June S&P 500 E-Mini futures (ESM24)are trending down -0.05% this morning as warnings from a series of Federal Reserve officials prompted investors to reassess their expectations regarding interest rate cuts this year.
In yesterday’s trading session, Wall Street’s major indexes closed lower. Deere & Co. (DE) slumped over -4% after the farm equipment maker slashed its full-year net income guidance. Also, Cisco Systems (CSCO) slid more than -2% and was the top percentage loser on the Dow after the networking giant provided soft Q4 revenue guidance. In addition, Biogen (BIIB) fell over -2% following its decision to terminate the development of BIIB105, a treatment for amyotrophic lateral sclerosis, in collaboration with Ionis, citing poor topline results from a Phase 1-2 study. On the bullish side, Walmart (WMT) climbed about +7% and was the top percentage gainer on the Dow and S&P 500 after the retail giant reported better-than-expected Q1 U.S. comparable sales and said it now expects its full-year net sales and adjusted operating income to be at the “high-end or slightly above” its original guidance. Also, Chubb (CB) gained over +4% after Warren Buffett’s Berkshire Hathaway disclosed a $6.7 billion stake in the company.
The Labor Department’s report on Thursday showed that the number of Americans filing for initial jobless claims in the past week fell -10K to 222K, compared with the 219K expected. Also, U.S. April housing starts rose +5.7% m/m to 1.360M, weaker than expectations of 1.420M, while U.S. building permits unexpectedly fell -3.0% m/m to a 15-month low of 1.440M in April, weaker than expectations of 1.480M. In addition, the U.S. May Philadelphia Fed’s manufacturing business outlook survey came in at 4.5, weaker than expectations of 7.7. At the same time, the U.S. import price index climbed +0.9% m/m in April, stronger than expectations of +0.2% m/m.
Richmond Fed President Thomas Barkin stated Thursday that the U.S. central bank must keep borrowing costs elevated for an extended period to bring down inflation to its 2% target, highlighting higher prices in the services sector. “To get to 2% sustainably in the right kind of way, I just think it’s going to take a little bit more time,” Barkin said in a CNBC interview. Also, Cleveland Fed President Loretta Mester remarked that policymakers require additional data to be confident that inflation is progressing toward the central bank’s 2% target, suggesting officials should keep interest rates higher for longer to achieve this goal. “Holding our restrictive stance for longer is prudent at this point as we gain clarity about the path of inflation,” Mester said. In addition, New York Fed President John Williams stated that while the latest U.S. inflation data indicate a gradual easing of price pressures, he still requires further evidence before considering adjustments to interest rates. “I don’t see any indicators now telling me, oh, that there’s a reason to change the stance of monetary policy now, and I don’t expect that,” Williams said in an interview with Reuters published Thursday.
Meanwhile, U.S. rate futures have priced in an 8.9% probability of a 25 basis point rate cut at June’s monetary policy meeting and a 27.6% chance of a 25 basis point rate cut at the July meeting. The swaps market now expects only one rate cut from the Fed this year.
Today, investors will likely focus on the U.S. Conference Board Leading Index. Economists foresee this figure to stand at -0.3% m/m in April, compared to the previous number of -0.3% m/m.
In addition, market participants will be anticipating speeches from Federal Reserve Governor Christopher Waller and San Francisco Federal Reserve President Mary Daly.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.387%, up +0.27%.
The Euro Stoxx 50 futures are down -0.39% this morning as investors digested Eurozone inflation data as well as comments from European Central Bank officials. Technology and real estate stocks retreated on Friday, while telecom stocks outperformed. Eurostat said Friday that the Eurozone’s annual inflation rate came in at 2.4% in April, confirming preliminary data. Meanwhile, in an interview with Nikkei published on its website on Friday, ECB Executive Board member Isabel Schnabel said the central bank might lower interest rates in June but urged caution regarding further cuts in borrowing costs due to uncertainty over the outlook. “Based on current data, a rate cut in July does not seem warranted,” she said. Also, ECB Vice-President Luis de Guindos remarked on Friday that Eurozone price pressures continue to ease, providing policymakers with greater assurance that inflation will retreat to the 2% target next year. In corporate news, Cie Financiere Richemont Sa (CFR.Z.IX) climbed over +5% after the Cartier owner appointed Nicolas Bos as the new chief executive officer and said its full-year sales rose 3% to reach an all-time high. Also, H & M Hennes & Mauritz Ab (HMB.S.DX) gained more than +2% after RBC upgraded the fashion retailer to Outperform from Sector Perform.
