MARKET WRAPS
Watch For:
PPI for May; Fed interest-rate decision, economic projection; EIA Weekly Petroleum Status Report; Lennar earnings
Today's Headlines/Must Reads
- Stock Market to Fed: You Haven't Done Enough
- American Investment Banks Are Giving Up Some China IPO Mandates
- Oil Demand to Peak This Decade as EVs Boom, IEA Says
- Shell Courts Investors, Not Activists With New Strategy
Follow WSJ markets coverage here .
Opening Call:
Stock futures were firmer on Wednesday as traders awaited confirmation the Federal Reserve's rate-hiking campaign was on hold.
Markets see a 90% probability that the Fed will leave interest rates unchanged at a range of 5% to 5.25%--the opportunity to pause its hiking cycle provided by Tuesday's news that consumer price inflation last month hit a two-year low of 4%.
Consequently, it is the text of the Fed's accompanying statement and Jerome Powell's subsequent comments that are more likely to drive trading later in the session.
That could pose a problem for stocks given their recent surge to fresh 52 week highs leaves them potentially vulnerable to disappointment.
The S&P 500's relative strength index closed on Tuesday at 72, and the RSI of the Nasdaq 100 was 75, both above the 70 threshold that marks overbought territory. Furthermore, the CBOE VIX index was trading around 14.6, close to recent three-year lows.
Such signs of investor optimism may clash with the market's recent poor record around Fed announcements, noted Bespoke Investment Group.
"U.S. equities have really struggled on Fed days recently. In fact, the S&P has averaged a one-day decline of more than 1% across the last six Fed days, and...those declines have primarily come in the final hour of trading following Powell's press conferences," Bespoke said.
Even normally bullish analysts were alert to the possibility of stocks dipping in the short term, particularly if Powell was seen stressing that a rate-hike pause did not necessarily mean borrowing costs had peaked for this cycle.
"There is a risk this is a 'hawkish' pause as the Fed could be troubled by the 15% rally in equities year to date. This is a possibility," Fundstrat said.
However, it added that if there was say a 5% pull back in stocks he would "absolutely" be a buyer, noting that many fund managers remain underweight equities according to a recent Bank of America survey.
Global stock markets were mixed. Hong Kong's Hang Seng fell 0.5% and Japan's Nikkei 225 advanced 1.5%. In Europe, the Stoxx Europe 600 added 0.4%.
Stocks on the Move
Advanced Micro Devices unveiled its new AI chip on Tuesday and the CEO said customers will begin sampling the technology in the third quarter, with production ramping up in the fourth quarter. AMD shares fell 3.6% on Tuesday but were rising 1.6% in premarket trading.
Logitech International said its President and CEO will be resigning to "pursue another opportunity." Its shares fell 9.2% in premarket trading.
Tesla closed higher for a 13th consecutive session on Tuesday and was poised to make it 14 straight with its shares rising 2.2% in premarket trading.
Forex:
The dollar was flat ahead of the Fed decision, with UBS saying Tuesday's inflation data wasn't soft enough to allow the central bank to call a final end to tightening.
MUFG said the Fed looks set to pause interest-rate rises but could deliver a hawkish communication and raise its so-called dot plot rate guidance, strengthening the dollar. However, any gains are unlikely to be sustained.
"In the end, a pause is a pause and will likely be viewed ultimately as that rather than a 'skip' given the incoming data is likely to continue to warrant an end to this tightening cycle."
The Fed will probably "pause for good," although Jerome Powell may try to convince the market otherwise, MUFG said.
"Ultimately, it will mark an important point in prompting dollar weakness."
Read Fed Seen Staying on Hold for Remainder of 2023, Says UniCredit Research
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Sterling was little changed after data showed the U.K. economy returned to growth in April, as expected, but the figures are positive for the currency, Ebury said.
"The likelihood of a recession continues to fade which should give the pound a boost," Ebury said.
The GDP print follows data on Tuesday showing higher-than-expected wage growth in the three months to April, fuelling expectations the Bank of England will raise interest rates at the June 22 meeting and take the peak rate well above 5% from 4.5% currently.
Read UK GDP Rise Adds to Wage Data to Make BOE Hike Inevitable
Energy:
Oil futures were little changed in Europe as investors awaited the latest Fed rate decision, with the central bank "caught between a rock and a hard place" regarding inflation, said Commodity Research Group.
Metals:
Metal prices were mixed with investors expecting a pause in Fed interest-rate hikes.
"Market pricing is currently pointing towards just one more rate hike in July, so any indication there'll be more (or less) than that could lead to a big reaction," Deutsche Bank said.
TODAY'S TOP HEADLINES
Tesla again raises starting price of Model Y by $250 in U.S.
Tesla Inc. raised U.S. prices for its Model Y crossover by $250 on Tuesday.
