OPENING CALL
Stock futures were holding near record levels on Wednesday as investors awaited inflation data that may impact the Federal Reserve's policy trajectory.
"All eyes are on the CPI update. Both headline and core inflation are expected to have moderated last month," Swissquote Bank said.
Risk assets such as stocks and credit are likely to rally if the data shows inflation is slowing, it added.
Overseas Markets
Mainland China's stocks edged lower after the Biden administration raised tariffs on Chinese electric vehicles, among others products.
Some Asian markets were closed for a holiday, including Hong Kong and South Korea.
Premarket Movers
Boeing declined 1.5% after the Justice Department said the company violated the terms of a settlement reached three years ago over its employees' role in two fatal 737 MAX jet crashes that occurred within five months of one another.
DLocal was falling 26% after first-quarter earnings and revenue missed analysts' expectations.
GameStop was rising 24% in premarket trading. It closed 60% higher on Tuesday and 74% on Monday. AMC Entertainment and Plug Power also rallied ahead of the opening bell.
Nextracker's revenue rose 42%, to $737 million, in the fourth quarter, topping forecasts. The company said it saw strong demand for its solar tracker and software solutions in the U.S. and internationally, reaching a backlog of $4 billion during the fiscal year. Shares were rising 11% premarket.
Post Close Movers
Boot Barn said it expected fiscal 2025 sales of $1.77 billion to $1.8 billion, below analysts' forecasts of $1.82 billion. The company also said it sees same-store-sales falling around 1.6% to 3.6%, wider than estimates. Shares fell 5.6%.
Prestige Consumer Healthcare said it expected revenue growth in the current fiscal year to be weighed down by supply-chain issues. The company's revenue and per-share earnings guidance both fell short of analysts' expectations. Shares fell 7.5%.
VirTra posted lower revenue and profit in the first quarter after delays to federal funding. The company said that the government's continuing resolution caused multiple contracts to be placed on hold. Shares fell 22%.
Watch For:
CPI for April; Retail Sales for April; EIA Weekly Petroleum Status Report; Canada Housing Starts for April; Earnings from Cisco Systems, Dynatrace, Grab Holdings, and Monday.com
Today's Top Headlines/Must Reads:
- U.S. Billionaire Frank McCourt Organizes Bid to Acquire TikTok
- Retail Sales Data Are Yet Another Test for the Consumer
- IEA Lowers 2024 Oil-Demand Growth Forecast on Slow Start of the Year
MARKET WRAPS
Forex:
Investors await the CPI data, following a higher-than-expected producer price print on Tuesday, which could well move EUR/USD after the recent jump above 1.08.
The 'diverging U.S./eurozone inflation' narrative and the widening gap between the Fed and ECB policy doesn't support the positive breakout above the 1.08 level, Swissquote Bank said.
"Hence, the recent gains in the EUR/USD are vulnerable to an 'emperor is naked' moment, if investors realize that the latest rise in the U.S. inflation may not be a blip."
Brown Brothers Harriman said the big issue for the inflation outlook is if producers manage to pass rising costs on to consumers.
"Anecdotal evidence from the April Fed Beige book showed that firms' ability to pass cost increases on to consumers had weakened considerably in recent months."
The dollar traded on the defensive ahead of the CPI data and BBH is of the view that the April PPI report doesn't justify sustained dollar weakness.
Uncertainty over the dollar outlook has risen, especially in view of the reduced visibility on the Fed front, MFS Investment Management said.
The USD does appear to be tactically overvalued, but the macro signals for a downward correction are a bit weaker than a few months ago, it said.
MFS IM views the U.S. election risk as a major consideration, especially given the significant uncertainty surrounding the future policy agenda.
Bonds:
The elevated starting yields prevalent across much of the bond market bode well for capital appreciation, Pimco said. It favors intermediate maturities.
"That said, as the outlook and scope of inflation, growth, and central bank policy diverge among countries, sovereign bond performance may be likely to diverge as well."
Desynchronization in central bank trajectories between the U.S. and other major developed economies creates prospects for diversifying bond allocation and seeking attractive returns, Pimco added.
Energy:
Oil prices edged higher on reports of a larger-than-expected draw in U.S. crude inventories, but remained broadly under pressure on prospects of higher-for-longer rates due to sticky inflation.
"The lack of progress on bringing down inflation continues to lower expectations of a rate cut in the near term," ANZ Research said.
Metals:
Gold futures rose as investors turned their attention to the crucial CPI data due later.
