Market Update
This morning, September S&P 500 E-Mini Futures (ESU25) increased by 0.16%, building on yesterday’s gains. Investors are analyzing the additional remarks from Federal Reserve Chair Jerome Powell regarding interest rate expectations.
Meanwhile, a ceasefire between Iran and Israel, facilitated by President Donald Trump, seems to be going into effect today, with both nations claiming victory. Trump’s Middle East envoy described the discussions between the US and Iran as “promising,” leading to some optimism in Washington about a potential long-term peace agreement. As a result, investors are shifting their focus to the US economy and how ongoing trade tensions and financial challenges could be impacting corporate profits and growth.
In yesterday’s trading, three significant Wall Street indices saw gains. Technology stocks, particularly, saw a rise, with Intel (INTC) and Advanced Micro Devices (AMD) both climbing over 6%. DEXCOM (DXCM) jumped more than 9%, marking the largest gain in the Nasdaq 100 following supportive comments from U.S. Health and Human Services Secretary Robert F. Kennedy Jr. Additionally, Uber Technologies (Uber) rose by more than 7% after announcing plans to introduce driverless rides to customers in Atlanta. On the downside, Dollar General (DG) experienced a drop of over 1% after Goldman Sachs downgraded its stock rating from buy to neutral.
Economic reports released Tuesday indicated a surprising decrease in consumer confidence in the US, with the index falling to 93.0 in June, below the anticipated 99.4. Additionally, the S&P/CS HPI Composite-20NSA for April showed a year-over-year increase of 3.4%, down from 4.1% in March, and also lower than the expected 4.0%. The Richmond Fed’s production index unexpectedly improved to -7 in June, compared to an anticipated -10.
Jerome Powell conveyed to lawmakers on Tuesday that the Federal Reserve is not rushing to decrease interest rates, emphasizing that the effects of Trump’s tariffs are still becoming evident. He mentioned that “the impact of tariffs depends on its ultimate level” and indicated that the Fed is waiting for more information on potential economic developments before making any policy adjustments. However, he noted that rate cuts could be expedited if inflation dips below expectations or if the job market weakens.
Cleveland Fed President Beth Hammack stated that interest rates are presently somewhat restrictive and that policymakers might sustain stable borrowing costs “for quite some time.” New York Fed President John Williams echoed that maintaining a slightly restrictive monetary policy is suitable for achieving employment and price stability goals. Meanwhile, Boston Fed President Susan Collins underscored the necessity of a “conservative and restrictive” monetary stance, and Fed official Michael Barr expressed hope that tariffs have led to increased inflation, supporting a more cautious approach to interest rates.
Currently, US futures predict an 81.4% likelihood versus an 18.6% chance of a 25 basis point decrease at the upcoming FOMC meeting in July.
Investors today are closely watching Jerome Powell’s six-month monetary policy testimony before the Senate Banking Committee. New home sales data is also expected to be released soon, with projections showing a decrease to 694K in May, down from 743K in April. Additionally, US crude oil inventory data is set to come out today, with expectations at -1.200 million compared to -11.473 million last week.
Financial firms announcing quarterly results today include Micron Technology (MU), Paychex (PayX), General Mills (GIS), and Jefferies Financial (JEF).
In the bond market, the yield on the benchmark 10-year US Treasury note dipped to 4.287%, reflecting a 0.07% drop. The Euro Stoxx 50 index fell by 0.13% this morning, taking a pause after the recent rally sparked by the ceasefire between Israel and Iran. The performance of banking and media stocks was lackluster today, while automobile and defense sectors saw gains. Data confirmed that Spain’s economy grew by 0.6% in the first quarter, slightly below the 0.7% growth from the previous quarter. Additionally, French consumer confidence remained stagnant in June, underperforming against long-term averages. Attention now shifts to the NATO summit in the Netherlands, where an increase in defense spending targets is on the agenda. Reports suggest that thirty-two members, excluding Spain, have agreed to aim for a spending level of 5% of GDP.
In corporate news, Stellantis NV gained over 4% after Jefferies upgraded its position, while Babcock International Group Plc surged by more than 12% following positive adjustments to its medium-term profit projections.
Further economic data was also released, showing French consumer trust at 88 in June, which was below the expected 89. Similarly, Spain’s GDP growth figures met expectations at 0.6% quarter-over-quarter and 2.8% year-over-year for the first quarter.
Asian markets closed positively today. China’s Shanghai Composite Index climbed by 1.04%, while Japan’s Nikkei 225 rose by 0.39%. The Shanghai index reached its highest level in over six months, buoyed by the ceasefire between Israel and Iran and China’s focus on boosting consumer-driven growth. Stocks in the brokerage and defense sectors led the way forward. Recently issued guidelines in China aim to foster consumption through financial incentives, supporting a diverse range of businesses to enhance economic activity. Chinese Prime Minister Li Qian noted the steady improvement in the economy during the second quarter and expressed confidence in harnessing consumer potential for new market opportunities. Additionally, Beijing has announced plans to respond to Taiwan’s addition of various Chinese firms, including Huawei, to an export control list aimed at limiting access to advanced technologies.
In corporate developments, New Oriental Education and Technology in Hong Kong saw an over 8% increase after JPMorgan upgraded its rating from neutral to overweight.
Japan’s Nikkei 225 index reached a four-month high today, spurred by investor optimism linked to the Iran-Israel ceasefire. Chip-related stocks, in particular, showed robust performance, reflecting gains observed in the US market. Data revealed that inflation in Japan’s services sector reached 3.3% in May, influencing speculations about potential interest rate hikes. Also, the Cabinet Office’s upward revision of the key economic indicator index for April reflects stronger economic sentiment. A summary from the Bank of Japan’s recent policy meeting indicated a consensus on stabilizing interest rates amidst uncertainties due to US tariffs. While some board members emphasized that inflation rates may exceed expectations, others indicated that further hikes might be necessary, even amid economic volatility. In trade news, a Japanese tariff negotiator is set for another visit to the US soon, signaling ongoing discussions about tariffs impacting the economy. Investors are also on the lookout for Japan’s retail sales and Tokyo CPI data coming this Friday, which will aid the BOJ’s forthcoming policy decisions. Concurrently, implied volatility for the Nikkei 225 option has seen a decrease of 2.63% to close at 23.29.
On another note, Japan’s corporate services price index unexpectedly rose to 3.3% year-over-year. Additionally, the main index for April came in at 104.2, surpassing the expected figure of 103.4.
Pre-U.S. Stock Movement
In pre-market trading, FedEx (FDX) fell by over 5% after it issued revised EPS guidance for the first quarter. Conversely, Blackberry (BB) surged more than 14% following better than anticipated first-quarter results and raised sales forecasts. Quantumscape (QS) rose 33% after announcing the integration of an advanced separation process into its baseline production. Worthington Enterprises (WOR) climbed by over 10% in pre-market trading, supported by stronger-than-expected fourth-quarter results. TMC The Metals Company Inc. (TMC) also gained more than 6% after an upgrade from Wedbush with a target price of $11.
Today’s Revenue Spotlight
Companies reporting today include Micron (MU), Paychex (PAYX), General Mills (GIS), Jefferies Financial (JEF), HB Fuller (FUL), Novagold (NG), Worthington Steel (WS), Steelcase (SCS), Millknoll (MLKN), Winnebago Industries (WGO), and Daktronics (DAKT).
