S&P Futures Climb Ahead of FOMC Meeting Minutes and U.S. PPI Data

Oleksandr Pylypenko - Barchart - Wed Oct 11, 2023

December S&P 500 futures (ESZ23) are trending up +0.32% this morning as investors looked ahead to the release of the Federal Reserve’s September policy meeting minutes while also gearing up for crucial U.S. PPI data.

In Tuesday’s trading session, Wall Street’s major averages closed in the green, with the benchmark S&P 500 and tech-heavy Nasdaq 100 climbing to 2-1/2 week highs and the blue-chip Dow posting a 2-week high. Truist Financial Corp (TFC) soared over +6% and was the top percentage gainer on the S&P 500 after Semafor reported that the bank is in talks to sell its insurance brokerage unit to Stone Pont for about $10 billion. Also, Hyatt Hotels Corporation (H) gained about +6% after S&P Dow Jones Indices announced that the stock would replace National Instruments in the S&P MidCap 400 Index, effective Thursday. In addition, PepsiCo Inc (PEP) rose more than +1% after reporting better-than-expected Q3 organic sales and raising its annual profit forecast for a third time this year. On the bearish side, Juniper Networks Inc (JNPR) fell over -1% after JPMorgan Chase downgraded the stock to Neutral from Overweight.

Atlanta Fed President Raphael Bostic stated on Tuesday that there is no need for the U.S. central bank to continue raising interest rates, and he does not expect a recession ahead. “I think that our policy rate is at a sufficiently restrictive position to get inflation down to 2%. I actually don’t think we need to increase rates anymore,” Bostic said. Also, Fed Governor Michelle Bowman acknowledged in a speech on Wednesday the progress made in curbing inflation yet promptly emphasized that “inflation continues to significantly exceed the FOMC’s 2% target.” In addition, Bowman highlighted the robust pace of domestic spending and the persistent labor market tightness, suggesting that “the policy rate may need to rise further and stay restrictive for some time to return inflation to the FOMC’s goal.”

U.S. rate futures have priced in a 13.7% chance of a 25 basis point rate hike at the November meeting and a 25.3% probability of a 25 basis point rate increase at December’s monetary policy meeting.

Meanwhile, U.S. Treasuries climbed as rising tensions in the Middle East drove investors toward havens.

Today, market participants will be closely watching the release of the Federal Reserve’s minutes from the September meeting to discern any indications of whether policymakers are inclining toward another interest rate increase before the end of the year.

Also, investors will likely focus on the U.S. Producer Price Index (PPI). Economists, on average, forecast that September U.S. PPI will stand at +0.3% m/m and +1.6% y/y, compared to the previous values of +0.7% m/m and +1.6% y/y.

U.S. Core PPI reading will also be closely watched today. Economists expect September figures to be +0.2% m/m and +2.3% y/y, compared to the previous numbers of +0.2% m/m and +2.2% y/y.

In addition, investors will be looking toward speeches from Atlanta Fed President Raphael Bostic and Fed Governor Christopher Waller.

In the bond markets, United States 10-year rates are at 4.562%, down -1.96%.

The Euro Stoxx 50 futures are down -0.31% this morning as disappointing corporate news subdued optimism regarding the outlook for interest rates and China’s economic stimulus prospects. Luxury stocks underperformed on Wednesday, with Lvmh (MC.FP) plunging over -6% after the luxury goods maker posted a 9% rise in Q3 revenue, indicating a deceleration in growth as a strong wave of post-pandemic spending subsides. Shares of other French luxury majors such as Hermes Intl (RMS.FP) and Kering (KER.FP) fell more than -2%. Meanwhile, data from the German statistics office Destatis showed Wednesday that German inflation significantly decreased in September, confirming preliminary estimates and hitting its lowest point since the outbreak of the war in Ukraine. In other corporate news, Novo Nordisk A/S (NOVOB.C.DX) climbed over +3% following the Danish drugmaker’s announcement of prematurely ending a trial on Ozempic for treating kidney failure in diabetic patients due to clear success indicators in an interim analysis.

Germany’s CPI data was released today.

The German September CPI has been reported at +0.3% m/m and +4.5% y/y, in line with expectations.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.12%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.60%.

China’s Shanghai Composite today closed slightly higher following a media report suggesting that Beijing is preparing fresh stimulus measures to support the attainment of this year’s official growth target. Bloomberg News reported on Tuesday that China is contemplating an increase in its budget deficit for 2023 as the government gears up to implement a fresh round of stimulus measures aimed at aiding the economy in achieving the official growth target. The China Passenger Car Association said Wednesday that passenger vehicle sales in China increased by 4.7% in September compared to the previous year, driven by increased purchases of discounted and new models ahead of key holidays. Meanwhile, healthcare, artificial intelligence, and communication stocks led the advance on Wednesday. Hong Kong-listed tech giants also gained ground.

Japan’s Nikkei 225 Stock Index closed higher today, hitting a 2-week high as dovish comments from Federal Reserve officials sparked a rally in chip stocks. Chip-related stocks advanced on Wednesday, with Lasertec Corporation climbing over +6%, Advantest Corp rising more than +2%, and Tokyo Electron Ltd gaining over +2%. In other corporate news, J.Front Retailing Co Ltd rose about +0.5% after the department store operator said it would raise its earnings guidance, driven by tourist spending and wealthy domestic customers. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.99% to 20.67.

“For the time being, there’s a sense that U.S. yields have peaked out, helping to lift sentiment,” said Kazuo Kamitani, a strategist at Nomura Securities.

Pre-Market U.S. Stock Movers

Silk Road Medical Inc (SILK) plunged about -38% in pre-market trading after the company reported below-consensus preliminary Q3 revenue and said its CEO Erica Rogers would step down.

E2open Parent Holdings Inc (ETWO) slid over -14% in pre-market trading after the company posted weaker-than-expected Q2 results and cut its adjusted EBITDA guidance.

Hyliion Holdings Corp (HYLN) tumbled more than -31% in pre-market trading after announcing a strategic review of alternatives for its powertrain business amid a slower-than-anticipated market adoption of electric trucks.

HP Inc (HPQ) rose over +1% in pre-market trading after the company projected FY24 earnings broadly in line with expectations and raised its annual dividend during its meeting with securities analysts.

Shoals Technologies Group Inc (SHLS) climbed more than +4% in pre-market trading after Goldman Sachs upgraded the stock to Buy from Neutral.

HubSpot Inc (HUBS) fell over -3% in pre-market trading after Raymond James downgraded the stock to Outperform from Strong Buy.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - October 11th

Richardson Electronics (RELL), J W Mays (MAYS), Theratechnologies (THTX).

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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.