S&P Futures Climb on Fed Rate Cut Hopes, U.S. Inflation Data in Focus

September S&P 500 E-Mini futures (ESU24) are trending up +0.45% this morning as the prospect of lower interest rates and a slew of upbeat earnings reports boosted sentiment, while investors geared up for the release of the Fed’s first-line inflation gauge.

In yesterday’s trading session, Wall Street’s major indexes closed mixed, with the blue-chip Dow posting a new record high. Best Buy (BBY) surged over +14% and was the top percentage gainer on the S&P 500 after the consumer electronics retailer posted upbeat Q2 results and lifted its full-year adjusted EPS guidance. Also, Crowdstrike Holdings (CRWD) gained nearly +3% after the cybersecurity company reported better-than-expected Q2 revenue. In addition, Affirm Holdings (AFRM) soared over +31% after reporting stronger-than-expected Q4 results and providing above-consensus Q1 revenue guidance. On the bearish side, Dollar General (DG) plummeted more than -32% and was the top percentage loser on the S&P 500 after the discount retailer posted downbeat Q2 results and cut its FY24 same-store sales growth guidance. Also, Nvidia (NVDA) slumped more than -6% after the chipmaker’s Q3 revenue forecast fell short of the highest expectations.

The U.S. Department of Commerce’s second estimate of Q2 GDP growth was revised higher to +3.0% (q/q annualized) from the initial estimate of +2.8% due to an upward revision of consumer spending. Also, the Q2 core PCE price index was revised lower to +2.80% (q/q annualized) from +2.90%. In addition, U.S. pending home sales unexpectedly fell -5.5% m/m in July, weaker than expectations of +0.2% m/m. Finally, the number of Americans filing for initial jobless claims in the past week fell -2K to 231K, compared with 232K expected.

“The message of [Thursday’s] data is ‘steady as she goes’,” said Chris Larkin at E*Trade from Morgan Stanley. “Weekly jobless claims were slightly lower than last week and GDP was revised slightly higher. The economy doesn’t appear to be falling off a cliff, and in the current market, good news is good. There was nothing here to make the Fed rethink its plan to cut rates next month.”

Meanwhile, U.S. rate futures have priced in a 67.5% chance of a 25 basis point rate cut and a 32.5% chance of a 50 basis point rate cut at the next central bank meeting in September.

Today, all eyes are focused on the U.S. core personal consumption expenditures price index, the Fed’s preferred price gauge, set to be released in a couple of hours. Economists, on average, forecast that the core PCE price index will stand at +0.2% m/m and +2.7% y/y in July, compared to the previous figures of +0.2% m/m and +2.6% y/y.

Also, investors will focus on the U.S. Chicago PMI, which arrived at 45.3 in July. Economists foresee the August figure to be 45.0.

U.S. Personal Spending and Personal Income data will be closely monitored today. Economists forecast July Personal Spending to be at +0.5% m/m and July Personal Income to come in at +0.2% m/m, compared to the June numbers of +0.3% m/m and +0.2% m/m, respectively.

The U.S. Michigan Consumer Sentiment Index will be reported today as well. Economists estimate this figure to arrive at 67.8 in August, compared to 66.4 in July.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.853%, down -0.24%.

The Euro Stoxx 50 futures are up +0.34% this morning, set for a four-week winning streak, buoyed by the prospect of lower interest rates as inflation in the region continued to ease. Real estate and mining stocks led the gains on Friday, while technology stocks retreated. A preliminary estimate from Eurostat released on Friday showed that the Eurozone’s annual inflation rate dropped sharply in August to its lowest level since mid-2021, paving the way for the European Central Bank to lower its key interest rate for the second time this year next month. Meanwhile, European Central Bank board member Isabel Schnabel stated on Friday that Eurozone inflation is declining as anticipated, reducing the risk that further rate cuts would disrupt disinflation, yet she warned that risks to the outlook still persist. In corporate news, Spie (SPIE.FP) gained over +4% after JPMorgan resumed coverage of the French multi-technical service provider with an Overweight rating.

France’s CPI (preliminary), France’s GDP, Germany’s Unemployment Rate, Germany’s Unemployment Change, Italy’s CPI (preliminary), Eurozone’s CPI (preliminary), Eurozone’s Core CPI (preliminary) and Eurozone’s Unemployment Rate were released today. 

The French August CPI came in at +0.6% m/m and +1.9% y/y, stronger than expectations of +0.5% m/m and +1.8% y/y.

