North American Morning Briefing : Stock Futures Hover Ahead of PPI Data

May 14, 2024 at 06:16 am EDT

OPENING CALL

Stock futures were little changed on Tuesday ahead of the release of the producer-price index for April, the first inflation print of the week.

That will be followed by the highly anticipated consumer-price index on Wednesday.

Money managers hope this week's data will show inflation easing, after several months of firmer-than-expected readings, as lingering price pressures have kept the Federal Reserve from beginning to cut interest rates.

Stocks to Watch

Walmart , whose earnings are due Thursday, is cutting hundreds of corporate jobs and asking some staff to relocate.

Premarket Movers

BuzzFeed reported a quarterly loss and an 18% drop in revenue. Shares were falling 7%.

Monday's meme-stock comeback continued. Shares of GameStop rose roughly 40%; AMC rose more than 35%.

Sony was rising 2.2% in U.S. premarket trading after fiscal fourth-quarter earnings rose 34% from a year earlier and revenue jumped 14%.

Post Close Movers

Akoya Biosciences said that first-quarter results fell short of expectations because of pressure on capital expenditures, deferred revenue at a pharmaceutical partner's lab and issues related to completing a manufacturing center. Shares fell 31%.

Augmedix slashed its full-year outlook after reporting a quarterly loss. CEO Manny Krakaris said the company had seen a slowdown in purchasing commitments by providers as customers consider AI offerings. Shares fell 44%.

Harrow backed its full-year guidance for revenue despite results being hit in the recently completed quarter by a cyberattack at Change Healthcare. Shares rose 15%.

Watch For:

PPI for April; Earnings from Home Depot, Alibaba, On Holding, Nextracker, and DLocal; Fedspeak from Jerome Powell

Today's Top Headlines/Must Reads:

- Biden Levies Sweeping Tariffs on China, Intensifying Trade Fight With Trump

- Why the World Has Gone Cuckoo for Copper

- Sky-High Housing Costs Propel Construction of Rental Homes

MARKET WRAPS

Forex:

The dollar was steady, trading within a relatively tight range ahead of the inflation data on Wednesday, which could be a key indicator for the timing of any interest-rate cut and could move the currency in either direction.

"A figure in line, or ideally below expectation, should give a sigh of relief to the Fed doves, let the dollar soften against major peers and help lift appetite in risk assets," Swissquote Bank said.

On the other hand, an above-forecast reading would further dampen rate-cut expectations and "give a boost to the dollar."

Sterling fell after U.K. labor market data showed a rise in the unemployment rate to 4.3% in the three months to March and Bank of England's Huw Pill said a rate cut is possible over the summer.

TickMill Group said traders have focused on these factors but should be wary that the data also showed wage growth remaining very high, at 6% excluding bonuses, while Pill warned about the risk of inflation staying elevated.

"The stickiness in wages at current levels seems to endorse Pill's warnings around persistent inflation meaning that sterling is unlikely to see a steady selloff from here," TickMill said.

Bonds:

U.S. rates are febrile, having moved constantly for over a year now in line with changes in Fed Funds rate expectations and inflation data, Natixis Research said.

"Barring any new surprises [in CPI data] on Wednesday... rates could be entering a phase of relative stability, even if it will probably be temporary, much as experienced between November 2022 and May 2023."

With the prospect of Fed interest rate cuts pushed back in time, logic would dictate that rates should become more rangy and volatility should subside, Natixis said.

Energy:

Oil prices continued to trade in a fairly narrow range ahead of PPI data and Jerome Powell's speech.

A hotter-than-expected inflation print would further dampen expectations that the central bank could cut rates soon, boosting the dollar and weighing on the commodities complex.

Meanwhile, the market awaited further clarity on OPEC+'s next policy move, with many analysts expecting an extension of output cuts.

Iraq's recent comments added to the uncertainties, with the oil minister reportedly saying the country would stick to whatever OPEC decides, after previously indicating that it won't agree to more cuts.

OPEC+ Meeting

OPEC+ is expected to extend output cuts at its June meeting, but recent mixed messages from Russia and Iraq suggest no final decision has been made yet, Goldman Sachs said.

"Based on recent inventory upside surprises and our model estimates, we now expect OPEC+ supply to stay lower for longer," it said.

Yet, "our forecasting model suggests that an extension of cuts is not a done deal."

There is a 53% probability that the cartel and its allies will extend curbs and a 37% probability that they will increase production, according to Goldman's estimates.

