September S&P 500 E-Mini futures (ESU24)are up +0.03%, and September Nasdaq 100 E-Mini futures (NQU24) are down -0.06% this morning as U.S. Treasury yields climbed 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, remarks from Fed Chair Jerome Powell, and a fresh batch of U.S. labor market data.
In Friday’s trading session, Wall Street’s major averages closed lower. Nike (NKE) tumbled about -20% and was the top percentage loser on the S&P 500 and Dow after the world’s largest sportswear company reported weaker-than-expected Q4 revenue and provided FY25 revenue guidance that fell short of analyst estimates. Also, Kura Sushi USA (KRUS) plunged more than -23% after reporting disappointing preliminary Q3 results and cutting its full-year revenue guidance. In addition, Accolade (ACCD) plummeted over -43% after the company issued below-consensus Q2 and FY25 revenue guidance. On the bullish side, Infinera (INFN) climbed more than +15% after Nokia Oyj agreed to acquire the company in a deal valued at about $2.3 billion.
Data from the U.S. Department of Commerce on Friday showed that the U.S. core PCE price index, a key inflation gauge monitored by the Federal Reserve, came in at +0.1% m/m and +2.6% y/y in May, in line with expectations. Also, the U.S. Chicago PMI rose to a 7-month high of 47.4 in June, stronger than expectations of 39.7. In addition, U.S. May personal spending rose +0.2% m/m, weaker than expectations of +0.3% m/m, while U.S. May personal income rose +0.5% m/m, stronger than expectations of +0.4% m/m. Finally, the University of Michigan’s gauge of consumer sentiment was revised upward to 68.2 in June, stronger than expectations of 66.0.
“From the market’s perspective, [Friday’s] PCE report was near perfect. The Fed’s favorite inflation indicator not only showed inflation was moving towards the Fed’s inflation target but that the economy was resilient. Consumer spending was on the rise and take-home pay was also up after a couple of sluggish months,” said David Donabedian at CIBC Private Wealth U.S.
Richmond Fed President Thomas Barkin remarked on Friday that the battle against inflation has not yet been won, emphasizing that the U.S. economy is expected to stay resilient as long as unemployment stays low and asset valuations remain high. Also, Barkin noted, “Given the remarkable strength we are seeing in the economy,” he is receptive to the notion that the longer-term equilibrium rate balancing supply and demand “has shifted up somewhat” and that policy may not be as restrictive as perceived.
U.S. rate futures have priced in a 10.9% chance of a 25 basis point rate cut at July’s monetary policy meeting and a 56.3% probability of a 25 basis point rate cut at the conclusion of the Fed’s September meeting.
Meanwhile, the U.S. stock markets will close early at 1 p.m. Eastern Time on Wednesday and remain closed on Thursday for the Independence Day holiday.
The highlight of the holiday-shortened week will be the U.S. Nonfarm Payrolls report for June. Also, investors will be eyeing a spate of other economic data releases, including U.S. JOLTs Job Openings, ADP Nonfarm Employment Change, Initial Jobless Claims, S&P Global Composite PMI, S&P Global Services PMI, Factory Orders, ISM Non-Manufacturing PMI, Crude Oil Inventories, Average Hourly Earnings, and Unemployment Rate.
Market participants will also be focused on remarks from Fed Chair Jerome Powell, who, along with New York Fed President John Williams, is set to participate in the European Central Bank’s annual forum in Sintra, Portugal this week.
In addition, investors will be keeping an eye on the release of the Fed’s minutes from the June meeting on Wednesday, which may provide further insights into the policymakers’ views on inflation, interest rates, and the economy.
Today, all eyes are focused on the U.S. ISM Manufacturing PMI, set to be released in a couple of hours. Economists, on average, forecast that the June ISM manufacturing PMI will come in at 49.2, compared to the previous month’s value of 48.7.
Also, investors will focus on the U.S. S&P Global Manufacturing PMI, which stood at 51.3 in May. Economists foresee the June figure to be 51.7.
U.S. Construction Spending data will be reported today as well. Economists foresee this figure to stand at +0.3% m/m in May, compared to the previous number of -0.1% m/m.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.413%, up +1.62%.
