June S&P 500 E-Mini futures (ESM24) are trending down -0.30% this morning as investors awaited the start of the Federal Reserve’s two-day policy meeting while also gearing up for the release of fresh data on the U.S. housing market.
In Monday’s trading session, Wall Street’s major indexes closed higher. Tesla Inc (TSLA) climbed over +6% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the electric carmaker said it would raise prices for all Model Y cars in the United States by $1,000 starting April 1st. The company also stated on Saturday that Model Y prices would increase by about 2,000 euros ($2,177) across several European countries on March 22nd. Also, Alphabet (GOOGL) advanced more than +4% following a report from Bloomberg News indicating that Apple is in talks to build Google’s Gemini artificial intelligence engine into the iPhone. In addition, PepsiCo (PEP) gained about +4% after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a $190 price target. On the bearish side, Boeing Co (BA) dropped more than -1% and was the top percentage loser on the Dow after Bloomberg News reported that a Federal grand jury in Seattle had issued a subpoena to the planemaker regarding the January 5th midair blowout of a Boeing door plug on an Alaska Airlines flight.
The Federal Reserve kicks off its two-day meeting later in the day, with investors widely expecting the U.S. central bank to hold interest rates steady on Wednesday for the fifth straight gathering. Investors will be attentive to the Fed’s new “dot plot” in its Summary of Economic Projections to assess how many rate cuts policymakers anticipate delivering this year. Market participants will also be closely monitoring Fed Chair Jerome Powell’s post-decision press conference for clues regarding the future direction of Fed policy.
“After last week’s double-dose of hot inflation data, everyone will be wondering whether the Fed is rethinking a June cut. The market will need to like what it sees in the Fed’s statement on Wednesday, and get confirmation from Jerome Powell that two months of sticky inflation numbers won’t derail the Fed’s game plan,” said Chris Larkin at E*Trade from Morgan Stanley.
Meanwhile, U.S. rate futures have priced in an 8.6% chance of a 25 basis point rate cut at the May FOMC meeting and a 50.7% probability of a 25 basis point rate cut at June’s policy meeting.
On the economic data front, investors will likely focus on the U.S. Building Permits preliminary data in a couple of hours. Economists foresee this figure to stand at 1.500M in February, compared to the previous figure of 1.489M.
U.S. Housing Starts data will be reported today as well. Economists expect February’s figure to be 1.430M, compared to the previous value of 1.331M.
In the bond markets, United States 10-year rates are at 4.322%, down -0.42%.
The Euro Stoxx 50 futures are up +0.10% this morning as investors digested key Eurozone economic data and looked ahead to the start of the Federal Reserve’s meeting. Energy stocks outperformed on Tuesday, while financial services and technology stocks lost ground. The ZEW Economic Research Institute reported Tuesday that German investor morale improved more than expected in March. Separately, Eurostat said Tuesday that hourly labor costs in the Eurozone expanded by 3.4% year-over-year in the fourth quarter, softer than the downwardly revised 5.2% increase in the third quarter. At the same time, wages and salaries in the region increased by 3.1% year-over-year in Q4, contrasting with the downwardly revised 5.2% surge in Q3. In corporate news, Unilever Plc (ULVR.LN) climbed over +4% following the consumer goods giant’s announcement that it plans to separate its ice-cream unit, encompassing brands such as Ben & Jerry’s and Magnum, as part of a restructuring plan that will affect 7,500 jobs.
European Central Bank Vice President Luis de Guindos stated on Tuesday that the ECB would be in a position to discuss an interest rate cut in June. “We haven’t yet discussed anything about future rate moves. We need to gather more information. In June we will also have our new projections and we will be ready to discuss this,” de Guindos told the Greek newspaper Naftemporiki in an interview.
Germany’s ZEW Economic Sentiment and Eurozone’s ZEW Economic Sentiment data were released today.
The German March ZEW Economic Sentiment came in at 31.7, stronger than expectations of 20.6.
Eurozone March ZEW Economic Sentiment arrived at 33.5, stronger than expectations of 25.4.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.72% and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.66%.
China’s Shanghai Composite Index closed lower today, snapping two straight sessions of gains amid subdued sentiment on concerns over the country’s worsening property crisis. Financial and pharmaceutical stocks underperformed on Tuesday. Also, mainland developers listed in Hong Kong retreated despite the announcement from the Chinese megacity Beijing regarding the optimization of property regulation and the implementation of different policies tailored to the situation of each district. Data on Monday revealed that China’s industrial output and fixed-asset investment growth topped expectations in January-February, but the persisting weakness in the property sector continues to weigh heavily on the economy and confidence. Meanwhile, the changes to the rules governing consumer finance firms announced by China’s National Financial Regulatory Administration also weighed on sentiment. The changes include increasing the minimum registered capital requirement for firms offering consumer loans, excluding those for home and car purchases, to 1 billion yuan, more than three times the minimum requirement set in 2014. In corporate news, WuXi AppTec plunged over -4% after the company issued downbeat 2024 revenue guidance, prompted by concerns about potential U.S. sanctions.
Japan’s Nikkei 225 Stock Index closed higher today following the Bank of Japan’s decision to end its negative interest rate policy, saying that a new era of stable inflation is in sight. Real estate stocks led the gains on Tuesday. The BOJ ended more than a decade of ultra-loose monetary policy, scrapping the world’s last negative interest rate while maintaining accommodative financial conditions for the time being. The central bank set a new policy rate range of 0% to 0.1%, shifting from a -0.1% short-term interest rate, and also abandoned its yield curve control program while pledging to continue purchasing long-term government bonds. In addition, it ended its purchases of exchange-traded funds. Meanwhile, the yen weakened, and Japanese government bond yields fell following Japan’s central bank decision to raise borrowing costs for the first time since 2007. In other news, data released on Tuesday revealed that Japan’s industrial output contracted by 6.7% compared to the previous month in January, a smaller decline than the initial projection of 7.5%, yet still representing the most significant drop in industrial production since May 2020. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -3.61% to 19.50.
“A well-flagged decision from the BOJ helped avoid turmoil in financial markets and reflects the power of strong communication. The BOJ’s commentary suggests that it expects accommodative conditions to persist for some time, which is a signal that concurrent rate rises are unlikely,” said Charu Chanana, a strategist at Saxo Capital Markets.
The Japanese January Industrial Production stood at -6.7% m/m, stronger than expectations of -7.5% m/m.
Pre-Market U.S. Stock Movers
Fusion Pharmaceuticals Inc (FUSN) spiked about +94% in pre-market trading after AstraZeneca agreed to buy the clinical-stage biopharmaceutical company for as much as $2.4 billion.
Augmedix (AUGX) climbed over +15% in pre-market trading after the company reported better-than-expected Q4 results.
National CineMedia Inc (NCMI) surged more than +21% in pre-market trading after the company posted upbeat Q4 results, offered strong Q1 revenue guidance, and authorized a share buyback program of up to $100 million.
3M Company (MMM) gained about +1% in pre-market trading after Barclays upgraded the stock to Overweight from Equal Weight with a price target of $126.
Snowflake Inc (SNOW) fell over -1% in pre-market trading after Redburn Atlantic downgraded the stock to Sell from Neutral with a $125 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - March 19th
ZTO Express Cayman (ZTO), Tencent Music Entertainment Group (TME), Xpeng (XPEV), Caleres (CAL), HUYA (HUYA), Terawulf (WULF), Taysha Gene (TSHA), Harrow Health (HROW), Citi Trends (CTRN), Relmada Therapeutics (RLMD), Design Therapeutics (DSGN).
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