Gold has found support elsewhere in haven demand, especially amid geopolitical tensions in the Middle East, but as these ease it is left vulnerable to pressure from rate expectations, XS.com said.
TODAY'S TOP HEADLINES
Tesla Hits the Road to Persuade Shareholders to Pay Elon Musk $46 Billion
Tesla shareholders have a decision to make in the next month about Elon Musk.
On June 13, they are set to vote on whether to reinstate stock options currently valued at $46 billion to Musk, the carmaker's CEO and one of the world's richest people, after a judge struck down the award in January.
BYD Debuts First Pickup Truck in Mexico
Chinese automaker BYD has launched its first pickup truck, debuting a luxury plug-in hybrid in Mexico to compete with global rivals in China's second-largest market for auto exports.
Warren Buffett-backed BYD, the world's biggest maker of electric vehicles, said Tuesday that it would sell the midsize Shark at prices starting at 899,980 Mexico pesos ($53,407) for its GL model and MXN969,800 for its upscale GS version.
Walmart's Reign as America's Biggest Retailer Is Under Threat
For a decade, Walmart has reigned as the nation's biggest company by revenue. Its sales last year added up to $648 billion-more than $1.2 million a minute.
That status comes with benefits. It gives Walmart power in negotiations with product manufacturers and in dealing with government officials over policy issues. It's also a point of pride: Job postings often tout working at the "Fortune 1" company as a perk.
With America Off-Limits, China EV Makers Aim to Conquer Rest of World
BEIJING-Chinese automakers will focus on global markets outside the U.S. now that the Biden administration has declared America off-limits to made-in-China electric cars.
The 100% tariffs on Chinese EVs announced Tuesday in Washington are more of a symbolic blow than a practical one for Chinese carmakers. They have almost no business in the U.S. and already recognized that the political hurdles to entering the market were insurmountable.
Eurozone Inflation Set to Ease More Rapidly, EU Says
The eurozone's annual rate of inflation is set to fall faster than previously expected as economic growth remains anemic, and hit the European Central Bank's target earlier in 2025, the European Union forecast.
The 20-member euro area should book average inflation of 2.5% for 2024 and 2.1% in 2025, the European Commission said Wednesday, lower than previous projections set out in February. The new forecasts will likely reassure policymakers at the ECB, who have signaled they are likely to lower their key interest rate when they meet on June 6.
Why the Hybrid Boom Is Funding EVs
Electric vehicle or hybrid? While car buyers debate the technologies' relative merits, manufacturers need to invest in both.
Take Japan's hybrid leaders, Toyota and Honda. Last week they both reported by far their most profitable fiscal years ever. The weak yen played a part: The U.S. is their largest market, while they have a lot of costs in Japan, making them big beneficiaries of a weaker local currency.
Michael Cohen Testifies at Hush-Money Trial: Six Key Moments
Michael Cohen testified about his time as Donald Trump's fixer, telling a jury that his former boss directed a hush-money payment to porn star Stormy Daniels to bury a story about an alleged affair and a coverup of the payment.
Cohen, known for volatility and self-described "colorful" language, was succinct and measured on the stand. He rarely veered off course from questions from the prosecution and largely kept his composure during the cross-examination. He sometimes answered defensively to questions about his credibility. But he responded to both lawyers as "ma'am" or "sir."
Senate Group Recommends Spending Tens of Billions of Dollars on AI
A bipartisan Senate group recommended tens of billions of dollars in new federal spending to guide the safe development of artificial intelligence and keep the U.S. ahead of rivals-particularly China.
The push came in a report made public Wednesday by the AI Working Group, a quartet of lawmakers led by Senate Majority Leader Chuck Schumer (D., N.Y.). The document, billed as a road map for AI policy, includes a long list of recommendations for encouraging AI while also addressing concerns about the technology's potential for harm.
The Lopsided Reality of the Russia-China Relationship
When Russian President Vladimir Putin visits Chinese leader Xi Jinping in Beijing this week, the two leaders will seek to project their customary united front against the U.S.-led global order.
Beneath the surface, however, the relationship isn't one of equals.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings [Q1 Unless Stated]:
Aya Gold & Silver
Bitfarms
Boyd Grp
Chemtrde Lgs Incm
Enthusiast Gaming
Hut 8 4Q
MAG Silver 2Q
Northland Power
Orla Mining
Quipt Home Med 2Q
SNC-Lavalin
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05-15-24 0620ET
