June S&P 500 E-Mini futures (ESM24) are down -0.36%, and June Nasdaq 100 E-Mini futures (NQM24) are down -0.30% this morning, signaling further losses on Wall Street after hotter-than-expected U.S. inflation data diminished hopes of early interest rate cuts by the Federal Reserve, while investors awaited crucial U.S. producer inflation data and a policy verdict from the European Central Bank.
The minutes of the Federal Open Market Committee’s March 19-20 meeting revealed that “almost all” officials judged it would be appropriate to commence reducing borrowing costs “at some point” this year. At the same time, policymakers discussed “the possibility of maintaining the current restrictive policy stance for longer should the disinflation process slow.” Also, some Fed officials warned that recent increases in inflation “had been relatively broad-based and therefore should not be discounted as merely statistical aberrations.” In addition, the minutes indicated that Fed officials “generally favored” slowing the pace at which they are shrinking the central bank’s asset portfolio by approximately half.
In yesterday’s trading session, Wall Street’s major averages closed in the red, with the benchmark S&P 500 dropping to a 3-week low and the blue-chip Dow falling to a 1-3/4 month low. Deckers Outdoor Corporation (DECK) slumped over -6% and was the top percentage loser on the S&P 500 after Truist Securities downgraded the stock to Hold from Buy. Also, chip stocks retreated as U.S. Treasury yields surged, with Microchip Technology (MCHP) and Analog Devices (ADI) sliding more than -3%. In addition, Monday.com (MNDY) plunged over -7% after Citigroup downgraded the stock to Neutral from Buy. On the bullish side, Nvidia (NVDA) gained about +2% and was the top percentage gainer on the Nasdaq 100 after Bank of America maintained a Buy rating and a $1,100 price target on the stock.
The Labor Department’s report on Wednesday showed consumer prices rose +0.4% m/m in March, higher than the expected rise of +0.3% m/m. On an annual basis, headline inflation rose +3.5% in March, accelerating from February’s +3.2% reading. Economists had expected a rise of +3.4% y/y. In addition, the core CPI, which excludes volatile food and fuel prices, came in at +3.8% y/y in March, unchanged from February and stronger than expectations of +3.7% y/y.
“Inflation right now is like the ‘stubborn child’ that refuses to heed the parent’s call to leave the playground. Two cuts are now likely the base case for 2024. As a result, investors should be prepared for a higher-for-longer monetary regime,” said Jason Pride at Glenmede.
Meanwhile, U.S. rate futures have priced in a 3.8% chance of a 25 basis point rate cut at the May FOMC meeting and a 16.5% chance of a 25 basis point rate cut at the conclusion of the Fed’s June meeting.
Today, all eyes are focused on the U.S. Producer Price Index in a couple of hours. Economists, on average, forecast that the U.S. March PPI will stand at +0.3% m/m and +2.2% y/y, compared to the previous figures of +0.6% m/m and +1.6% y/y.
The U.S. Core PPI will also be closely watched today. Economists expect March’s figures to be +0.2% m/m and +2.3% y/y, compared to the previous numbers of +0.3% m/m and +2.0% y/y.
U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 216K, compared to last week’s value of 221K.
In addition, market participants will likely focus on a batch of speeches from Fed officials Williams, Barkin, Collins, and Bostic.
First-quarter corporate earnings season kicks off in earnest on Friday, with banking giants such as JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) slated to post their quarterly results. Analysts estimate aggregate S&P 500 earnings to grow 5.0% year-over-year in Q1, according to LSEG data.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.567%, up +0.13%.
The Euro Stoxx 50 futures are down -0.44% this morning as investors exercised caution in anticipation of the European Central Bank’s interest rate decision and remarks by President Christine Lagarde. Telecom and bank stocks underperformed on Thursday, while energy stocks gained ground. Meanwhile, investors’ focus now turns to the interest rate decision from the ECB, due later in the session, where it is expected to leave rates unchanged at a record high for a fifth straight meeting. The central bank is widely anticipated to prepare markets for an initial cut in June amid easing price pressures and economic weakness. In corporate news, Societe Generale (GLE.FP) rose over +2% following the announcement by the French lender that it had reached an agreement to sell a professional equipment financing business to rival BPCE for 1.1 billion euros ($1.18 billion).
Italy’s Industrial Production data was released today.
The Italian February Industrial Production arrived at +0.1% m/m, weaker than expectations of +0.6% m/m.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.23%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.35%.
China’s Shanghai Composite Index closed slightly higher today. Automobile and semiconductor stocks outperformed on Thursday, while healthcare stocks lost ground. Data released by the National Bureau of Statistics on Thursday revealed that consumer inflation in China cooled sharply in March, while industrial producer prices continued to slump, highlighting the deflationary pressures that pose a key threat to the economy’s rebound. Meanwhile, the People’s Bank of China intensified its support for the yuan against a strengthening greenback by setting the daily reference exchange rate at a level that exceeded estimates by a record margin. In other news, as per a report by the Asian Development Bank on Thursday, China’s economy is projected to grow by 4.8% in 2024 amid sluggish external demand and the real estate crisis. In corporate news, Henan Pinggao Electric advanced over +7% after the electrical and electronic manufacturer reported that its profit surged 284.5% year-on-year to 815.7 million yuan in 2023.
The Chinese March CPI has been reported at -1.0% m/m and +0.1% y/y, weaker than expectations of -0.5% m/m and +0.4% y/y.
The Chinese March PPI came in at -2.8% y/y, in line with expectations.
Japan’s Nikkei 225 Stock Index closed lower today, tracking Wall Street’s losses overnight after hotter-than-expected U.S. inflation data ebbed Fed rate-cut hopes. Losses in real estate, technology, and healthcare stocks led the overall market lower on Thursday. Meanwhile, Japan’s benchmark 10-year bond yield climbed to its highest level since November, tracking a surge in U.S. Treasury yields following higher-than-expected U.S. inflation data. The Japanese yen traded little changed on Thursday after weakening to levels not observed since 1990 against the dollar in the previous session. Japanese Finance Minister Shunichi Suzuki said Thursday that authorities would not rule out any options to address significant exchange-rate fluctuations following the dollar’s surge to a 34-year high against the yen. In other news, Morgan Stanley lowered its view on Japan’s electronic components industry to In-Line from Attractive. In corporate news, Seven & I Holdings slumped over -4% after revealing its consideration of an initial public offering for its superstore business. At the same time, Koshidaka Holdings climbed more than +6% after boosting its full-year guidance. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.27% to 20.73.
Pre-Market U.S. Stock Movers
Rallybio (RLYB) spiked about +76% in pre-market trading after announcing a collaboration with Johnson & Johnson to develop treatments for fetal and neonatal alloimmune thrombocytopenia. The company also received an equity investment of $6.6 million from Johnson & Johnson.Alpine Immune Sciences (ALPN) surged more than +36% in pre-market trading, extending yesterday’s gains after Vertex Pharmaceuticals agreed to acquire the company for $65 per share or about $4.9 billion in cash.
Rent the Runway (RENT) soared over +44% in pre-market trading after the company reported a narrower loss from a year ago and topped revenue expectations in the fourth quarter.
Avita Medical (RCEL) plunged more than -6% in pre-market trading after cutting its Q1 commercial revenue guidance.
Robinhood (HOOD) fell over -2% in pre-market trading after Citigroup downgraded the stock to Sell from Neutral.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - April 11th
Constellation Brands (STZ), Fastenal (FAST), CarMax (KMX), Argan (AGX), Lovesac (LOVE), Applied Digital (APLD), Hooker Furniture (HOFT), Northern Technologies (NTIC).
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