OPENING CALL
Stock futures drifted lower and bond yields rose on Wednesday as investors eyed minutes from the Federal Reserve's May meeting and higher-than-expected U.K. inflation reminded the market of stubborn price pressures in developed economies.
Investors also awaited Nvidia's quarterly earnings report, due after the closing bell. Its shares, which closed at a record high on Tuesday, edged lower in premarket trading.
The FOMC minutes will be released at 2 p.m. Eastern, with investors keen to scan the deliberations for any fresh insight into the central bank's likely rate-cut trajectory.
Recent comments from Fed officials suggest the majority are wanting to wait a while longer to see if inflation resumes its downward path before trimming borrowing cost from their 23-year high.
Markets are pricing in a 98.4% probability that the Fed will leave interest rates unchanged at a range of 5.25% to 5.50% after its next meeting on June 12th, and an 80.4% chance of also standing pat in July, according to the CME FedWatch tool.
The chances of at least a 25 basis point rate cut by the subsequent meeting in September is priced at 60.1%. The central bank is expected to take its Fed funds rate target back down to around 5% by December 2024, according to 30-day Fed Funds futures.
Premarket Movers
Urban Outfitters reported fiscal first-quarter earnings that beat analysts' estimates. The stock gained 8.5%.
ViaSat said it expects revenue in fiscal 2025 to be roughly flat year over year, excluding a one-time benefit from a litigation settlement, while analysts expected revenue to increase about 7%. Shares fell 11%.
Postmarket Movers
Rezolute said its study of a potential treatment for diabetic macular edema met its primary endpoints of change in macular edema and a good safety profile. Shares rose 47%.
United Natural Foods said it had extended a distribution partnership with Amazon-owned Whole Foods Market to May 2032. The deal was previously set to expire in September 2027. Shares rose 5.4%.
Watch For:
Existing Home Sales for April; EIA Weekly Petroleum Status Report; FOMC Meeting Minutes; Nvidia, Target earnings
Today's Headlines/Must Reads:
- Some Corporations Seek to Silence 'Trojan Horse' Activists
- Gold's Latest Allure? It's Sanctions-Proof
- Risky Bonds Join the Everything Rally
MARKET WRAPS
Forex:
Sterling hit two-month highs against the dollar and euro after headline inflation in the U.K. fell less than expected.
The data was "good news for the pound" as it likely rules out a rate cut by the Bank of England in June, particularly as services inflation remains elevated, Vantage said.
"That [services inflation] is still very much too elevated for some Monetary Policy Committee officials to vote for a rate cut in June," Vantage said.
Bonds:
The bond market reaction to an anticipated interest-rate cut by the European Central Bank in June is expected to be muted, Neuberger Berman said.
"We don't expect any government bond reaction in any country as the market already discounted few months ago such a cut."
The market should instead focus on the ECB analysis regarding first-quarter wage increase for the eurozone, as ECB members have identified this as their key criteria for inflation evolution, Neuberger Berman said.
Energy:
Oil prices fell more than 1% on signs of market weakness, Federal Reserve rate cut fears and easing geopolitical tensions.
Refinery margins in the U.S. have fallen sharply and gasoline demand in the country is seasonally tracking at its lowest level since 2020, ANZ Research said.
The fall in prices also follows the latest U.S. crude oil inventories data, which showed stockpiles rose 2.5 million barrels in the week ended May 17, surprising the market.
At the same time, cautious statements from Fed officials have lowered hopes for interest-rate cuts this week, prompting market concern that high rates for longer will weigh on demand.
Metals:
Metal prices were weaker across the board, retreating after record highs earlier this week, as traders take profit, SP Angel said..
TODAY'S TOP HEADLINES
Citigroup Fined by U.K. Watchdogs Over $1.4 Billion Trading Error
A Citigroup subsidiary was fined 61.6 million pounds ($78.3 million) by two U.K. regulators after failings in the group's systems and controls led to $1.4 billion of equities being sold in error.
The Financial Conduct Authority said an error by a trader at Citigroup Global Markets lead to a $444 billion basket of equities, instead of $58 million. The U.S. banking group's controls blocked part of the basket, but $189 billion was wrongfully sent to a trading algorithm, which placed parts of the order over the course of the day.
Hedge funds cut stakes in Magnificent Seven to invest in broader AI boom
Hedge funds started cutting their stakes in the Magnificent Seven in the first quarter of 2024 and investing in broader artificial intelligence stocks instead, a new Goldman Sachs analysis shows.
Money managers trimmed their positions in mega-cap stocks as they piled into power and infrastructure companies that could benefit from an AI boom, the analysis of 707 hedge funds with $2.7 trillion in equity positions shows.
Japan's 10-Year Government Bond Yield Hits 1%, An 11-Year High
Japan's 10-year government bond yield climbed to 1% for the first time in 11 years, propelled by growing expectations that the country's central bank may take further tightening steps in the coming months.
