September S&P 500 futures (ESU23) are down -0.08%, and September Nasdaq 100 E-Mini futures (NQU23) are up +0.01% this morning at the start of a holiday-shortened week, with market participants looking ahead to the release of the minutes of the Federal Reserve’s latest policy meeting as well as Friday’s nonfarm payrolls report.
U.S. stock markets will have an early closure at 1 p.m. ET on Monday in observance of the Independence Day holiday. Also, the stock and the bond markets will remain closed on Tuesday.
In Friday’s trading session, Wall Street’s major indexes closed sharply higher, with the tech-heavy Nasdaq 100 notching its best first-half performance in 40 years. Apple Inc (AAPL) rose over +2% and achieved a historic $3T market capitalization. Chip stocks also gained ground, with NVIDIA Corporation (NVDA) climbing more than +3%, Microchip Technology Inc (MCHP) gaining +3%, and ON Semiconductor Corporation (ON) rising over +2%. In addition, Carnival Corporation (CCL) surged more than +9% and was the top percentage gainer on the benchmark S&P 500 after Jefferies upgraded the stock to Buy from Hold. On the bearish side, Nike Inc (NKE) slid over -2% after the company reported mixed Q4 results and provided a gloomy Q1 revenue forecast.
Data on Friday showed the U.S. core PCE price index, a key inflation gauge monitored by the Federal Reserve, stood at +0.3% m/m and +4.6% y/y in May, compared to expectations of +0.3% m/m and +4.7% y/y. Also, U.S. May personal spending came in at +0.1% m/m, slightly weaker than the anticipated +0.2% m/m number. In addition, the University of Michigan’s second estimate of consumer sentiment arrived at 64.4 in June, stronger than expectations of 63.9.
“These data are not enough to stop the Fed hiking in July if the June CPI and payroll numbers are strong. Our base case, though, is that these data will be on the softer side, so we think the chance of a further hike is about 40%. And if they don’t hike in July, they’re probably done,” said Ian Shepherdson, a chief economist at Pantheon Macroeconomics.
Meanwhile, U.S. rate futures have priced in an 88.7% probability of a 25 basis point rate increase and an 11.3% chance of no hike at the July meeting.
In the coming week, the U.S. Nonfarm Payrolls report for June will be the main highlight. Also, investors will be monitoring a spate of economic data, including the U.S. Factory Orders, ADP Nonfarm Employment Change, Exports, Imports, Initial Jobless Claims, Trade Balance, S&P Global Composite PMI, Services PMI, ISM Non-Manufacturing PMI, ISM Non-Manufacturing Prices, JOLTs Job Openings, Crude Oil Inventories, Average Hourly Earnings, Private Nonfarm Payrolls, and Unemployment Rate.
In addition, investors will be closely watching the release of the Federal Reserve’s minutes from the June meeting when the central bank held rates steady after 10 consecutive rate hikes. The minutes are anticipated to provide valuable insights into the ongoing debate surrounding Fed Chair Jerome Powell’s assessment of the risks, which he has described as a delicate balance between doing too little and going too far with policy tightening.
Today, all eyes are focused on U.S. ISM Manufacturing PMI data in a couple of hours. Economists, on average, forecast that June ISM Manufacturing PMI will stand at 47.2, compared to the previous value of 46.9.
Also, investors will likely focus on U.S. ISM Manufacturing Prices data, which came in at 44.2 in May. Economists foresee the June figure to be 44.0.
U.S. Manufacturing PMI data will be reported today as well. Economists foresee this figure to stand at 46.3 in June, compared to 48.4 in May.
In the bond markets, United States 10-Year rates are at 3.849%, up +0.79%.
The Euro Stoxx 50 futures are up +0.32% this morning as further evidence of sluggish growth in China fueled hopes of a potential policy stimulus, while investors also assessed regional manufacturing data. Gains in bank and mining stocks are leading the overall market higher. Data on Monday showed that Eurozone manufacturing activity contracted at a faster pace than initially estimated in June, as the European Central Bank’s continued policy tightening put pressure on finances. Meanwhile, the upcoming earnings season will be closely monitored by investors, as JPMorgan Chase & Co. strategists suggest that the second half will be a critical period to assess the resilience of profits. In corporate news, shares of Assicurazioni Generali Spa (G.M.DX) climbed over +4% after Italy’s insurance regulator said it had authorized investor Delfin to hold a stake of over 10% in the company.
