Five things you need to know before the market opens on Wednesday May 10:
1. -- Stock Futures Slip Lower Amid Mixed Signals On Growth and Inflation
U.S. equity futures nudged lower Wednesday, while Treasury bond yields bumped higher ahead of a key inflation reading prior to the start of trading as well as lingering concerns over the fate of the nation's debt ceiling.
Stocks have remained rangebound over most of the past month, with the S&P 500 trading largely in-line with levels seen in early April amid a muted earnings season and confusing economic data that appears to suggest slowing near-term growth prospects set against stubbornly high inflation rates.
Yesterday's reading of small business sentiment, published by the The National Federation of Independent Business (NFIB), fell to the lowest level in 10 years, with companies noting difficultly in obtaining new credit, pulling plans for capital spending near to their pandemic-era low.
Yet hiring remains robust, as evidenced by last week's April jobs report, with wages rising by 4.4% on the year, a level consistent with rates of inflation that are well ahead of the Federal Reserve's 2% target.
Nonetheless, traders are pricing in at least a 60% chance of a September rate cut from the Fed, even as economics continue to forecast sticky CPI reading -- including today's April data -- over the coming months.
The contradictory signals have yet to manifest into higher levels of market volatility, however, with the CBOE Group's VIX index holding below the 18 point mark in overnight trading after hitting a six-month low of 15.98 over the final days of April.
In a further sign of the market's confusion, foreign buyers bid a record amount during yesterday's $40 billion auction of new 3-year notes, even as debt ceiling talks between President Joe Biden and senior Republican lawmakers failed to make any progress heading into the June 1 default deadline.
Benchmark 2-year notes yields inched higher in overnight trading, to 4.06%, while 10-year notes were pegged at 3.515% ahead of today's $35 billion auction expected at 1:00 pm Eastern time.
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 were priced for a 5 point opening bell decline while those linked to the Dow Jones Industrial Average are set for a 36 point pullback. The tech-focused Nasdaq was marked 25 points lower.
In Europe, the region-wide Stoxx 600 was marked 0.22% lower in early Frankfurt trading while London's FTSE 100 fell 0.21% in London.
Overnight in Asia, the region-side MSCI ex-Japan index was marked 0.34% lower into the close of trading while the Nikkei 225 slipped 0.41 from its eight-month high to close at 29,122.18 points.
2. -- April Inflation Data On Deck With Core Pressures In Focus
U.S. inflation likely remained at elevated levels last month, data from the Commerce Department will indicate Wednesday, as wage increases from a tight labor market, against only modest declines in energy prices, keep headline price pressures well ahead of the Federal Reserve's target.
Headline CPI is likely to rise at an annualized rate of 5% in April, Street forecasts suggest, a pace that matches the acceleration recorded in March. On the month, prices are expected to jump 0.4%.
The closely tracked core CPI reading, which stripes out food and energy costs, is forecast to ease modestly to 5.5% on the year, although volatile housing costs could deliver another hotter-than-expected April print.
"The Fed will be looking to see a reduction in core inflation, which has been stubbornly constant for the last few months," said Lightcast Senior Economist Layla O’Kane. "With the labor market still holding strong, a reduction in core inflation would bolster the signal that interest rate increases could slow down."
3. -- Disney Earnings After The Bell Amid Myriad Challenges For House of Mouse
Disney (DIS) shares edged lower in pre-market trading ahead the media and entertainment group's second quarter earnings expected after the closing bell.
Muted ad sales, as well as a notable decline in new streaming subscribers, are likely to translate into the slowest overall revenue growth in two years, according to Street forecasts, with Disney expected to post a top line of $21.8 billion.
Earnings will likely fall 14% from last year to 93 cents per share, with solid profits from Disney's Parks and Experiences offsetting a likely $750 million operating loss in its streaming division.
Disney's broader challenges are myriad, however, with interim CEO Bob Iger embroiled in a political spat with Florida Governor Ron DeSantis while fending off challenges from activist investors who have grown impatient over the levels of red ink Disney has spilled in ensuring its streaming service holds a market-leading position over Netflix (NFLX).
Disney shares were marked 0.13% lower in pre-market trading to indicate an opening bell price of $102.05 each.
4. -- Airbnb Tumbles As Soft Near-Term Outlook Clouds Earnings Beat
Airbnb (ABNB) shares tumbled lower in pre-market trading after the home rental and experience booking group forecast softer-than-expected current quarter growth rates that offset solid first quarter earnings.
Airbnb said bookings would slow from last year's levels over the three months ending in June thanks in part to a pullback in travel spending and "the introduction of new Host pricing tools." That likely means revenues of between $2.35 billion and $2.45 billion, v said,
For the three months ending in March, Airbnb said profits were pegged at 18 cents per share, well ahead of the Street consensus forecast of 8 cents, on revenues of $1.8 billion.
"Q2 is turning out to be a little bit tougher comp given omicron last year, but we're seeing overall stable demand for the back half," said CFO Dave Stephenson. "We highlight in the letter that we have 25% more bookings on the books at this time this year for the back half of the year than we did this time last year.
Airbnb shares were marked 13.7% lower in pre-market trading to indicate an opening bell price of $109.62 each.
5. -- Biden Holds 'Productive' Debt Ceiling Talks, But Fails to Break Impasse
President Joe Biden held a "productive" 90-minute meeting with senior Republican lawmakers late Tuesday, but failed to make headway in his effort to broker a compromise over the fate of the nation's debt ceiling.
Biden, who met with Republican House Speaker Kevin McCarthy and Republican Senate Minority Leader Mitch McConnell at the White House yesterday, said there's likely to be "a lot of posturing, politics and gamesmanship" over the coming weeks as both sides seek to extract concessions ahead of a June 1 deadline that could see the U.S. run out of cash and default on its debts.
McCarthy himself, however, said he "didn’t see any new movement" from the White House, despite Biden's promise to take a "hard look" at billions of unspent Covid relief in an effort to reduce government spending.
The two sides agreed to further talks, with aides to both the President and House Speaker McCarthy committing to daily meetings in an effort to find a way through the impasse.
Republican lawmakers have refused to agree an increase in the $31.4 debt ceiling, which the U.S. breached earlier this year, unless its tied to significant spending cuts, a view echoed by 43 Senate Republicans in a letter to Majority Leader Chuck Schumer over the weekend.
President Biden, meanwhile, has refused to negotiate any changes to his budget, accusing his Republican rivals of playing "chicken" with the nation's credit rating.
