Five things you need to know before the market opens on Thursday May 11:
1. -- Stock Futures Edge Higher Amid Mixed Inflation Narratives
U.S. equity futures edged higher Thursday, while the dollar held gains against its global peers and Treasury yields eased, following a mixed inflation report yesterday that provided little change to the Fed's current rate path narrative.
Commerce Department data showed headline inflation eased to the slowest pace in 2 years last month, dipping below the 5% mark, but also indicated that core pressures remained eleveted at 5.5%. Combined with noisy monthly readings and a surge in used car prices, however, the data failed to provide a conclusive reading to either change the Fed's near-term policy path nor cement the case for rate cuts over the back half of the year.
Factory gate inflation later this morning, and prior to the opening bell, may give investors a better sense of underlying pressures on corporate margins, but the main rate path narrative remains firmly in place: traders are pricing in a 91.5% chance that the Fed holds its benchmark Fed Funds rate in place at between 5% and 5.25% next month in Washington.
Bets on a September rate cut, which at this stage seem unlikely given that inflation is running at more than twice the Fed's target, have risen to around 74%, according to data from the CME Group's FedWatch.
"The Fed is likely on hold for the near term, and the timing of a first rate cut will depend both on how quickly inflation slows and how quickly the job market becomes less tight," said Bill Adams, chief economist for Comerica Bank in Dallas. "Leading indicators of the job market like layoff announcements and job openings have weakened considerably over the last year, while more coincident indicators like the unemployment rate are still the strongest in half a century."
In the bond market, 2-year note yields eased to 3.935% in overnight trading, with 10-year paper at 3.435%, following yesterday's solid $35 billion acution and a back-and-forth session that saw 2-year notes trading as high as 4.06% prior to the inflation data.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.38% higher at 101.862
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 were priced for a 12 point opening bell gain while those linked to the Dow Jones Industrial Average are set for a 30 point bump. The tech-focused Nasdaq was marked 53 points higher.
In Europe, the region-wide Stoxx 600 was marked 0.48% higher in early Frankfurt trading while London's FTSE 100 gained 0.16% ahead of today's Bank of England rate decision expected at 7:00 am Eastern time in London.
Overnight in Asia, the region-side MSCI ex-Japan index was marked 0.33% lower into the close of trading while the Nikkei 225 ended little-changed at 29,126.72 points.
2. -- Jobless Claims In Focus As Labor Market Cracks Continue to Spread
The Labor Department is likely to publish a notable spike in weekly unemployment claims prior to the start of trading Thursday as investors continue to track developments in the job market for clues on the likely strength of inflation prospects.
While the pace of layoffs so far this year, lead by the tech sector, is the highest since 2009, the losses have yet to find their way into weekly jobless claims, given that many sidelined workers are unable to file for jobless benefits for a period after accepting severance payments.
That could change over the coming weeks, beginning with today's reading -- expected to indicate new filings of around 245,000 -- as companies continue to trim their existing headcounts amid macroeconomic uncertainty and tighter credit conditions.
"Rising layoffs and falling hiring intentions can have only one outcome, namely, slower payroll growth," said Ian Shepherdson of Pantheon Macroeconomics.
3. -- Disney Slumps After Shedding 4 Million Streaming Subscribers, Matching Earnings Forecasts
Disney (DIS) shares slumped lower in pre-market trading after the media and entertainment group posted second quarter earnings that were largely in-line with Street forecasts, but noted it lost 4 million subscribers from its streaming service.
Disney said adjusted diluted earnings for the three months ending in March, the group's fiscal second quarter, came in at 93 cents per share, down 14% from the same period last year and largely in-line with the Street forecast. Group revenues, Disney said, rose 7.5% to $21.82 billion, narrowly topping Street forecasts of $21.79 billion.
Disney+ paid subscribers fell by 4 million to 157.8 million, the company said, thanks in part to the loss of televised cricket rights in India. Revenues per Hotstar+ user, meanwhile, fell 20% from last quarter to $0.59
"While the softness we saw in Q2 domestic Disney+ net ads may linger into Q3, we do expect core sub growth to rebound in Q4," CFO Christine McCarthy told investors on a conference call late Wednesday. "There are still many moving pieces, including macroeconomic factors, the state of the global advertising market, and content timing shifts, which could impact our plans and expectations for the back half of this year."
Disney shares were marked 5.6% lower in pre-market trading to indicate an opening bell price of $95.45 each.
4. -- Robinhood Leaps After Narrower Q1 Loss, 24 Hour Market Launch Plans
Robinhood Markets (HOOD) shares jumped higher in pre-market trading after it posted a narrower-than-expected first quarter loss and unveiled plans for the launch of a 24-hour trading market as early as next week.
Robinhood said revenues rose 47.5% from last year to $441 million, well ahead of Street forecasts, thanks in part to higher Fed rates that nearly tripled its net interest revenue. Operating expenses of around $950 million, however, pushed it into a loss of 57 cents per share, a tally that was 4 cents inside the consensus estimate.
The group said it launch 'Robinhood 24 Hour Market' on May 14, offering full trading on 43 stocks and ETFs, 24 hours each day, between Sunday at 8:00 pm Eastern time and Friday at 8:00 pm Eastern time.
"Our specialists believe Robinhood may struggle to reduce operational costs while focusing on product development due to the amount of headcount required to develop new products, especially when products like retirement accounts and the debit card have low revenue growth potential," said Andrew McGee of Third Bridge research.
Robinhood shares were marked 4.3% higher in pre-market trading to indicate an opening bell price of $9.46 each.
5. -- Google Extends Gains As Investors Bet New AI Search Drive Can Fend-Off Microsoft
Google parent Alphabet (GOOGL) extended gains in pre-market trading after the tech and ad giant unveiled plans to boost its signature search engine with artificial intelligence.
The new Google search engine will be enhanced with an AI-driven model called Search Generative Experience, which uses large-language capabilities to deepen and tailor search results The new versions will be available on a trial basis over the near-term, with a fuller rollout expected later in the year.
Google, which generated around $43 billion in search-related revenues last quarter and holds a commanding leader over its rivals, is nonetheless facing a significant challenge of late from Microsoft's MSFT Bing, which has embedded AI technology called ChatGPT, developed by OpenAI, into its in both its Edge internet browser and Bing search engine.
"While we view ChatGPT as the superior product when comparing more complex answers, we believe Google's distribution, widespread integrations with merchants and businesses, and user awareness are significant enough that we do not expect a significant share shift in search as Google seems willing to be a fast follower," said JMP Securities analysts.
Google shares, which surged 4.1% yesterday, were marked 1.34% higher in pre-market trading to indicate an opening bell price of $113.25 each.
