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Stock Index Futures Climb as Fed Rate Cut Hopes Grow, Fed Speak and ECB Minutes in Focus
June S&P 500 E-Mini futures (ESM24)are up +0.40%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.44% this morning after three major U.S. benchmark indices ended the regular session in the green as higher-than-expected applications for U.S. unemployment benefits bolstered the case for rate cuts, with investors looking ahead to fresh comments from Federal Reserve officials.
In yesterday’s trading session, the benchmark S&P 500 rose to a 1-month high and the blue-chip Dow notched a 5-week high. Equinix (EQIX) climbed over +11% and was the top percentage gainer on the S&P 500 after the data center operator reported better-than-expected Q1 adjusted EBITDA. Also, Applovin (APP) advanced more than +14% after the company reported upbeat Q1 results and provided strong Q2 revenue guidance. In addition, Affirm Holdings (AFRM) gained over +10% after JPMorgan Chase upgraded the stock to Overweight from Neutral with a price target of $43. On the bearish side, EPAM Systems (EPAM) plummeted about -27% and was the top percentage loser on the S&P 500 after cutting its FY24 adjusted EPS guidance. Also, Airbnb (ABNB) slumped over -6% and was the top percentage loser on the Nasdaq 100 after the home-rental company gave a weaker-than-expected Q2 revenue forecast.
The Labor Department’s report on Thursday showed that the number of Americans filing for initial jobless claims in the past week rose +22K to an 8-1/2 month high of 231K, weaker than expectations of 212K.
“Time will tell whether it’s a one-off or part of a genuine cooldown in the labor market. Investors may have adjusted to the idea of the Fed waiting until September to cut interest rates, but that doesn’t mean they’re comfortable waiting indefinitely,” said Chris Larkin at E*Trade from Morgan Stanley.
San Francisco Fed President Mary Daly stated on Thursday that interest rates are presently constraining the economy, but it may require “more time” to bring inflation back to the central bank’s target. Daly emphasized that recent data, which indicated a resurgence in price pressures earlier this year, highlights the reason why officials cannot declare victory until they are confident that inflation is contained. “There’s considerable now uncertainty about what the next few months of inflation will be and what we should do in response,” she said during a moderated discussion at George Mason University’s Mercatus Center.
Meanwhile, U.S. rate futures have priced in an 8.5% chance of a 25 basis point rate cut at June’s policy meeting and a 30.8% probability of a 25 basis point rate cut at the conclusion of the Fed’s July meeting.
Today, all eyes are focused on the U.S. Michigan Consumer Sentiment preliminary reading in a couple of hours. Economists, on average, forecast that the Michigan consumer sentiment index will stand at 76.0 in May, compared to the previous value of 77.2.
In addition, market participants will be anticipating speeches from Fed Governor Michelle Bowman, Chicago Fed President Austan Goolsbee, Minneapolis Fed President Neel Kashkari, Dallas Fed President Lorie Logan, and Fed Vice Chair for Supervision Michael Barr.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.448%, down -0.04%.
The Euro Stoxx 50 futures are up +0.83% this morning, buoyed by stronger-than-anticipated U.K. growth data and optimism regarding rate cuts in the region and the U.S. Mining, utilities, and energy stocks outperformed on Friday. The Office for National Statistics reported Friday that Britain’s economy experienced its most significant growth in nearly three years in the first quarter of 2024, marking the end of the shallow recession it entered in the second half of last year. Meanwhile, investors are anticipating the release of the minutes from the European Central Bank’s April meeting later in the session. In corporate news, Iveco Group NV (IVG.M.DX) climbed over +6% after the Italian truck and bus maker reported better-than-expected Q1 operating profit. Also, Zalando Se (ZAL.D.DX) gained more than +2% after Berenberg upgraded the stock to Buy from Hold.
The Bank of England maintained interest rates at a 16-year high on Thursday, yet two members of the nine-person committee responsible for rate decisions advocated for a reduction, signaling the bank’s gradual move toward lowering interest rates. BoE Governor Baily said, “It’s likely that we will need to cut the bank rate over the coming quarters and make monetary policy less restrictive over the forecast period, possibly more so than currently priced into market rates.” He further stated that a change in the bank rate in June “is neither ruled out nor a fait accompli.”
U.K.’s GDP (preliminary), U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Monthly GDP 3M/3M Change, and Italy’s Industrial Production data were released today.
U.K. GDP has been reported at +0.6% q/q and +0.2% y/y in the first quarter, stronger than expectations of +0.4% q/q and 0.0% y/y.
U.K. March GDP arrived at +0.4% m/m and +0.7% y/y, stronger than expectations of +0.1% m/m and +0.3% y/y.