Metals:

Base metals and gold prices were broadly flat as investors shifted attention to key U.S. inflation reports due this week.

TODAY'S TOP HEADLINES

Uber to Buy Delivery Hero's Taiwan Business for $950 Million

Uber Technologies will buy Delivery Hero's Foodpanda delivery business in Taiwan for $950 million cash, marking a major expansion for the U.S. company in Asia.

The companies aim to close the deal-one of the largest international acquisitions in Taiwan outside of the semiconductor industry-in the first half of 2025, subject to regulatory approval, they said late Monday.

Sony Group Profit Jumps on Stronger Game, Movie Earnings

Sony Group reported a rise in fourth-quarter net profit thanks to stronger earnings from its game and movie businesses.

The Japanese entertainment and electronics company said Tuesday that net profit rose 34% from a year earlier to 189.005 billion yen ($1.21 billion) for the three months ended March. That beat the estimate of Y149.71 billion in a poll of analysts by data provider FactSet.

Anglo American Plans to Split Up After Rejecting $43 Billion BHP Bid

Anglo American said it plans to unload several assets as part of a turnaround effort after rejecting a sweetened takeover offer from rival BHP that valued the mining company at almost $43 billion.

Anglo said Tuesday that it would spin off its platinum-metals subsidiary Anglo American Platinum, divest or demerge its diamond unit De Beers, sell its steelmaking coal assets and explore options for putting its nickel operation on care and maintenance before divesting it.

Blinken Arrives in Ukraine to Boost Spirits, Funnel U.S. Military Aid

KYIV, Ukraine-Secretary of State Antony Blinken began a two-day visit to Ukraine to buttress the morale of the government in Kyiv and help channel the delivery of $60 billion in newly approved U.S. aid to help resist a grinding Russian offensive.

The question now, though, is whether the aid, which languished for months before Congress approved it in April, is enough to daunt a resurgent Russian military that the U.S. and Blinken himself had derided as all but washed up last year.

Israel's Rafah Offensive Strains 45 Years of Peace With Egypt

In the almost 45 years since their historic peace deal, Israel and Egypt have become essential partners, a close though never warm relationship that underpins both countries' national security. Israel's Rafah offensive is threatening to undo all of that.

Egypt, a center of Arab military, political and cultural power, is now considering a downgrade to its diplomatic ties with Israel, Egyptian officials say. Egypt has in recent days said it would join South Africa's court case charging Israel with genocide. And Egypt has refused to reopen its border with Gaza after Israeli forces seized the Palestinian side of the crossing.

Fighting Flares Across Gaza Amid Push to Revive Israel-Hamas Talks

Battles between Israel and Hamas intensified across the Gaza Strip on Monday, as mediators pushed for a resumption of talks to pause fighting and free hostages held in the enclave.

Write to ina.kreutz@wsj.com

TODAY IN CANADA

Earnings [Q1 Unless Stated]:

Aptose Biosciences

Aris Mining

Ascot Resources

Bird Construction

Calian Grp 2Q

Calibre Mining

Centerra Gold

Dexterra Grp

Dye & Durham 3Q

Element Flt Mgmnt

Fennec Pharma.

Galaxy Digital

Hamilton Thorne

Hudbay Minerals

Hydro One Limited

Keyera

KP Tissue

Mattr

NanoXplore 3Q

OrganiGram Hldgs 2Q

Peyto Exp & Dvlpnt

SilverCrest Metals

Strathcona Resrcs.

Superior Plus

Economic Indicators (ET):

0830 Mar New motor vehicle sales

0830 Mar Wholesale trade

Stocks to Watch:

Ace Beverage Group Closes Acquisition Of Nude Ready-to-Drink Brand; Corby Announces New Independent Director; Corby Spirit & Wine: Pam Laycock Joins Board

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Firm Capital Property 1Q Net C$9.9M; 1Q Rev C$15M

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Global Atomic 1Q EPS C$0.01; 1Q Rev C$271,463

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I-80 Gold 1Q Rev $8.4M; 1Q Loss $15.7M; 1Q Adj Loss/Shr 7c

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Imperial Metals 1Q Rev C$84.6M; 1Q Loss/Shr C$0.06; 1Q Adj Loss/Shr C$0.06

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Orezone Gold 1Q Rev $64.6M; 1Q EPS 3c; 1Q Adj EPS 2c

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Orvana Minerals 2Q Rev $15.9M