Stocks Lower, Inflation Data On Deck, SVB Lawsuit, Alibaba, Biden

Five things you need to know before the market opens on Monday July 10:

1. — Stocks Edge Lower, Treasury Yields Hold Gains With Inflation In Focus

U.S. equity futures edged lower Monday, while Treasury yields held onto their recent gains, as investors looked to a key week of data and bank earnings following the weakest five-day session on Wall Street in nearly three months. 

Friday’s mixed jobs report, which showed the slowest pace of new hires since December of 2020 paired with another tick higher in average hourly earnings, failed to consolidate previous Treasury bond moves that followed the blowout ADP employment report but was firm enough to keep bets on a July rate hike from the Federal Reserve firmly in place.

June inflation data, due later this week, could pressure the Fed’s forecast of “two or more” rate hikes between now and the end of the year, while bank earnings will kick-off the second quarter reporting season amid a host of concerns over the fate of the broader economy heading into the second half of the year. 

Bets on a follow-on hike in November are pegged at around 36%, according to the CME Group’s FedWatch.

Stocks are also facing the added headwind of last week’s surge in Treasury bond yields, which lifted 10-year notes firmly past the 4% mark and took 2-year paper to the highest levels since 2007.

Benchmark 10-year notes were trading at 4.072% in overnight trading, with 2-year notes at 4.921%, while the U.S. dollar index edged 0.11% higher against a basket of its global peers to 102.376.

Overnight data from China show producer prices in the world’s biggest exporter falling by 5.4% over the month of June, the biggest decline in early 8 years, while consumer prices were largely flat, indicating further post-Covid weakness heading into the summer months.

Oil prices were softer as a result, with WTI futures for August delivery, which are tightly correlated to U.S. gasoline prices, falling 55 cents to $73.31 per barrel in European trading.

Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 were indicating a 10 point opening bell decline while those linked to the Dow Jones Industrial Average were priced for a 20 point pullback. Nasdaq futures were down 63 points.

In overnight trading, the MSCI ex-Japan index fell 0.05% into the close of trading while Japan’s Nikkei 225 ended the session down 0.61% at 32,3189.73points.

The Europe-wide Stoxx 600 was marked 0.08% higher in early Frankfurt trading while Britain’s FTSE 100 gained 0.13% in London.

2. — Week Ahead: June CPI Data, JPMorgan Earnings Highlight

The Commerce Department’s June inflation report, expected before the market opens on Wednesday, will likely provide the week’s key data reading as investors look to the unofficial start of the second quarter earnings season Friday.

Economists expect a notable decline in consumer price pressures, with headline inflation slowing to just 3.1% over the month of June while core prices edge lower, to 5%, thanks in part to an easing in rents and used car prices. 

Producer price inflation figures are also set to follow on Thursday.

JPMorgan  (JPM) – Get Free Report lead a trio of big bank earnings before the market opens on Friday as the second quarter earnings season gets underway, supported in part by figures from UnitedHealth UNH.

Analysts expect collective S&P 500 profits for the three months ending in June to fall 6.4% from last year to around $4363.9 billion, lead to the downside by a 45.5% decline in earnings from the energy sector. Profits from financials, including JPMorgan, Wells Fargo  (WFC) – Get Free Report and Citigroup  (C) – Get Free Report — all reporting Friday — are expected to rise 5.4% from the previous quarter to $79.2 billion..

3. — SVB Financial Sues FDIC Over $1.9 Billion Deposit Seizure

SVB Financial Group, the parent of the failed lender Silicon Valley Bank, has sued the U.S. Federal Deposit Insurance Corp. to recover nearly $2 billion in deposits . 

In a filing linked to its Chapter 11 bankruptcy proceedings in the Southern District of New York, SVB Financial said the FDIC has not identified specific claims against the group to justify the seizure of $1.93 billion in deposits during the agency’s takeover of Silicon Valley Bank in early March. 

SVB says the cash should be earning interest for the group, which recently won court permission to sell its investment banking for around $100 million to an investment group lead by Jeff Leerink, and it impeding its broader restructuring plans.

irst Citizens BancShares  (FCNCA) – Get Free Report agreed to buy Silicon Valley Bank in late March, assuming around $56 billion in deposits while taking on the tech-startup lender’s $72 billion loan book at a discount of around $165 billion.

The group said it would also receive an additional line of credit from the FDIC for what it called “contingent liquidity purposes.”

4. — Alibaba Edges Lower As Group Mulls Ant Financial Buyback Offer

Alibaba Group Holding’s  (BABAF) – Get Free Report U.S.-listed shares edged lower in pre-market trading after the China-based e-commerce giant said it may sell back some if its shares in Ant Financial at a steep discount.

Ant Financial, which was spun from Alibaba around 12 years ago, agreed to pay a $984 billion dollar fine to authorities in China on Friday as part of a broader settlement linked to Beijing’s crackdown on the tech sector. The group then unveiled plans to buy back around $6 billion in shares at a prices that values the fintech company at a 75% discount to its prior valuation – just prior to the scraping of its 2020 IPO. 

Alibaba, which owns a 33% stake in Ant Financial, said in a filing with the Hong Kong stock exchange that it was “considering” participation in the buyback. 

Last month, Alibaba Chairman and CEO Daniel Zhang would step down from his dual role to focus on the group’s cloud division after it unveiled plans to split each of its six divisions into a separate company, with plans to pursue individual IPOs.

Alibaba shares were marked 1% lower in pre-market trading to indicate an opening bell price of $89.67 each.

5. — President Biden To Meet Prime Minister, King Charles, In U.K. Visit

President Joe Biden will meet U.K. Prime Minister Rishi Sunak this morning in London, before taking an audience with King Charles later in the day at Windsor Castle, ahead of a two-day NATO summit that begins tomorrow in Lithuania.

President Biden is expected to discuss the Northern Ireland peace protests, the impacts of Brexit and Britain’s climate change efforts as well as the broader Ukraine war during their Monday meeting at 10 Downing Street as the two nations prepare for the NATO summit in Vilnius.

The President’s visit, as well as the debate over whether Ukraine should be allowed to join the NATO alliance, comes just days after President Biden approved the delivery of controversial cluster munitions to Ukraine, despite their being banned by around 100 different countries around the world, including the United Kingdom.

“I think you find Prime Minister Sunak and President Biden on the same page strategically on Ukraine, in lock step on the bigger picture on what we are trying to accomplish, and as united as ever,” White House National Security Adviser Jake Sullivan told reporters Sunday.

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