Eurozone’s CPI and Eurozone’s Core CPI data were released today.
Eurozone April CPI has been reported at +0.6% m/m and +2.4% y/y, in line with expectations.
Eurozone April Core CPI came in at +0.7% m/m and +2.7% y/y, in line with expectations.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +1.01%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.34%.
China’s Shanghai Composite Index reversed opening losses and closed higher today following the unveiling of a broad rescue plan by Beijing aimed at supporting the struggling property market. Property stocks led the gains on Friday. Initially, shares in mainland China declined following the release of economic data indicating new signs of economic weakness in the country. Data released by the National Bureau of Statistics on Friday showed that China’s retail sales growth declined to its lowest level since July 2023, and fixed-asset investment growth moderated in January-April compared to the first quarter. Separately, data on Friday showed that home sales in China declined in April at a faster rate than in the previous month. At the same time, data revealed that China’s industrial production growth picked up pace in April. However, the benchmark index surged following China’s announcement of a batch of property support measures. According to a statement on Friday, the People’s Bank of China effectively eliminated the nationwide minimum mortgage interest rate and cut the minimum down-payment ratio to 15% for first-time buyers and 25% for second homes. In addition, Beijing stated that local governments in cities with excess home inventories should purchase unsold homes at “reasonable” prices and turn them into affordable housing, according to the state-run Xinhua News Agency, which cited Chinese Vice Premier He Lifeng. In corporate news, Baidu Inc. rose over +2% after the search engine and artificial intelligence giant reported better-than-expected Q1 results.
The Chinese April Industrial Production stood at +6.7% y/y, stronger than expectations of +5.5% y/y.
The Chinese April Retail Sales came in at +2.3% y/y, weaker than expectations of +3.7% y/y.
The Chinese April Fixed Asset Investment arrived at +4.2% y/y, weaker than expectations of +4.6% y/y.
The Chinese April Unemployment Rate was at 5.0%, stronger than expectations of 5.2%.
Japan’s Nikkei 225 Stock Index snapped a three-day winning streak to close lower today, tracking Wall Street’s overnight weakness, while uncertainties surrounding the Bank of Japan’s policy path further dampened sentiment. Losses in technology and chemical stocks offset gains in automobile and bank stocks on Friday. Meanwhile, the yen weakened against the dollar on Friday following news that the Bank of Japan kept bond buying amounts unchanged. Also, BOJ Governor Kazuo Ueda stated on Friday that the central bank had no immediate intention to sell its substantial holdings of exchange-traded funds. In other news, in an interview with Bloomberg on Wednesday, Toshitaka Sekine, a former BOJ chief economist, suggested that the central bank might hike interest rates three more times this year, potentially making the next move as soon as June, given its current accommodative policy stance. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -3.45% to 16.79.
Pre-Market U.S. Stock Movers
Doximity Inc (DOCS) surged about +14% in pre-market trading after the company reported upbeat Q4 results, issued solid Q1 revenue guidance, and announced a $500 million share repurchase program.
Reddit (RDDT) climbed over +12% in pre-market trading following the announcement of a new partnership with Microsoft-backed OpenAI, which will bring the company's content to ChatGPT.
DXC Technology (DXC) tumbled more than -21% in pre-market trading after the company provided below-consensus FY25 guidance.
Take-Two (TTWO) fell over -2% in pre-market trading after the company offered a weaker-than-expected full-year net bookings forecast.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - May 17th
Huazhu (HTHT), RBC Bearings (RBC), Autolus Therapeutics (AUTL), Canaan (CAN).
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On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
