading after Nano Dimension agreed to acquire the company in an all-cash deal for $5.50 a share, with potential downward adjustments to $4.07 per share.

Dell Technologies (DELL) gained nearly +1% in pre-market trading after BofA added the stock to its “U.S. 1 List.”

Simulations Plus (SLP) slumped more than -8% in pre-market trading after the company suspended its quarterly dividend and cut its full-year adjusted EPS guidance.

Charter Communications (CHTR) fell over -2% in pre-market trading after Citi downgraded the stock to Sell from Neutral with a price target of $255.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - July 3rd

Constellation Brands (STZ).

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