Morning Markets
September E-Mini S&P 500 futures (ESU23) this morning are down -0.22%, and Sep Nasdaq 100 E-Mini futures (NQU23) are down -0.37%.
U.S. stock index futures are mildly lower as the market remains cautious ahead of Fed Chair Powell’s semi-annual testimony later this morning before the House Financial Services Committee. Mr. Powell will then appear Thursday before the Senate Banking Committee and repeat his testimony, although he will answer different questions from panel members.
The markets are concerned Mr. Powell may take a hawkish tone today after the FOMC last week warned of additional interest rate hikes this year even after leaving rates unchanged last week for the first time in 15 months. The markets are discounting the odds at 74% that the FOMC, at its next meeting on July 25-26, will raise its funds rate target by +25 bp, unchanged from late Tuesday.
The Fed this morning at 8:30 am ET released the prepared statement that Mr. Powell will read during his testimony today. T-note prices moved a few ticks lower on the release of that statement. The statement is in line with Mr. Powell’s comments from last week’s FOMC meeting.
Mr. Powell, in his prepared testimony today, will say that the Fed believes that higher interest rates will be needed to curb inflation. He will say the Fed remains “strongly committed to bringing inflation back down to our 2% goal.” However, he will say that the Fed is making decisions “meeting by meeting,” which means that a rate hike is not guaranteed for the next meeting.
Stocks are being undercut this morning by a +3.1 bp rise in the 10-year T-note yield to 3.752%. T-note prices were undercut by fears of hawkish Powell testimony today and an upside UK inflation surprise. T-note prices were also undercut by a small +0.3 bp rise today in the 10-year inflation expectations rate to 2.229%.
The UK May CPI rose +0.7% m/m and +8.7% y/y, stronger than expectations of +0.5% m/m and +8.4% y/y. The UK May core CPI rose +7.1% y/y, stronger than expectations of +6.8% y/y and April’s report of +6.8% y/y. The 10-year gilt yield today is up +5.2 bp at 4.389%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.06%. China’s Shanghai Composite closed down -1.31%, while Japan’s Nikkei Stock Index closed up +0.56%.
Chinese stocks today were undercut by continued disappointment that China’s State Council on Tuesday didn’t mention specific economic support measures and that the Chinese central bank cut lending rates less than expected. The PBOC today on Tuesday cut the one-year and five-year loan prime rates by -10 bp, smaller than expectations for a -15 bp cut.
Pre-Market U.S. Stock Movers
FedEx (FDX) is down -2.9% in pre-market trading after company management issued 2024 earnings guidance of $16.50-$18.50 per share, with a mid-point of $17.50 that was below the market consensus of $18.31. Also, FedEx reported sales of $21.9 billion in the quarter ending May 31, which was the third consecutive decline as package volumes declined from pandemic levels. On the positive side, fiscal Q4 earnings of $4.94 per share were above the market consensus of $4.88, although down from the year-earlier level of $6.87.
Adobe (ADBE) is up +1.2% in pre-market trading after BMO Capital Markets upgraded the stock to outperform from market perform on expectations for a revenue boost from AI and Adobe Express.
Amazon (AMZN) is up +0.2% in pre-market trading after Jefferies raised its price target to $150 from $135 due to expectations for a recovery in its cloud services and AI tailwinds.
Li Auto (LI) is up +3.2% after Chinese electric vehicle makers saw support from the Chinese government’s extension of tax breaks through 2027 for clean-energy vehicles.
Peloton Interactive (PTON) is down -3.4% after Wolf Research downgraded its rating to underperform from peer-perform.
Infosys (INFY) is down -1.4% on a downgrade by Susquehanna Financial to negative from neutral.
Today’s U.S. Earnings Reports (6/21/2023)
Avid Bioservices Inc (CDMO), Enerpac Tool Group Corp (EPAC), KB Home (KBH), Patterson Cos Inc (PDCO), Steelcase Inc (SCS), Winnebago Industries Inc (WGO).
On the date of publication, Rich Asplund 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.