U.K. March Industrial Production stood at +0.2% m/m and +0.5% y/y, stronger than expectations of -0.5% m/m and +0.3% y/y.
U.K. March Manufacturing Production came in at +0.3% m/m and +2.3% y/y, stronger than expectations of -0.5% m/m and +1.8% y/y.
U.K. March Monthly GDP 3M/3M Change was at 0.6%, stronger than expectations of +0.4%.
The Italian March Industrial Production arrived at -0.5% m/m, weaker than expectations of +0.3% m/m.
Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.01%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.41%.
China’s Shanghai Composite Index closed just above the flatline today, lagging its regional peers as geopolitical concerns weighed on investor sentiment. The Federal Register showed on Thursday that President Joe Biden’s administration added 37 Chinese entities to a trade restriction list, including some accused of supporting the spy balloon that flew over the United States last year, for “acting contrary to the national security or foreign policy interests of the United States.” In addition, Bloomberg News reported on Thursday that the Biden administration plans to announce a sweeping decision on China tariffs as early as next week, targeting industries such as electric vehicles, batteries, and solar equipment. Meanwhile, strategists at Citigroup Inc. downgraded China equities to Neutral, citing that the recent rebound in Chinese stocks occurred despite deteriorating fundamentals. On the positive side, Bloomberg News reported Thursday that China is contemplating a proposal to exempt individual investors from paying dividend taxes on Hong Kong stocks purchased through Stock Connect. Also, property stocks surged for a second consecutive day following the removal of residential property purchase restrictions in two major cities. In corporate news, Semiconductor Manufacturing International Corp. gained over +1% after reporting 23% revenue growth in the first quarter. Investor attention is now directed toward key China inflation data for April scheduled for release this weekend.
Japan’s Nikkei 225 Stock Index closed higher today, tracking overnight gains on Wall Street fueled by jobs data that bolstered the case for U.S. interest-rate cuts. Consumer-related stocks led the gains on Friday. Data released by the Ministry of Finance on Friday indicated that Japan’s current account surplus surged by 44% in March compared to a year earlier. Separately, data released by the Ministry of Internal Affairs and Communications on Friday showed that average household spending in Japan declined for the 13th consecutive month in March compared to a year earlier. Meanwhile, the yen was little changed at around 155.60 per dollar on Friday. Japan’s Finance Minister Shunichi Suzuki stated Friday that the government would take appropriate actions in the currency market. In corporate news, Konami Group surged over +9% following the Japanese gaming giant’s announcement of an approximately 70% year-over-year increase in full-year profit, largely attributed to “record highs in the Digital Entertainment business.” The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -6.79% to 18.53.
The Japanese March Household Spending came in at +1.2% m/m and -1.2% y/y, stronger than expectations of -0.3% m/m and -2.3% y/y.
The Japanese March Current Account n.s.a. stood at 3.399T yen, weaker than expectations of 3.489T yen.
Pre-Market U.S. Stock Movers
Novavax (NVAX) spiked about +136% in pre-market trading after the biotech removed its going concern notice following a co-exclusive licensing agreement with Sanofi to co-commercialize its COVID-19 vaccine and develop next-generation flu-COVID-19 combination vaccines.
Array Technologies (ARRY) climbed more than +11% in pre-market trading after the company reported stronger-than-expected Q1 adjusted EPS.
Victoria’s Secret (VSCO) gained over +6% in pre-market trading after the lingerie retailer reported higher-than-anticipated preliminary Q1 EPS.
3M Company (MMM) rose more than +1% in pre-market trading after HSBC upgraded the stock to Buy from Hold with a price target of $115.
MacroGenics (MGNX) plummeted about -63% in pre-market trading after the company reported downbeat Q1 results and provided an interim update on safety and preliminary efficacy data from the TAMARACK study of vobra duo in metastatic castration-resistant prostate cancer.
Akamai Technologies (AKAM) plunged over -10% in pre-market trading after the content delivery provider reported mixed Q1 results and issued below-consensus guidance for the second quarter and full year.
Unity Software (U) slid more than -2% in pre-market trading after the game development software company posted mixed Q1 results and provided a soft Q2 revenue outlook.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - May 10th
Enbridge (ENB), Energy of Minas Gerais (CIG), Crescent Point Energy (CPG), DigitalOcean Holdings (DOCN), Construction Partners (ROAD), Sylvamo (SLVM), Central Puerto (CEPU), Now Inc (DNOW), Costamare (CMRE), Sphere Entertainment (SPHR), ANI Pharma (ANIP), Calumet (CLMT), Hawaiian Electric Industries (HE), i3 Verticals (IIIV), Novavax (NVAX), AMC Networks (AMCX), Humacyte (HUMA), Sonida Senior Living (SNDA), Telesat (TSAT).
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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
