Stock Index Futures Plunge as Bond Yields Climb on Rate Fears, U.S. Inflation Data Awaited

June S&P 500 E-Mini futures (ESM24)are down -0.53%, and June Nasdaq 100 E-Mini futures (NQM24) are down -0.58% this morning as U.S. Treasury yields continued to rise following weak debt auctions, resilient consumer confidence data, and hawkish comments from a Federal Reserve official, while investors braced for key U.S. inflation data later this week.

In yesterday’s trading session, Wall Street’s major indexes closed mixed. Nvidia (NVDA) climbed about +7% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the Information reported that Elon Musk indicated that xAI would utilize the chipmaker’s H100 graphics processing units. Also, United States Cellular (USM) advanced more than +12% after announcing it would sell almost all its wireless operations and certain specified spectrum assets to T-Mobile US for about $4.4 billion. In addition, Norwegian Cruise Line Holdings (NCLH) gained over +3% after Mizuho Securities upgraded the stock to Buy from Neutral with a price target of $24. On the bearish side, Moderna (MRNA) plunged more than -8% and was the top percentage loser on the S&P 500 and Nasdaq 100 after an SEC filing revealed that director Afeyan offloaded $2.36 million worth of company common stock last Wednesday. Also, Zscaler (ZS) slid over -4% after Wells Fargo Securities downgraded the stock to Equal Weight from Overweight.

Economic data on Tuesday showed that the U.S. CB consumer confidence index unexpectedly rose to 102.0 in May, stronger than expectations of 96.0. Also, the U.S. S&P/CS HPI Composite - 20 n.s.a. rose +7.4% y/y in March, stronger than expectations of +7.3% y/y and the largest increase in 17 months.

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, particularly given the strong labor market and resilient economy. “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. “I don’t think anybody has totally taken rate increases off the table. I think the odds of us raising rates are quite low, but I don’t want to take anything off the table,” Kashkari said later Tuesday at an event in London.

Meanwhile, U.S. rate futures have priced in a 0% chance of a 25 basis point rate cut at the next FOMC meeting in June and a 10.2% probability of a 25 basis point rate cut at the July FOMC meeting.

The focus this week will be on the April reading of the U.S. core personal consumption expenditures price index, the Fed’s first-line inflation gauge, scheduled for release on Friday.

On the earnings front, notable companies like Salesforce (CRM), Dick’s Sporting Goods (DKS), Chewy (CHWY), HP Inc. (HPQ), Pure Storage (PSTG), Okta (OKTA), UiPath (PATH), and C3.ai (AI) are set to report their quarterly figures today.

On the economic data front, investors will likely focus on the U.S. Richmond Manufacturing Index due later in the day. Economists foresee this figure to stand at -6 in May, compared to the previous value of -7.

Later today, the Federal Reserve will release its Beige Book survey of regional business contacts, which includes observations by officials in each of the 12 Fed districts, with commentary on business activity and economic conditions across the country. The Beige Book is published two weeks before each meeting of the policy-setting Federal Open Market Committee.

In addition, market participants will be anticipating speeches from New York Fed President John Williams and Atlanta Fed President Raphael Bostic.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.566%, up +0.55%.

The Euro Stoxx 50 futures are down -0.69% this morning as increasing bond yields globally weighed on the risk mood, with investors awaiting the release of key inflation data from both sides of the Atlantic later in the week. Travel stocks underperformed on Wednesday, while energy stocks gained ground. A survey released on Wednesday indicated that German consumer sentiment improved for the fourth straight month heading into June. Meanwhile, investors will now turn their attention to Germany’s preliminary inflation data due later in the session, which is anticipated to show some moderation on a monthly basis in May. In corporate news, Delivery Hero Se (DHER.D.DX) slid about -3% after Morgan Stanley downgraded the stock to Equal Weight from Overweight.

Germany’s GfK Consumer Climate Index and France’s Consumer Confidence data were released today.

The German June GfK Consumer Climate Index has been reported at -20.9, stronger than expectations of -22.5.

The French May Consumer Confidence came in at 90, weaker than expectations of 91.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.05%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.77%.

