June S&P 500 E-Mini futures (ESM24) are up +0.12%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.11% this morning as market participants looked ahead to the release of the minutes of the Federal Reserve’s latest policy meeting, comments from Fed officials, and an earnings report from semiconductor stalwart Nvidia.
In Friday’s trading session, Wall Street’s major averages ended mixed, with the blue-chip Dow closing above the 40,000 mark for the first time. Doximity (DOCS) climbed over +18% after the online networking service reported upbeat Q4 results and issued above-consensus Q1 revenue guidance. Also, Reddit (RDDT) gained more than +10% following the announcement of a partnership with OpenAI that will bring its content to the ChatGPT chatbot. In addition, DuPont de Nemours (DD) rose about +3% after Jefferies upgraded the stock to Buy from Hold with a price target of $101. On the bearish side, DXC Technology (DXC) plunged more than -16% after the company issued weaker-than-expected FY25 guidance.
Economic data on Friday showed that the U.S. leading indicator index fell -0.6% m/m in April, weaker than expectations of -0.3% m/m and the biggest decline in 6 months.
Fed Governor Michelle Bowman stated on Friday that she anticipates inflation to remain elevated for “some time,” yet she maintains her expectation that price pressures will eventually diminish with interest rates held at their current level. At the same time, Bowman repeated that she wouldn’t dismiss the possibility of raising rates if necessary. “While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed,” she said.
Meanwhile, U.S. rate futures have priced in a 9.1% chance of a 25 basis point rate cut at June’s monetary policy meeting and a 26.0% chance of a 25 basis point rate cut at the conclusion of the Fed’s July meeting.
In the coming week, investors will be monitoring a spate of economic data releases, including the U.S. S&P Global Composite PMI (preliminary), S&P Global Manufacturing PMI (preliminary), S&P Global Services PMI (preliminary), Existing Home Sales, Crude Oil Inventories, Building Permits, Initial Jobless Claims, New Home Sales, Durable Goods Orders, Core Durable Goods Orders, and Michigan Consumer Sentiment Index.
Several prominent companies like Nvidia (NVDA), Palo Alto Networks (PANW), Zoom Video (ZM), Analog Devices (ADI), Snowflake (SNOW), and Intuit (INTU), along with retailers including Target (TGT), Lowe’s (LOW), TJX (TJX), Dollar Tree (DLTR), and Ross Stores (ROST), are scheduled to release their quarterly results this week.
In addition, market participants will closely monitor the publication of the Federal Reserve’s minutes from the April 30-May 1 meeting on Wednesday, during which Fed Chair Jerome Powell indicated that interest rates are expected to stay elevated for an extended period due to lingering inflationary pressures.
A host of Fed officials will be making appearances throughout the week, including Bostic, Barr, Waller, Jefferson, Mester, Kroszner, Barkin, Williams, and Collins.
In other news, the Wall Street Journal reported Sunday that three regulatory agencies might substantially reduce a planned increase in capital requirements for the largest U.S. banks. JPMorgan Chase CEO Jamie Dimon and other CEOs at big banks played hardball, and as a result, the Fed, along with the FDIC and the Comptroller of the Currency, could reduce the plan for a 20% mandated increase by approximately half, the report said.
Investors are also monitoring developments in the Middle East following the helicopter crash that resulted in the death of Iranian President Ebrahim Raisi and the nation’s Foreign Minister.
The U.S. economic data slate is empty on Monday.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.426%, up +0.14%.
The Euro Stoxx 50 futures are up +0.16% this morning, kicking off the new week on a positive note. Mining and energy stocks outperformed on Monday, while automobile and technology stocks lagged. Meanwhile, investors’ focus this week will be directed toward the release of the latest economic activity data from the region. In corporate news, Keywords Studios Plc (KWS.LN) soared over +60% after the Dublin-based video game services company said it is in advanced talks with European private equity group EQT regarding a potential takeover worth more than 2 billion pounds ($2.5 billion).
