Five things you need to know before the market opens on Wednesday June 28:
1. — Stock Futures Waver As Traders Eye Fed, Tech Export Ban Reports
U.S. equity futures were mixed Wednesday, while the dollar built gains against its global peers, as investors pared sentiment from yesterday’s solid rally on Wall Street ahead of a key central bank summit in Portugal and worries over an escalating trade war between Washington and Beijing.
Stocks enjoyed a solid late-quarter rally on Tuesday following better-than-expected data on new home sales, durable goods order and consumer sentiment that challenged the market’s concerns of a near-term recession in the world’s biggest economy.
The data, which included a two-year high in consumer sentiment figures, paired with a profit outlook boost from carrier Delta Air Lines (DAL) – Get Free Report, and a rebound in mega-cap tech stocks helped the S&P 500 to a 1.1% session gain.
The Nasdaq, meanwhile, gained 1.65% to extend its year-to-date advance past 30%, a move that puts it on pace for the best first half start to any year in four decades.
Reports of a Biden Administration export ban on AI chips to China, however, could take the steam out of tech stocks in today’s early session, while investors are likely to focus on remarks from a panel of top-level central bankers in Sintra, Portugal speaking today as part of the European Central Bank’s annual policy summit.
The CME Group’s FedWatch suggests a 77% chance that the Fed will lift rates by another quarter point in July, but is pricing in less than a 20% chance that it will make good on its promise for a follow-on rate hike between now and the end of the year.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% higher at 102.571 while 2-year Treasury note yields held at 4.741% in overnight trading.
On Wall Street, futures contracts tied to the S&P 500 were indicating an 8 point opening bell decline while those linked to the Dow Jones Industrial Average priced for an 18 point move to the upside ahead of trade data and retail inventories at 8:30 am Eastern time. The Nasdaq is looking at a 70 point opening bell gain.
Overnight in Asia, another weak data series, this time showing a near 20% collapse in industrial profits for state-owned companies over the first five months of the year, kept regional stocks in the red as the MSCI ex-Japan index fell 0.1% into the close of trading.
Japan’s Nikkei 225, meanwhile, snapped a four-day losing streak with a 2.02% gain, closing north of the 33,000 point mark.
In Europe, the Stoxx 600 was marked 0.48% higher in early Frankfurt trading while Britain’s FTSE 100 added 0.51% in London.
2. — Fed Chair Powell Joins Central Bank Panel At ECB Summit in Portugal
Federal Reserve Chairman Jerome Powell will speak later this morning at the European Central Bank’s annual monetary policy summit in Portugal as investors around the world brace for higher rates and stubborn inflation into the second half of the year.
Powell is expected to join a panel of high-ranking central bank officials, including the ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and the newly-appointed Bank of Japan Governor Kazuo Ueda slated to begin at 9:30 am Eastern time.
The event comes amid a broader interest rate re-set from investors following a series of faster-than-expected inflation readings in Europe and the UK and repeated warnings from the Fed that it plans to execute a least two more rate hikes between now and the end of the year in order to bring domestic readings back towards its preferred 2% target.
“We remain committed to bringing inflation back down to our 2% goal and to keeping longer-term inflation expectations well anchored,” Powell told lawmakers on Capitol Hill last week. “Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions.”
3. — Nvidia Tumbles On Report of Potential AI Chip Sale Ban To China
Nvida (NVDA) – Get Free Report shares lead U.S. chipmakers lower in pre-market trading following reports that the Biden Administration is considering new export curbs on AI semiconductor exports to China.
The Wall Street Journal reported late Tuesday that the Commerce Department is mulling new restrictions that would halt shipments of AI chips made by Nvidia, as well as Advanced Micro Devices (AMD) – Get Free Report and other companies, to Beijing starting as early as July.
Any ban on China-bound exports would both clip a significant amount of sales from both Nvidia and AMD, but also leave each company, as well as their U.S.-based peers, open to retaliation from Beijing as it continues to challenge Washington’s efforts to influence its trade and economic policies.
Nvidia shares were marked 4.6% lower in pre-market trading to indicate an opening bell price of $399.63 each while AMD shares slumped 3.5% to $106.57.
4. — JPMorgan Edges Lowers As Banks Brace for Stern Fed Stress Test Results
JPMorgan (JPM) – Get Free Report shares edged lower in pre-market trading, with most major lenders mixed, ahead of results from the Federal Reserve’s latest bank stress tests, which are expected after the close of trading.
The annual tests, which gauge a bank’s ability to weather a series of significant, but theoretical, economic events, are used to determine how much extra capital it will need to raise to protect depositors and how much it can return to shareholders in the form of dividends and buybacks.
A total of 23 lenders will be tested, down from the 34 that went through the scenario last year, after the Fed altered rules that will see smaller banks, with assets between $100 billion and $250 billion, tested ever other year. Reports suggest the Fed will apply sterner tests to bank capital levels, including a hypothetical unemployment rate of around 10% and an 8.75% decline in U.S. GDP.
Banks won’t immediately update investors on those plans, however, as the Fed prefers to release results in aggregate, with banks following up on an individual basis in the days that follow.
JPMorgan shares were marked 0.01% lower in pre-market trading to indicate an opening bell price of $139.09 each.
5. — Micron Technology Earnings On Deck With AI Demand In Focus
Analysts expect Micron to post an adjusted loss of $1.58 per share, swinging from a profit of $2.59 per share over the same period last year, as the impact of its “security review” by China’s Cyberspace Administration, put in place as retribution for the Biden administration’s ban on the export of high-tech equipment and chips, hammers both its top and bottom lines.
Group revenues are forecast to fall 58% from last year to $3.66 billion, with the company itself issuing a May quarter range of between $3.5 billion and $3.9 billion.
Micron said it expects AI-chip demand is also expected to be a “secular driver” of near-term growth, and the group unveiled plans to invest around $3.7 billion, alongside significant government assistance, to make make next-generation memory chips in Japan earlier this month.
Micron shares were marked 1.53% lower in pre-market trading to indicate an opening bell price of $65.77 each.