The French GDP arrived at +0.2% q/q and +1.0% y/y in the second quarter, weaker than expectations of +0.3% q/q and +1.1% y/y.

The German August Unemployment Rate was at 6.0%, in line with expectations.

The German August Unemployment Change stood at 2K, stronger than expectations of 17K.

The Italian August CPI came in at +0.2% m/m and +1.1% y/y, weaker than expectations of +0.3% m/m and +1.2% y/y.

Eurozone August CPI has been reported at +2.2% y/y, in line with expectations.

Eurozone August Core CPI arrived at +2.8% y/y, in line with expectations.

Eurozone July Unemployment Rate was at 6.4%, stronger than expectations of 6.5%.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.68%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.74%.

China’s Shanghai Composite Index closed higher today, recovering from a multi-month low as news of heavy purchasing by a sovereign fund boosted market sentiment. However, the index recorded its fourth consecutive monthly decline in August. Property stocks led the gains on Friday. The offshore yuan strengthened against the dollar on Friday, advancing for the second consecutive session to its highest level since June 2023, primarily fueled by strong corporate demand for the Chinese currency. Meanwhile, state-backed Central Huijin Investment increased its ownership in several blue-chip exchange-traded funds, according to the funds’ mid-year report published on Friday. For instance, Huijin Investment tripled its stake in the E Fund CSI300 Index ETF to 67% in the first half of the year and increased its holdings in the ChinaAMC China50 ETF by 70%. In other news, Bloomberg reported on Friday that China is contemplating permitting homeowners to refinance up to $5.4 trillion in mortgages to reduce borrowing costs for millions of families and stimulate consumption. In corporate news, Kaifa Technology surged about +10% after posting a 21% increase in first-half profit to 360.3 million yuan. At the same time, Bank of China Ltd. fell more than -2% after reporting a drop in first-half net income and commissions. Investors are now awaiting the release of official Chinese PMI figures for August, scheduled for Saturday, to gain further insights into the state of the world’s second-largest economy.

Japan’s Nikkei 225 Stock Index closed higher today, likely due to month-end position adjustments on the last trading day of August. The benchmark index closed lower for the second month in a row but recorded its third consecutive weekly gain. Industrial and utility stocks led the gains on Friday. Data from the Japan Statistics Bureau revealed on Friday that core inflation in Tokyo accelerated for the fourth consecutive month in August, sparking speculation that the Bank of Japan may soon hike interest rates again. Separate government data showed that industrial production experienced a sharp recovery in July, marking the third increase in industrial output year-to-date. At the same time, data showed that Japan’s retail sales growth slowed in July, while the unemployment rate unexpectedly ticked up. Meanwhile, BOJ Governor Kazuo Ueda and other senior officials have recently stated that the bank will contemplate further rate hikes, provided that data affirm the economy and inflation are advancing according to its forecasts. In corporate news, Terumo fell nearly -3% following news that shareholders of the medical equipment manufacturer intend to sell shares worth 73.2 billion yen ($505.56 million) to overseas investors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -6.08% to 21.32.

The Japanese August Tokyo Core CPI has been reported at +2.4% y/y, stronger than expectations of +2.2% y/y.

The Japanese July Industrial Production arrived at +2.8% m/m, weaker than expectations of +3.6% m/m.

The Japanese July Retail Sales came in at +2.6% y/y, weaker than expectations of +2.8% y/y.

The Japanese July Unemployment Rate was at 2.7%, weaker than expectations of 2.5%.

Pre-Market U.S. Stock Movers

MongoDB (MDB) surged about +14% in pre-market trading after the company reported better-than-expected Q2 results and lifted its FY25 guidance.

Marvell Technology (MRVL) gained more than +8% in pre-market trading after the semiconductor infrastructure company reported stronger-than-expected Q2 results and offered solid Q3 guidance.

Dell Technologies (DELL) climbed over +6% in pre-market trading after the IT giant posted upbeat Q2 results and raised its full-year guidance.

Autodesk (ADSK) rose more than +3% in pre-market trading after the company reported upbeat Q2 results and boosted its annual guidance.

Ulta Beauty (ULTA) slid over -8% in pre-market trading after the company reported weaker-than-expected Q2 results and slashed its FY24 forecast.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - August 30th

Frontline (FRO), Miniso (MNSO), JinkoSolar (JKS), Up Fintech (TIGR).

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