Spain’s Manufacturing PMI, Italy’s Manufacturing PMI, France’s Manufacturing PMI, Germany’s Manufacturing PMI, Eurozone’s Manufacturing PMI, and U.K.’s Manufacturing PMI data were released today.
The Spanish June Manufacturing PMI has been reported at 48.0, stronger than expectations of 47.7.
The Italian June Manufacturing PMI came in at 43.8, weaker than expectations of 45.3.
The French June Manufacturing PMI stood at 46.0, stronger than expectations of 45.5.
The German June Manufacturing PMI was at 40.6, weaker than expectations of 41.0.
Eurozone June Manufacturing PMI came in at 43.4, weaker than expectations of 43.6.
U.K. June Manufacturing PMI stood at 46.5, stronger than expectations of 46.2.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.31%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.70%.
China’s Shanghai Composite today closed higher amid expectations of further policy easing after the country’s central bank said it would implement prudent monetary policy to bolster economic growth and employment. The People’s Bank of China said Friday it would make better use of aggregate and structural policy tools to stabilize growth and employment and effectively support domestic demand amid a slowdown in the economy’s recovery from the COVID pandemic. The PBOC also announced its intention to support the stable and healthy development of the real estate market. A private sector survey on Monday showed that the country’s factory activity growth slowed in June. The survey indicated diminishing sentiment and reduced recruitment, reflecting growing concerns among firms regarding sluggish market conditions. Meanwhile, tourism and electric vehicle stocks outperformed on Monday. Hong Kong-listed technology stocks also advanced. In other news, U.S. Treasury Secretary Janet Yellen is scheduled to visit Beijing from July 6th to July 9th for meetings with senior Chinese officials to discuss a wide range of issues.
“The PBOC pledged to intensify countercyclical adjustment to support domestic demand, boost consumption and build a virtuous circle of economic growth. We continue to expect a 25bp RRR cut and a 10bp additional policy interest rate cut in the rest of the year to facilitate economic growth,” Goldman Sachs said in a note.
The Chinese June Caixin Manufacturing PMI stood at 50.5, stronger than expectations of 50.2.
Japan’s Nikkei 225 Stock Index closed sharply higher today as better-than-expected results from the Bank of Japan’s Tankan business survey and Wall Street’s strong finish on Friday boosted sentiment. A survey conducted by the Bank of Japan revealed on Monday that business sentiment in the country experienced an improvement in the second quarter, indicating that the domestic economy is on a path of recovery as an increasing number of firms pledged to increase capital expenditure. At the same time, a separate survey reiterated that the country’s factory activity contracted in June. Meanwhile, machinery stocks jumped on Monday, with Komatsu rising about +2%. Technology heavyweight stocks also gained ground. Chip-making equipment maker Tokyo Electron soared over +3%, while chip-testing equipment maker Advantest climbed more than +5%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 2.99% and hit a new 1-month low of 19.11.
“U.S. stock market was strong on Friday after investors confirmed a slowdown of the Personal Consumption Expenditures index, while the BOJ’s “tankan” showed an increase in capital expenditure,” said Shuji Hosoi, a senior strategist at Daiwa Securities.
The Japanese June Manufacturing PMI has been reported at 49.8, in line with expectations.
The Japanese Tankan Large Manufacturers Index stood at 5 in the second quarter, stronger than expectations of 3.
The Japanese Tankan Large Non-Manufacturers Index came in at 23 in the second quarter, stronger than expectations of 22.
Pre-Market U.S. Stock Movers
Tesla Inc (TSLA) surged over +6% in pre-market trading after the company announced that it had delivered 466,140 electric vehicles in the second quarter of 2023, easily topping estimates of about 445,000 units.
Nio Inc (NIO) climbed about +6% in pre-market trading after the company said it had delivered 10,707 vehicles in June, bringing total deliveries in Q2 to 23,520 units.
Li Auto Inc (LI) gained over +6% in pre-market trading following the announcement of a new record with 32,575 deliveries in June, driven by higher operating capabilities.
Acm Research Inc (ACMR) soared more than +8% in pre-market trading after Jefferies upgraded the stock to Buy from Underperform.
Ensysce Biosciences Inc (ENSC) rose over +10% in pre-market trading after H.C. Wainwright initiated coverage of the stock with a Buy rating.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - July 3rd
Daktronics (DAKT), Barnes & Noble Education Inc (BNED).
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