Here are five things you must know for Wednesday, May 25:
1. -- Stock Futures Mixed Ahead of Fed Minutes, Bond Yields Slide
U.S. equity futures edged lower Wednesday, while the dollar bounced from a one-month low and Treasury yields held steady, as markets proceed cautiously ahead of the release of minutes from the Federal Reserve's May policy meeting later in the session.
The Fed's inflation fight, which will likely delivery 50 basis point rate hikes at consecutive policy meetings between now and September, has pounded domestic stocks and slowed economic growth prospects in the world's biggest economy.
What it hasn't done, as yet, is blunt the pace of consumer price increases, which are accelerating at the fastest pace in four decades, largely as a result of influences beyond the Fed's control, such as Russia's war on Ukraine, China's Covid crisis and the knock-on disruptions they've caused to global supply chains.
That could give the Fed a reason to slow, or even pause, the pace of its tightening, although bets on a 50 basis point hike in both June and July remain well north of 90%, according to the CME Group's FedWatch.
Minutes from the Fed's April meeting will provide clues as to whether policymakers are sensitive to the affects of their hawkish strategy, particularly with respect to the job market, as data suggests key components of the economy are starting to show signs of rate-hike fatigue.
European stocks, however, are off to a solid, although by no means spectacular, start following a modest improvement in German consumer morale, based on a closely-watch GfK survey, and data showing its economy -- the region's largest -- avoided recession over the first three months of the year.
In the U.S., benchmark 10-year Treasury bond yields -- which move inversely to prices -- traded at a one-month low of 2.745% overnight following yesterday's shockingly poor new home sales figures and PMI data indicating slowdowns in both the manufacturing and services sector. The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.38% higher at 102.248 in early European trading.
On Wall Street, futures tied to the Dow Jones Industrial Average indicating a modest 70 point opening bell decline while those linked the S&P 500 were priced for a 7 point pullback. Futures linked to the tech-focused Nasdaq, which id down 28.85% for the year, are looking at 25 point opening bell dip.
2. -- Fed Minutes In Focus As Markets Wilt Under Rate Pressure
The Federal Reserve will release minutes of its May policy meeting later today with investors looking for any suggestion that it could back away from perhaps the most aggressive tightening plans in a generation.
The FOMC lifted its key Fed Funds rate by 50 basis points on May 5, taking it to a range of 0.75% to 1%, and said near-term rate moves would be needed in order to combat the faster since the early 1980. Fed Chairman Jerome Powell attempted to sooth investor concerns during his regular media that a 75 basis point rate hike in June is not being "actively considered" -- a view he's since repeated -- but the S&P 500 has fallen more than 8.3% since then, while the dollar has traded at a 20-year high against its global peers.
Growth has slowed, while inflation hasn't budged, adding to concerns that Powell will be able to engineer a so-called 'soft landing' for the world's biggest economy.
That might leave the Fed with at least the option of a pause in rate hikes -- a so-called 'Fed Put' a view expressed yesterday by Atlanta Fed President Raphael Bostic, who wrote that he intended to "proceed carefully in tightening policy", while being mindful of non-financial impacts and avoiding any "reckless" policy decisions.
Little evidence of that so-called 'Fed put' can be found in the CME Group's FedWatch tool, however, as rate traders continue to bet on a 93.3% chance of a 50 basis point rate hike next month, while placing a 90% probability on a similar-sized move in July.
3. -- Nordstrom Shares Leap After Solid Q1 Sales, Forecast Boost
Nordstrom (JWN) shares surged in pre-market trading after the mall-focused retailer defied the sector's recent gloom with a narrower-than-expected first loss paired with a boost to its full-year profit forecast.
Nordstrom, which targets a higher-income consumer base, said it hasn't seen a notable impact on demand from the fastest inflation in forty years, adding price increases enacted over the first three months of the year have been largely absorbed.
Still, the Seattle-based retailer lost a penny per share on an adjusted basis for the three months ending in April, but noted sales were up 18.7% to $3.57 billion. Looking into the final months of the year, Nordstrom said it expects adjusted earnings in the region of $3.38 and $3.68 per share, with sales rising as high as 8% from 2021 levels.
Nordstrom shares were marked 10% higher in premarket trading to indicate an opening bell price of $22.76 each, a move that would nudge the stock into positive territory for the year.
4. -- Wendy's Shares Surge As Activist Nelson Peltz Plots Takeover
Wendy's (WEN) shares powered higher in pre-market trading after activist investor Nelson Peltz said he was considering a takeover of the iconic restaurant chain.
Peltz, who chairs the Wendy's board and has been an investor in the group for nearly two decades, said in a Securities and Exchange Commission filing late Tuesday that his Trian Fund Management group could "explore and evaluate the possibility of participating, alone or with third parties, in a potential transaction with respect to the Company to enhance shareholder value."
Wendy's said it would "carefully review any proposal submitted by Trian Partners", which owns an 11.8% stake in the Dublin, Ohio-based chain, while adding it would act in the best interest of shareholders.
Shares in the group hit a two-year low last month, however, after posting weaker-than-expected same store sales for the first quarter and cautioning investors that breakfast sales -- a key revenue driver -- would likely only rise to the lower end of prior forecasts as customers tame discretionary spending.
Wendy's shares were marked 11.6% higher in premarket trading to indicate an opening bell price of $18.15 each, a move that would peg its market value at just under $4 billion.
5. -- Nvidia Edges Lower Ahead of Q1 Earnings
Nvidia Corp (NVDA) shares edged modestly lower in pre-market trading ahead of the chipmaker's first quarter earnings report after the closing bell.
CEO Jensen Huang said earlier this year that "exceptional demand" for its computing platforms, which include both data center and gaming chips, will offset semiconductor industry supply constraints and deliver April quarter revenues in the region of $8.1 billion.
The Street is looking for a solid bottom line of $1.29 per share, a 40% increase from last year, as chip prices march higher amid the supply chain snarls linked to China's Covid crisis. Revenues are expected to meet Nvidia's February guidance of $8.1 billion, plus or minus 2%, although slowing sales of its 'CMP' chips, which are used by cryptocurrency miners, could shave some of that tally as the sector continues to struggle.
Earlier this month, in fact, Nvidia agreed to pay $5.5 million to settle a civil lawsuit brought by the U.S. Securities and Exchange Commission that alleged the chipmaker failed to disclose the impact of CMP sales on its gaming business in 2018.
Nvidia shares were marked 0.05% lower in pre-market trading to indicate an opening bell price of $161.51 each, a move that would still leave the stock with a year-to-date gain of around 48%.