China’s Shanghai Composite Index closed marginally higher today as investors weighed new property measures aimed at reviving the sector alongside the International Monetary Fund’s updated forecasts for the country. Gains in automobile and metal stocks led the overall market higher on Wednesday. The International Monetary Fund stated on Wednesday that it now expects China’s 2024 gross domestic product growth at 5%, up from its earlier forecast of 4.6% made in April, citing a strong first-quarter performance and recent policy stimulus. The organization also boosted China’s growth forecast for next year by 0.4 percentage points to 4.5%. At the same time, the IMF cautioned that growth in China would decelerate to 3.3% by 2029 due to an aging population and slower productivity expansion. Meanwhile, Guangzhou and Shenzhen joined Shanghai in relaxing restrictions on home purchases on Tuesday, becoming the latest first-tier cities in nationwide efforts to rescue the troubled sector. On the negative side, the onshore yuan dropped to its lowest level against the U.S. dollar since November following China’s central bank’s decision to set a weaker daily fix in an effort to bolster exports. Reuters reported on Wednesday that China’s major state-owned banks were purchasing U.S. dollars in the offshore foreign exchange market before selling them in the spot market to stabilize the Chinese currency. In corporate news, BYD surged over +8% after unveiling a new hybrid powertrain capable of traveling more than 2,000 kilometers (1,250 miles) without the need for recharging or refueling. Market participants this week will be closely monitoring the release of key Chinese Purchasing Managers’ Index data for May, scheduled for Friday.

Japan’s Nikkei 225 Stock Index erased early gains to close lower today as the 10-year Japanese government bond yield hit a new 12-year high. Electronics and machinery stocks led the declines on Wednesday. The Cabinet Office reported Wednesday that the consumer confidence index in Japan fell to a 6-month low in May. Meanwhile, Japan’s 10-year bond yield reached a level not seen in more than 12 years on Wednesday, driven by increasing speculation that policy tightening by the Bank of Japan is imminent. BOJ Board Member Seiji Adachi acknowledged on Wednesday that yen weakness could potentially spur price gains or influence the public’s perception of future prices more than expected, prompting authorities to consider another rate hike sooner than anticipated. In other news, an influential ruling party panel outlined in a draft proposal on fiscal policy obtained by Reuters on Wednesday that Japan must reinstate fiscal discipline to prepare for increasing interest rates and uphold market trust in the yen. In corporate news, Mitsubishi Electric fell over -4% after the home appliance manufacturer lowered its return on equity target to 9% from 10%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +3.51% to 16.80.

The Japanese May Household Confidence came in at 36.2, weaker than expectations of 39.1.

Pre-Market U.S. Stock Movers

American Airlines Group (AAL) plunged over -8% in pre-market trading after cutting its Q2 EPS guidance. The company also lowered its Q2 operating margin forecast.

Digital Turbine (APPS) slumped more than -6% in pre-market trading after the company reported weaker-than-expected Q4 revenue and offered a soft FY25 revenue outlook.

First Solar (FSLR) slid over -2% in pre-market trading after DZ Bank downgraded the stock to Hold from Buy with a $270 price target.

Marathon Oil Corporation (MRO) surged about +6% in pre-market trading following a report from the Financial Times indicating that ConocoPhillips is in advanced talks to acquire the company in an all-stock deal that would value the Houston-based company at slightly more than its current market value of $15 billion.

Robinhood Markets (HOOD) gained more than +3% in pre-market trading after the company announced a $1 billion share repurchase program.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - May 29th

Salesforce (CRM), Bank of Montreal (BMO), Agilent Technologies (A), HP Inc (HPQ), Pure Storage Inc (PSTG), Nutanix (NTNX), Okta (OKTA), Dick’s Sporting Goods (DKS), U-Haul Holding (UHAL), UiPath (PATH), Descartes Systems (DSGX), Abercrombie&Fitch (ANF), Chewy (CHWY), American Eagle Outfitters (AEO), Advance Auto Parts (AAP), Capri Holdings (CPRI), Ncino (NCNO), Credo Technology Holding (CRDO), C3.ai (AI), Columbus McKinnon (CMCO), Thermon (THR), Noah (NOAH), Nordic American Tankers (NAT), Stratasys Ltd (SSYS), American Superconductor (AMSC).

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