The 10-year yield briefly touched the psychological threshold of 1.0%, its highest level since May 2013.
U.S. Says Historic Israel-Saudi Normalization Deal Within Reach but Israel Might Balk
WASHINGTON-Biden administration officials said Tuesday that a U.S.-brokered deal to normalize relations between Israel and Saudi Arabia was within reach, but that Prime Minister Benjamin Netanyahu's government might balk at the historic agreement rather than accept Riyadh's demands for a new commitment to a Palestinian state and a halt to the Gaza war.
"The Saudis have been clear that [normalization] would require calm in Gaza and it would require a credible pathway to a Palestinian state," Secretary of State Antony Blinken told the Senate Foreign Relations Committee Tuesday. "It may well be that in this moment Israel isn't able or willing to proceed down that pathway."
Foreign Purchase of U.S. Ammo Maker Sparks National-Security Battle
The potential sale of an American ammunition maker to a Czech arms company is drawing scrutiny from some lawmakers, highlighting concern about foreign ownership in a key industry in the midst of global arms shortages sparked by the continuing wars in Ukraine and Gaza.
Minnesota-based Vista Outdoor announced in October that it had agreed to a $1.91 billion sale of its firearms business-which includes ammunition brands such as Remington-to the Czechoslovak Group, or CSG, based in Prague, a major supplier of munitions and military equipment to Ukraine.
Chinese Business Group Warns of Tariff Increases on Car Imports in Response to U.S., EU Moves
A Chinese business group warned of possible tariff increases on car imports in retaliation for moves taken by the U.S. and European Union on Chinese electric vehicles, as trade tensions escalate between China and the West.
The Brussels-based China Chamber of Commerce to the EU said in a statement Tuesday that it had been informed by insiders that Beijing is considering temporary extra tariffs on imported cars equipped with large-displacement engines.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Computer Modelling 4Q
Heroux-Devtek 4Q
Economic Calendar:
Nothing scheduled
Stocks to Watch:
Bell Canada Offering C$1.5B of Debentures in Two Series; Offering C$400M of 5.60% Debentures Maturing August 2053; Offering C$1.1B of 5.15% Debentures Maturing August 2034; to Use Net Proceeds From Offering to Repay Debenture Debt Maturing in 1Q 2025, for General Purposes; Offering the Debentures in Canada; Expects Offering to Close May 24
Bombardier Announces Conditional Notices of Partial Redemption for $338M of Its 7.125% Senior Notes Due 2026; Announces Conditional Notices of Partial Redemption for $450M of Its 7.875% Senior Notes Due 2027
Solaris Resources Announces C$35M Common Share Bought Deal Offering
Expected Major Events for Wednesday
05:00/JPN: Apr Steel Production
06:00/UK: Apr Public sector finances
06:00/UK: Apr UK producer prices
06:00/UK: Apr CPI
08:30/UK: Mar UK House Price Index
11:00/US: 05/17 MBA Weekly Mortgage Applications Survey
14:00/US: Apr Existing Home Sales
14:00/US: 1Q Advance Quarterly Services
14:30/US: 05/17 EIA Weekly Petroleum Status Report
23:30/JPN: Mar Final Labour Survey - Earnings, Employment & Hours Worked
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Wednesday
Analog Devices $(ADI)$ is expected to report $0.45 for 2Q.
AquaBounty Technologies Inc $(AQB)$ is expected to report for 1Q.
Arena Group Holdings Inc $(AREN.AU)$ is expected to report for 1Q.
Athira Pharma Inc $(ATHA)$ is expected to report $-0.79 for 1Q.
Aurora Cannabis Inc (ACB,ACB.T) is expected to report for 4Q.
Bird Global Inc (BRDSQ) is expected to report for 1Q.
Brady Corp $(BRC)$ is expected to report $1.01 for 3Q.
Bright Green Corp $(BGXX)$ is expected to report for 1Q.
CURO Group Holdings Corp (CUROQ) is expected to report $0.64 for 1Q.
Cidara Therapeutics Inc $(CDTX)$ is expected to report for 1Q.
Cullinan Therapeutics Inc (CGEM) is expected to report $-0.94 for 1Q.
Dorian LPG Ltd (LPG) is expected to report $1.87 for 4Q.
Dycom Industries Inc $(DY)$ is expected to report $1.47 for 1Q.
Express Inc (EXPRQ) is expected to report for 1Q.
Heroux-Devtek Inc (HRX.T) is expected to report $0.33 for 4Q.
Hovnanian Enterprises Inc $(HOV)$ is expected to report $-1.25 for 2Q.
Kineta Inc $(KA)$ is expected to report for 1Q.
(MORE TO FOLLOW) Dow Jones Newswires
May 22, 2024 06:09 ET (10:09 GMT)
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