September S&P 500 E-Mini futures (ESU24) are down -0.09%, and September Nasdaq 100 E-Mini futures (NQU24) are down -0.10% this morning as market participants refrained from making any big bets ahead of a crucial U.S. inflation reading that could solidify expectations for Federal Reserve interest rate cuts later this year.
In yesterday’s trading session, Wall Street’s major indices ended in the green, with the benchmark S&P 500 topping the 5,600 level for the first time. Illumina (ILMN) climbed over +6% and was the top percentage gainer on the Nasdaq 100 after acquiring single cell analysis technology company Fluent BioSciences. Also, chip stocks advanced after Taiwan Semiconductor Manufacturing Co. reported stronger-than-expected Q2 sales, with Advanced Micro Devices (AMD) and Micron Technology (MU) rising about +4%. In addition, Aehr Test Systems (AEHR) surged more than +24% after reporting better-than-expected Q4 preliminary revenue. On the bearish side, Intuit (INTU) fell over -2% after the company cut 1,800 employees, amounting to roughly 10% of its total workforce.
Federal Reserve Chair Jerome Powell told House lawmakers on Wednesday that he perceives inflation to be diminishing, though he remains uncertain whether price increases are sustainably slowing toward the Fed’s 2% target. Also, Powell stated the Fed doesn’t require inflation to drop below 2% before reducing rates, while noting that officials still have more work to do. In addition, the Fed chief remarked that the labor market has cooled “pretty significantly.”
“Markets remain remarkably calm despite the flood of data this week, including Fed Chair Powell’s testimony, CPI/PPI reports, and the beginning of earnings season,” said Mark Hackett at Nationwide. “This could be challenged by the CPI reading.”
Meanwhile, U.S. rate futures have priced in a 4.7% chance of a 25 basis point rate cut at the July FOMC meeting and a 68.1% probability of a 25 basis point rate cut at the September meeting.
Today, all eyes are focused on the U.S. consumer inflation report, set to be released in a couple of hours. Economists, on average, forecast that the U.S. June CPI will arrive at +0.1% m/m and +3.1% y/y, compared to the previous numbers of 0.0% m/m and +3.3% y/y.
The U.S. Core CPI data will also be closely watched today. Economists anticipate the Core CPI to be +0.2% m/m and +3.4% y/y in June, compared to the previous figures of +0.2% m/m and +3.4% y/y.
According to a survey by 22V Research, 55% of investors anticipate a “risk-on” market reaction to the CPI report, while 16% foresee a “risk-off” response, and 29% expect a “mixed/negligible” response.
U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 236K, compared to last week’s number of 238K.
In addition, market participants will be anticipating a speech from Atlanta Fed President Raphael Bostic.
On the earnings front, PepsiCo (PEP) and Delta Air Lines (DAL) are slated to report their Q2 earnings results today.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.277%, down -0.02%.
The Euro Stoxx 50 futures are up +0.38% this morning, with investors looking ahead to key U.S. inflation data. Construction and technology stocks led the gains on Thursday. The Office for National Statistics said Thursday that the U.K.’s economy expanded more than expected in May. Separately, final data from the Federal Statistical Office showed Thursday that Germany’s annual inflation rate cooled to 2.2% in June, confirming preliminary data. Meanwhile, investors are now shifting their focus to U.S. inflation data and the approaching corporate earnings season. In corporate news, Pennon Group Plc (PNN.LN) climbed over +7% following the appointment of Laura Flowerdew as its new CFO.
U.K.’s GDP, U.K.’s Industrial Production, U.K.’s Manufacturing Production, U.K.’s Monthly GDP 3M/3M Change, and Germany’s CPI data were released today.
U.K. May GDP has been reported at +0.4% m/m and +1.4% y/y, stronger than expectations of +0.2% m/m and +1.2% y/y.
U.K. May Industrial Production arrived at +0.2% m/m and +0.4% y/y, weaker than expectations of +0.3% m/m and +0.6% y/y.
U.K. May Manufacturing Production stood at +0.4% m/m and +0.6% y/y, compared to expectations of +0.4% m/m and +1.2% y/y.
U.K. May Monthly GDP 3M/3M Change was at +0.9%, stronger than expectations of +0.7%.
The German June CPI came in at +0.1% m/m and +2.2% y/y, in line with expectations.
Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.06%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.94%.
China’s Shanghai Composite Index closed higher today as investor sentiment improved after the nation’s securities regulator announced additional restrictions on short-selling. Consumer services and software stocks outperformed on Thursday. The China Securities Regulatory Commission announced late Wednesday that it would tighten rules on short-selling and high-frequency trading in an effort to curb improper arbitrage and uphold market stability. The CSRC approved an increase in margin requirements for short selling, effective from July 22nd, and committed to enhancing scrutiny over quant-based investments. Meanwhile, China Securities Finance Corp., the nation’s largest stock lending provider, announced the suspension of stock lending to brokerages for short selling starting July 11th. In corporate news, Zhejiang Asia-Pacific Mechanical and Electronic climbed over +6% after securing an order to supply electronic parking brakes to an undisclosed foreign customer. Investor attention is now directed toward China’s trade data for June, scheduled for release on Friday, seeking further insights into Asia’s biggest economy. Market participants are also looking forward to the country’s Third Plenum, which convenes next week.
Japan’s Nikkei 225 Stock Index closed higher today, crossing the 42,000 mark for the first time, buoyed by an overnight rally on Wall Street that lifted investor sentiment. Energy, technology, and healthcare stocks led the gains on Thursday. The Cabinet Office reported Thursday that Japan’s core machinery orders, a leading indicator of capital spending in the coming six to nine months, unexpectedly fell in May compared to the previous month, underscoring the economy’s fragility. Meanwhile, the Japanese yen held around 161.5 per dollar on Thursday, staying close to its lowest level in 38 years, as market participants remained uncertain about how aggressively the Bank of Japan would normalize monetary policy. In other news, foreign investors purchased Japanese stocks worth a net 916.05 billion yen ($5.67 billion) last week, marking the largest weekly net purchase since January 12th. In corporate news, Creek & River fell about -2% after reporting a 17.7% year-over-year decline in Q1 profit to 860 million yen. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +1.85% to 18.12.
The Japanese May Core Machinery Orders arrived at -3.2% m/m and +10.8% y/y, compared to expectations of +0.9% m/m and +7.2% y/y.
Pre-Market U.S. Stock Movers
Actelis Networks (ASNS) surged about +28% in pre-market trading after the company announced it had secured a $260,000 order to modernize the traffic systems of a U.S. Mid-Atlantic county.
WD-40 Company (WDFC) climbed over +12% in pre-market trading after the company reported upbeat Q3 results and affirmed its full-year guidance.
Costco (COST) gained more than +3% in pre-market trading following the big-box retailer’s announcement of a 7.4% increase in monthly net sales for June and its decision to raise the membership fee for the first time since 2017.
ON Semiconductor (ON) slid over -3% in pre-market trading after Morgan Stanley downgraded the stock to Underweight from Equal Weight with a price target of $65.
Microchip Technology (MCHP) fell more than -2% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - July 11th
PepsiCo (PEP), Delta Air Lines (DAL), Methode Electronics (MEI), Bank7 (BSVN), Northern Technologies (NTIC).
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