Stocks Little Changed Before the Open as Fed Rate Decision Looms

June S&P 500 futures (ESM23) are up +0.07%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.10% this morning after three major U.S. benchmark indices finished the regular session higher as concerns about contagion among regional banks eased and investors braced for the Federal Reserve’s interest rate decision.

In Tuesday’s trading session, Wall Street’s major averages closed sharply higher, with the benchmark S&P 500 and blue-chip Dow notching 1-1/2 week highs and the tech-heavy Nasdaq posting a 6-week high. Financial stocks continued to stage a recovery, with First Republic Bank (FRC) surging over +29% amid reports that JPMorgan Chase CEO Jamie Dimon is in talks with chief executives of other big banks to stabilize the troubled bank. Energy stocks also gained ground as the price of WTI crude rose over +2% on easing fears about the global growth impact of a potential banking collapse.

Data on Tuesday showed U.S. existing home sales jumped +14.5% m/m in February to a seasonally adjusted annual rate of 4.58M, blasting past estimates of 4.19M and snapping a 12-month losing streak. 

Treasury Secretary Janet Yellen said in prepared remarks before the American Bankers Association on Tuesday that the government stood ready to provide further support for smaller lenders if needed. 

Today, all eyes are focused on the U.S. Federal Reserve’s monetary policy decision later in the day. U.S. rate futures have priced in an 87.8% chance for the Fed to raise its fed funds target range by 25 basis points for a second consecutive time to 4.75-5.00% from the current 4.50-4.75%. In addition, market participants will closely monitor Fed Chair Jerome Powell’s statement and a new Summary of Economic Projections, a quarterly report outlining policymakers’ forecasts for interest rates, inflation, unemployment, and economic growth.

“We expect Chair Powell to strongly argue the banking system is safe, sound, and well capitalized. As a result, we expect the Committee not to pause and risk signaling the banking system cannot withstand a 25-bp rate increase, nor risk admitting rapid front-loading may have been riskier than they previously assumed,” said Jonathan Pingle, an economist at UBS. 

Also, investors are likely to focus on the U.S. Crude Oil Inventories data. Economists estimate this figure to be -1.565M, compared to last week’s value of +1.550M.

In the bond markets, United States 10-Year rates are at 3.587%, down -0.54%.

The Euro Stoxx 50 futures are down -0.14% this morning as investors digested U.K. inflation data and cautiously awaited the latest Federal Reserve monetary policy decision. U.K. CPI unexpectedly rose +1.1% m/m and +10.4% y/y in February, stronger than expectations of +0.6% m/m and +9.9% y/y. The Bank of England meets on Thursday and is widely expected to raise interest rates by 25 basis points to 4.25%, with the latest inflation print increasing the pressure on the central bank to go further and consider a 50 basis points move. In corporate news, Fevertree Drinks Plc (FEVR.LN) climbed over +4% after the soft drinks producer reported better-than-expected full-year adjusted EBITDA.

U.K.’s Core CPI and Eurozone’s Current Account data were also released today.

U.K. February Core CPI stood at +1.2% m/m and +6.2% y/y, stronger than expectations of +0.8% m/m and +5.7% y/y.

Eurozone January Current Account came in at 17.0B, stronger than expectations of 16.5B.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.31%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.93%.

China’s Shanghai Composite lagged its Asian peers today and closed slightly higher. Chinese stocks rose for a second day after U.S. banking stocks rebounded on optimism over stability in the banking system while investors’ cautious mood ahead of the Federal Reserve’s monetary policy decision kept gains limited. 

At the same time, Japan’s Nikkei 225 Stock Index closed sharply higher, catching up on gains after the market was closed on Tuesday for a holiday. The index’s upward momentum was primarily fueled by gains in beaten-down financial stocks as concerns about the global banking sector eased. Investor attention this week is also on Japanese consumer inflation data due on Friday. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 17.22% and hit a new 3-month high of 22.80.

Pre-Market U.S. Stock Movers

GameStop Corp (GME) surged about +40% in pre-market trading after the retailer recorded a surprise Q4 profit.

Diebold Nixdorf Inc (DBD) climbed over +23% in pre-market trading after announcing an amendment to its asset-based credit facility to add a new $55 million first-in-last-out term loan tranche.

Nike Inc (NKE) dropped more than -1% in pre-market trading after the company reported upbeat Q3 results but guided FY23 gross margin at the low end of the prior forecast.

Luminar Technologies (LAZR) slid over -7% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral with a $5 price target.

BuzzFeed Inc (BZFD) fell about -1% in pre-market trading after the company filed a $150M mixed securities shelf. 

Banco Santander SA ADR (SAN) rose over +2% in pre-market trading after BNP Paribas upgraded the stock to outperform from neutral.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - March 22nd

Chewy (CHWY), Ollies Bargain Outlet Holdings Inc (OLLI), KB Home (KBH), Braskem A (BAK), Petco Health and Wellness (WOOF), Worthington Industries (WOR), Winnebago Industries (WGO), MillerKnoll (MLKN), Corporacion America Airports (CAAP), Afya (AFYA), Steelcase (SCS), Zhihu (ZH), Shoe Carnival (SCVL), Ehang (EH), Wave Life Sciences Ltd (WVE), Aeva Technologies (AEVA), Baozun Inc (BZUN), Astria Therapeutics (ATXS), Rani Therapeutics Holdings (RANI), Hyzon Motors (HYZN), Scpharmaceuticals (SCPH), Nextnav Acquisition (NN), Spectrum (SPPI), CNFinance (CNF), Sera Prognostics (SERA), Natural Gas Services (NGS).

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