The Euro Stoxx 50 futures are up +1.06% this morning as investors digested the outcomes of the first round of France’s snap parliamentary election. Bank stocks led the gains on Monday. The first round of legislative voting showed Le Pen’s National Rally in front of President Emmanuel Macron’s centrist alliance, though by a narrower margin than projected by some polls. France’s second round of voting is scheduled for July 7th. Meanwhile, the euro climbed to its strongest level since mid-June amid speculation that Marine Le Pen’s far-right party would face challenges in securing an outright majority in French elections. A survey revealed on Monday that the Eurozone’s final manufacturing PMI dropped to a two-month low in June, with output, new orders, purchasing activity, and employment all declining at faster rates. Investor attention is currently on preliminary inflation data from Germany slated for later in the session. Market participants will also be on the lookout for the Eurozone’s preliminary inflation data for June on Tuesday.
Spain’s Manufacturing PMI, Italy’s Manufacturing PMI, France’s Manufacturing PMI, Germany’s Manufacturing PMI, and Eurozone’s Manufacturing PMI data were released today.
The Spanish June Manufacturing PMI came in at 52.3, weaker than expectations of 53.1.
The Italian June Manufacturing PMI stood at 45.7, stronger than expectations of 44.3.
The French June Manufacturing PMI arrived at 45.4, stronger than expectations of 45.3.
The German June Manufacturing PMI was at 43.5, stronger than expectations of 43.4.
Eurozone June Manufacturing PMI has been reported at 45.8, stronger than expectations of 45.6.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.92%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.12%.
China’s Shanghai Composite Index closed higher today following a private reading indicating an uptick in the country’s manufacturing activity, contrasting with the official index. Energy stocks led the gains on Monday. An official survey released on Sunday indicated that China’s manufacturing activity contracted for a second consecutive month in June, while non-manufacturing activity expanded at its slowest pace since last December. At the same time, a private sector survey showed on Monday that China’s manufacturing activity expanded at its fastest pace in over three years, driven by increased production despite a slowdown in demand growth. In corporate news, Shenzhen Kaizhong Precision Technology surged +10% after securing a 1.35 billion yuan order to provide motor equipment to a prominent European automaker. Investor attention in July centers on the Third Plenum of the Chinese Communist Party, a gathering of top officials expected to detail additional economic support measures.
The Chinese June Manufacturing PMI stood at 49.5, in line with expectations.
The Chinese June Non-Manufacturing PMI arrived at 50.5, weaker than expectations of 51.0.
The Chinese June Caixin Manufacturing PMI came in at 51.8, stronger than expectations of 51.5.
Japan’s Nikkei 225 Stock Index gave up most of its early gains and closed slightly higher today after the Bank of Japan’s Tankan survey bolstered expectations for potential interest rate hikes by the central bank. Gains in shipping and trading-house stocks led the overall market higher on Monday. The Bank of Japan’s Tankan survey released on Monday indicated that sentiment among large Japanese manufacturers improved in the three months to June to levels not seen in two years, further fueling expectations for interest rate increases by the BOJ. Separately, S&P Global reported Monday that Japan’s manufacturing PMI was revised downward in June. In addition, the government announced in an unusual unscheduled revision that the country’s real GDP contracted at an annualized rate of 2.9% in January-March, revised downward from an initial estimate of a 1.8% decline, primarily due to corrections in construction data. Meanwhile, the yen was little changed on Monday after hitting its lowest level since 1986 last week, leading some analysts to flag an increased likelihood of a rate move at the BOJ’s next meeting, as Governor Kazuo Ueda has committed to closely monitoring the yen’s impact on inflation. In corporate news, J.Front Retailing surged over +14% after the department store operator raised its full-year profit forecast. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -0.56% to 16.04.
The Japanese Tankan Large Manufacturers Index has been reported at 13 in the second quarter, stronger than expectations of 11.
The Japanese Tankan Large Non-Manufacturers Index came in at 33 in the second quarter, in line with expectations.
The Japanese June au Jibun Bank Japan Manufacturing PMI stood at 50.0, weaker than expectations of 50.1.
The Japanese June Household Confidence arrived at 36.4, in line with expectations.
Pre-Market U.S. Stock Movers
Spirit AeroSystems (SPR) climbed over +5% in pre-market trading after Boeing agreed to acquire the supplier of fuselages for $37.25 a share in an all-stock deal.
Li Auto (LI) rose more than +2% in pre-market trading following the announcement of delivering 47,774 vehicles in June, marking a substantial 46.7% year-over-year increase.
T-Mobile US (TMUS) gained about +0.7% in pre-market trading after Goldman Sachs initiated coverage of the stock with a Buy rating and a $200 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - July 1st
Elite Pharma Inc (ELTP).
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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.