Five things you need to know before the market opens on Thursday June 22:
1. — Stock Futures Lower As Central Bank Hawks Tighten Grip
U.S. equity futures slipped lower Thursday, while global stocks traded firmly in the red in major markets around the world, as investors looked to re-set interest rate expectations amid hawkish central bank rhetoric and a series of inflation-fueled policy changes.
The Bank of England will make a key interest rate decision later this morning in London, with markets effectively locking-in at least a quarter point hike in the Bank Rate, which sits at 4.5%, with a 40% chance of a 50 basis point increase following red-hot May inflation data published earlier this week.
Switzerland’s Swiss National Bank also unveiled a 25 basis point rate hike, citing “persisting second-round effects in many domestic goods and services” while Norway’s Norges Bank lifted its key policy rate by 50 basis points to a a 15-year high of 3.75%.
The moves followed a hawkish series of comments from Federal Reserve Chairman Jerome Powell yesterday to the House Financial Services Committee on Capitol Hill, where he told lawmakers that there is still a “long way to go” to bring inflation back to the central bank’s 2% target, noting that two more rate hikes this year would be a “pretty good guess” in terms of policy direction.
Markets are only betting on one more hike — in July — and see the economy sliding into recession over the second half of the year, as the gap between 2-year and 10-year note yields widens to around 99 basis points, a steepening that typically amplifies investors’ recession concerns.
The twin conditions of rising rates and weakening growth prospects has stocks on the back foot this week, with data from S3 Partners indicating short-sellers have more than $1 trillion in wagers against the S&P 500, the most since April of last year.
Curiously, the market’s key volatility gauge, the VIX index, continues to retreat, touching the lowest levels since the pandemic in overnight trading and last seen marked at 13.85, a level that suggests investors see daily moves of around 0.86%, or 37 points, for the S&P 500 over the coming month.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating a 10 point opening bell decline and those linked to the Dow Jones Industrial Average priced for only a 68 point move to the downside. The tech-focused Nasdaq was looking at a 45 point decline.
Stocks in Asia were also lower on the session, with Japan’s Nikkei 225 falling 0.92% on the session and the region-wide MSCI ex-Japan benchmark losing 0.28%.
In Europe, London’s FTSE 100 fell 0.77% as the pound jumped to 1.2775 against the greenback ahead of today’s Bank of England rate decision, while the region-wide Stoxx 600 fell 0.92% to a three-month low in early Frankurt trading.
2. — Jobs Data In Focus As Powell Points To More Rate Hikes
The Commerce Department will publish its regular update on weekly jobless claims Thursday as investors look deeper into the labor market in order to gauge the Fed’s commitment to near-term rate hikes.
With Fed Chairman Jerome Powell repeating his view yesterday that policymakers will be focused on incoming data over the coming weeks before deciding whether to resume the central bank’s rate hiking cycle, investors are likely to study each major economic release for clues as to the Fed’s next move.
Economists expect another 260,000 people to file for new weekly unemployment benefits over the period ending on June 17, a tally that is largely unchanged from the prior tally of 262,000.
Still, jobless claims have yet to reflect the surge in layoffs reported by Challenger Gray, which indicate 417,500 positions lost so far this year, more than triple the first half tally of 2022, and slowing wage growth in monthly employment reports has neutralized a key Fed concern heading into the summer months.
The CME Group’s FedWatch tool now suggests a 74.4% chance of a quarter point rate hike from the Fed in July, but sees a 50/50 chance it will reverse course and lower rates between now and the end of the year.
3. — KB Home Sees Improving Demand As Housing Market Finds Feet
KB Home (KBH) – Get Free Report shares edged lower in pre-market trading after the homebulider forecast improved buyer demand over the coming months following better-than-expected second quarter earnings.
Following on from upbeat forecasts from its larger rival Lennar LEN, KB Home said “the improvement in demand we started to see in February was sustained throughout our second quarter” as it posted revenues of $1.77 billion for the three months ending in May, with earnings of $1.94 per share.
Looking into the back half of the year, KB Home said revenues would likely rise to between $5.8 billion and $6.2 billion, topping Refintiv forecasts, as mortgage rates ease and house prices decline amid a dearth of new properties on the market.
KB Home shares were marked 0.3% lower in pre-market trading to indicate a Tuesday opening bell price of $51.87 each.
4. — Nvidia Slips As Another Board Insider Sells Shares
Mark Stevens, a Nvidia board member since 2008, dumped $51 million worth of stock over the past week, according to Securities and Exchange Commission filings on Wednesday, Board colleagues Tench Coxe and Harvey Jones have also sold shares in the group, unloading $59 million and $72 million respectively over the month of June.
Nivida shares hit an all-time high of $439.90 on Tuesday, valuing the chipmaker at more than $1.06 trillion, following its blowout second quarter earnings that included a massive lift in revenues forecasts powered by demand for its AI-focused chips.
Nvidia shares were marked 0.7% lower in pre-market trading to indicate an opening bell price of $427.60 each.
5. — Bitcoin Tops $30,000 on BlackRock ETF Hopes
Bitcoin prices topped $30,000 in overnight trading, the highest in more than two months, amid hopes that a move by BlackRock (BLK) – Get Free Report to create a bitcoin ETF will drive further gains for the world’s biggest cryptocurrency.
BlackRock, the world’s biggest asset manager, filed papers with the Securities and Exchange Commission last week to develop the bitcoin ETF, which will use Coinbase Custody as its official custodian. If approved, the ETF would allow investors to track bitcoin without purchasing the underlying asset itself.
However, the SEC has previously rejected spot bitcoin ETF applications from Grayscale, CBOE Global Markets and Fidelity, suggesting the BlackRock application faces an uphill battle for approval.
Bitcoin prices were last seen marked 0.18% higher on the session and changing hands at $30,125.67 each.