The starting price for a Model Y is now $47,740, according to Tesla's website. Prices for the "long-range" and "performance" versions remained the same.
Stock Market to Fed: You Haven't Done Enough
Federal Reserve officials plan to take a break from raising interest rates Wednesday because they think monetary policy is already plenty tight.
To which the markets say: no, it ain't.
Eurozone Industrial Production Improved More Than Expected in April
Industrial output in the eurozone was better than expected in April, improving from a steep decline in March, providing a respite from a gloomy outlook of the bloc's manufacturing economy.
Industrial production-which comprises output from manufacturing, mining and utilities-rose 1.0% in April compared with the previous month, swinging from an upwardly revised 3.8% slump in March, according to data from the European Union statistics agency Eurostat released Wednesday.
UK Economy Rebounded in April on Service-Sector Boost - Update
The U.K. economy grew in April, boosted by an improved services sector, though resilient high inflation and Bank of England interest-rate rises could put a lid on an uplift through the rest of the year.
The country's gross domestic product grew 0.2% on month in April, rebounding from a decline of 0.3% in March, data from the Office for National Statistics showed Wednesday.
Donald Trump Pleads Not Guilty in Documents Case, Denounces Prosecutors
MIAMI-Donald Trump pleaded not guilty to charges that he illegally retained and shared classified documents, and hours after he was arraigned he denounced prosecutors for lodging the criminal case against him.
"Today we witnessed the most evil and heinous abuse of power in the history of our country," Trump said Tuesday night at his golf club in Bedminster, N.J.
McCarthy Restarts House Votes as Dissidents Press for Spending Cuts
WASHINGTON-Speaker Kevin McCarthy (R., Calif.) restarted votes on the House floor Tuesday following a week of paralysis, after working to win over dissident Republicans upset about the recent debt-ceiling deal.
The disputes between the dissidents and McCarthy are unresolved, and talks are continuing. However, the holdouts signaled they would let Republican leaders move forward with votes this week. In an effort to assuage them, McCarthy has pledged to back efforts to pursue lower spending levels than in the recent debt-ceiling deal, drawing immediate opposition from Democrats.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Blackline Safety 2Q
Flow Beverage 2Q
HEXO 3Q
Economic Calendar (ET):
0830 Apr New motor vehicle sales
Expected Major Events for Wednesday
06:00/UK: Apr Index of Production
06:00/UK: Apr UK trade
06:00/UK: Apr Index of services
06:00/UK: Apr Monthly GDP estimates
06:00/GER: May WPI
08:00/FRA: Jun IEA Oil Market Report
08:30/UK: 1Q Business Finance Review
10:00/FRA: 1Q OECD Quarterly National Accounts G20 GDP growth
11:00/US: 06/09 MBA Weekly Mortgage Applications Survey
11:30/UK: May NIESR Monthly GDP Tracker
12:30/CAN: Apr New motor vehicle sales
12:30/US: May PPI
14:30/US: 06/09 EIA Weekly Petroleum Status Report
18:00/US: Federal Reserve economic projections
18:00/US: U.S. interest rate decision
23:50/JPN: Apr Orders Received for Machinery
23:50/JPN: May Provisional Trade Statistics for the Month
All times in GMT. Powered by Onclusive and Dow Jones.
Expected Earnings for Wednesday
Aceragen Inc (ACGN) is expected to report for 1Q.
Advaxis Inc (ADXS) is expected to report for 2Q.
Andrew Peller (ADW.A.T,ADW.B.T) is expected to report for 4Q.
Anterix Inc (ATEX) is expected to report for 4Q.
Aurora Cannabis Inc (ACB,ACB.T) is expected to report for 3Q.
Bengal Energy is expected to report for 4Q.
BeyondSpring Inc (BYSI) is expected to report $-0.67 for 1Q.
Charles Schwab (SCHW) is expected to report.
Clearday Inc (CLRD) is expected to report for 1Q.
Coda Octopus Group Inc (CODA) is expected to report for 2Q.
Crown Crafts (CRWS) is expected to report for 4Q.
Daktronics (DAKT) is expected to report $0.14 for 4Q.
Encision (ECIA) is expected to report for 4Q.
Ideanomics Inc (IDEX) is expected to report for 1Q.
IronNet Inc (IRNT) is expected to report for 1Q.
Lennar Corp - A Share (LEN,LENB) is expected to report $2.31 for 2Q.
Niko Resources (NKO-T,NKRSF) is expected to report for 4Q.
Progressive Corp (PGR) is expected to report.
RF Industries (RFIL) is expected to report $-0.05 for 2Q.
Royale Energy (ROYL) is expected to report for 1Q.
Silver Bull Resources is expected to report for 2Q.
(MORE TO FOLLOW) Dow Jones Newswires
06-14-23 0609ET