European Central Bank Governing Council member Martins Kazaks stated on Monday that the pace of ECB interest rate reductions should align with the gradual deceleration of inflation in the euro area. Kazaks mentioned in an interview with Bloomberg Adria that June appears to be the appropriate time to commence reducing borrowing costs, but decisions regarding any subsequent actions are most effectively determined by incoming data. “The baseline scenario shows that we are gradually approaching our 2% target, which will of course mean gradually we can also start reducing the rates. This process needs to be cautious, gradual, and we should not rush,” he said.
The European economic data slate is mainly empty on Monday.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.54%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.73%.
China’s Shanghai Composite Index closed higher today as sentiment remained positive following Beijing’s latest measures to bolster its struggling property sector. Commodity stocks outperformed on Monday. The People’s Bank of China on Friday announced some of its most aggressive measures yet to stimulate the beleaguered property sector, including a 300 billion yuan funding to clear excess housing inventory, lowering the minimum mortgage down payment requirements, and eliminating the national floor for mortgage interest rates. Meanwhile, China kept benchmark lending rates unchanged at a monthly fixing on Monday, in line with expectations. According to official data, the one-year loan prime rate remained stable at 3.45%, with the five-year rate also unchanged at 3.95%. In other news, China hinted at the possibility of retaliation in reaction to the European Union’s probes into Chinese companies and initiated an antidumping investigation into imports of polyoxymethylene copolymer, a commonly utilized plastic in auto parts and electronics, from the U.S., the EU, Japan, and Taiwan. In corporate news, Shenghe Resources Holding gained more than +3% after the company said it would acquire a subsidiary of Australian mining company Strandline Resources, along with its four heavy sands mining projects in Tanzania, through its unit.
Japan’s Nikkei 225 Stock Index closed higher today, crossing the 39,000 mark for the first time in a month. Bank and energy stocks led the gains on Monday. The Ministry of Economy, Trade, and Industry reported on Monday that Japan’s tertiary industry index slipped in March. Meanwhile, Japan’s benchmark 10-year bond yield rose to its highest level since 2013 on Monday amid speculation surrounding the Bank of Japan’s commitment to normalizing interest rates and supporting the struggling yen. In other news, the Nikkei newspaper reported on Monday that Japan and the Association of Southeast Asian Nations intend to create their first joint strategy regarding automobile production and sales within the Southeast Asian bloc to counter the growing presence of China in the electric vehicle market. In corporate news, Kotobuki Spirits climbed over +3% after reporting an over 54% jump in profit attributable to owners in the fiscal year ended March 31. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.56% to 17.22.
The Japanese March Tertiary Industry Activity Index fell -2.4% m/m, weaker than expectations of +0.1% m/m.
Pre-Market U.S. Stock Movers
Micron Technology (MU) climbed more than +2% in pre-market trading after Morgan Stanley upgraded the stock to Equal Weight from Underweight with a price target of $130.
Paramount Global (PARA) gained over +2% in pre-market trading following a report from The New York Times indicating that Sony Pictures and Apollo Global Management have made significant progress in their effort to court the company. According to the report, the two companies have entered into nondisclosure agreements with Paramount, granting them access to the company’s nonpublic financial information. Sony and Apollo are now considering multiple approaches to acquire the company’s assets but are backing away from their $26 billion all-cash offer, the report said.
Teradyne (TER) rose more than +2% in pre-market trading after Goldman Sachs upgraded the stock to Buy from Neutral with a price target of $161.
Universal Health (UHS) advanced over +1% in pre-market trading after UBS upgraded the stock to Buy from Neutral with a price target of $226.
United States Steel (X) rose more than +1% in pre-market trading after Jefferies initiated coverage of the stock with a Buy rating and a $45 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - May 20th
Palo Alto Networks (PANW), Trip.com (TCOM), Keysight Technologies (KEYS), Li Auto (LI), Zoom Video (ZM), Nordson (NDSN), Wix.Com Ltd (WIX), UL Solutions (ULS), GlobalE Online (GLBE), Taro Pharma Industries (TARO), Ehang (EH), Tuya (TUYA), Transcat (TRNS), Yalla (YALA).
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