June S&P 500 futures (ESM23) are up +0.09%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.12% this morning as market participants continued to monitor U.S. debt-ceiling negotiations while awaiting the release of the Fed’s favorite inflation gauge and the minutes of the Federal Reserve’s latest policy meeting.
U.S. President Joe Biden and House Speaker Kevin McCarthy are scheduled to meet in Washington later today for another round of talks on raising the debt ceiling following a “productive” call between the two leaders over the weekend. U.S. Treasury Secretary Janet Yellen said Sunday that June 1st remains a “hard deadline” for lifting the government’s debt ceiling.
In Friday’s trading session, Wall Street’s major averages closed moderately lower following a report that U.S. debt ceiling negotiations were paused amid a walkout by Republican negotiators. A plunge in regional bank stocks also weighed on sentiment after CNN reported that U.S. Treasury Secretary Janet Yellen told bank chief executives that additional bank mergers might be needed after recent bank failures.
Federal Reserve Chair Jerome Powell said Friday that interest rates might not need to rise as high as previously anticipated because the banking sector turmoil was “contributing to tighter credit conditions,” which also helps to cool the economy. Powell also signaled that he is inclined to halt the increase of interest rates at the June meeting. At the same time, Mr. Powell acknowledged that inflation remains too high and pledged the Fed would stay “steadfast” in its goal to reduce prices.
Meanwhile, U.S. rate futures have priced in an 81.5% probability of no hike and an 18.5% chance of a 25 basis point rate increase at the next central bank meeting in June.
In the coming week, the April reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight. Also, market participants will be eyeing a spate of economic data, including the U.S. Building Permits, Manufacturing PMI (preliminary), S&P Global Composite PMI (preliminary), Services PMI (preliminary), New Home Sales, Richmond Manufacturing Index, Crude Oil Inventories, GDP (preliminary), GDP Price Index (preliminary), Initial Jobless Claims, Pending Home Sales, Core Durable Goods Orders, Durable Goods Orders, Goods Trade Balance (preliminary), Personal Income, Personal Spending, Michigan Consumer Expectations, and Michigan Consumer Sentiment.
In addition, investors will be closely watching the release of the Federal Reserve’s minutes from the May meeting for further insight into the central bank’s perspective on the economy and any potential future monetary policy actions.
The U.S. economic data slate is mainly empty on Monday. However, investors will likely focus on speeches from St. Louis Fed President James Bullard, Richmond Fed President Thomas Barkin, and Atlanta Fed President Raphael Bostic for fresh clues on the Federal Reserve’s monetary policy trajectory.
In the bond markets, United States 10-Year rates are at 3.667%, down -1.05%.
The Euro Stoxx 50 futures are up +0.05% this morning as investors awaited the latest news on U.S. debt ceiling talks. Meanwhile, mining and energy stocks lost ground on Monday, while consumer product and utility stocks outperformed. In corporate news, shares of Ryanair Holdings Plc (RYA.I.DX) rose over +2% after the Dublin-based carrier reported a near-record profit in the year to March 31st and predicted strong demand in the peak summer season. In other news, Natwest Group Plc (NWG.L.EB) gained about +1% after agreeing to buy back 1.26 billion pounds of its shares from the U.K. government.
The European economic data slate is largely empty on Monday.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.39%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.90%.
China’s Shanghai Composite today closed higher as optimism over a potential improvement in U.S.-China relations boosted market sentiment. U.S. President Joe Biden said Sunday after the Group of Seven summit in Japan that he expects relations between the U.S. and China to improve “very shortly.” Meanwhile, the People’s Bank of China kept its key lending rates unchanged near historical lows on Monday and pledged to support economic growth. Chinese chip stocks advanced on Monday after China banned Micron Technology from selling memory chips to key domestic industries over security concerns, with Ingenic Semiconductor climbing over +2% and Shenzhen Kaifa gaining more than +1%. Hong Kong-listed tech stocks also gained ground, with short video platform Kuaishou Technology rising over +6% ahead of its earnings results.
Japan’s Nikkei 225 Stock Index closed higher today, posting an eighth successive session of gains as investors continued to buy discounted Japanese stocks. Data on Monday showed that Japan’s core machinery orders fell in March, pointing to continued weakness in the country’s manufacturing sector. Meanwhile, non-life insurance stocks advanced on Monday, with shares of Tokio Marine Holdings rising over +5% after the company posted a robust outlook and announced a buyback of up to 1.5% of its shares. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 1.95% to 20.07.
The Japanese March Core Machinery Orders stood at -3.9% m/m and -3.5% y/y, weaker than expectations of +0.7% m/m and +1.4% y/y.
Pre-Market U.S. Stock Movers
Micron Technology Inc (MU) plunged over -5% in pre-market trading after China banned domestic companies working in the critical information security sector from buying products manufactured by Micron amid security risks.
Immix Biopharma Inc (IMMX) surged about +44% in pre-market trading after the company announced positive NXC-201 clinical results at ASGCT.
Catalent Inc (CTLT) dropped over -2% in pre-market trading after JPMorgan downgraded the stock to neutral from overweight.
Nike Inc (NKE) fell more than -1% in pre-market trading after Williams Trading downgraded the stock to sell from hold.
Canadian National Railway Co (CNI) slid about -1% in pre-market trading after Citi downgraded the stock to neutral from buy.
DraftKings Inc (DKNG) climbed more than +3% in pre-market trading after UBS upgraded the stock to buy from neutral.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - May 22nd
Heico (HEI), Zoom Video (ZM), Nordson (NDSN), Catalent Inc (CTLT), GlobalE Online (GLBE), Lufax (LU), ZIM Integrated Shipping Services (ZIM), Navigator Holdings (NVGS), Transcat (TRNS), Capital Southwest (CSWC), Niu Tech (NIU), PetMed Express (PETS), So-Young (SY).
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