Daily Markets: Fed Expected to Leave Rates Unchanged

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed despite yesterday’s news of a rate cut from the People’s Bank of China (PBOC). China’s Shanghai Composite was down 0.14%, Hong Kong’s Hang Seng fell 0.58%, and South Korea’s KOSPI closed 0.72% lower. Taiwan’s TAIEX and India’s SENSEX gained 0.13% and 0.14%, respectively, and Australia’s ASX All Ordinaries added. 0.34% Japan’s Nikkei rose an additional 1.47% as the flight to equity quality continued on the back of yesterday’s strong U.S. CPI print. European markets are up across the board in midday trading except for Switzerland and Sweden and U.S. futures point to a mixed open.

Investors will be looking for confirmation of trends found in yesterday’s May Consumer Price Index when they review the May Producer Price Index report that will be disseminated at 8:30 AM ET. That will be the last data point before the Fed concludes its June monetary policy meeting at 2 PM ET, when it will announce its next move (or lack thereof) with the Fed funds rate, and shares its updated set of economic projections for the U.S. economy. The overwhelming view (over 95% per the CME FedWatch Tool) is that the Fed will leave the fed funds rate unchanged between 5.00%-5.25%, but we expect it will reiterate future policy moves will be data dependent, and it does not see any rate cuts in 2023. As important will be what is revealed in its Economic Projections, including revised GDP figures for 2023 and 2023 as well as the forward view on the fed funds rate for those years.

Data Download

International Economy

Germany's wholesale prices fell by 2.6 percent from a year earlier in May, marking the second straight month of decline and the steepest fall since July 2020.

UK GDP increased 0.5% YoY in April following a 0.3% rise in March, matching market expectations.

Industrial production in the Euro Area expanded 0.2% YoY in April, partially offsetting the previous period's contraction of 1.4% but fell short of the expected 0.8% increase.

In a report published earlier today, the International Energy Agency shared its view global oil demand is expected to slow "almost to a halt" within five years as higher prices and supply concerns will likely speed up the shift to clean energy sources and electric vehicles.

Domestic Economy

At 8:30 AM ET, the May Producer Price Index (PPI) report will be published, and it is expected to show a 0.1% MoM drop following a 0.2% rise in the month before. Core PPI for May, which excludes food and energy prices, is expected to climb 0.2% MoM, matching the prior month. When it comes to viewing core PPI on a YoY basis, the market is calling for a slower increase of 2.9% in May vs. 3.2% in April.

Markets

Tuesday saw markets continuing to be cautiously optimistic regarding a “no action” result from today’s Fed meeting. The Dow gained 0.43%. the S&P 500 rose 0.96%, the Nasdaq Composite added 0.83% and the Russell 2000 closed 1.23% higher. After Monday’s drawdown, it was the Materials sector’s time to shine as that sector gained 2.32% on news of a People’s Bank of China (PBOC)rate cut that is hoped to provide enough stimulus to kick-start growth in that country. Industrials followed, rising 1.16% trailed by Consumer Discretionary (1.04%) led primarily by Tesla’s (TSLA) 3.55% gain, continuing an almost two-week rally. AI darling Nvidia (NVDA) shares were bid up 3.90% on the back of what was considered a positive CPI release.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 3.21%
• S&P 500: 13.79%
• Nasdaq Composite: 29.68%
• Russell 2000: 7.67%
• Bitcoin (BTC-USD): 55.93%
• Ether (ETH-USD): 44.94%

Stocks to Watch

Before U.S. equity markets begin trading today, no market-moving quarterly earnings reports are expected.

Advanced Micro Devices (AMD) CEO Lisa Su said the company's new artificial intelligence chip, the MI300X, will have 192 gigabytes of memory and a key performance measure for how well the chip will handle the large AI systems behind services similar to ChatGPT. AMD is expected to ramp production in the fourth quarter.

Accenture (ACN) said it will invest $3 billion over three years into its data and AI practice, doubling the number of employees that are working with the cutting-edge technology at the IT consulting firm.

For its YouTube service, Alphabet (GOOGL) announced two new Google AI-powered campaigns, Demand Gen and Video View campaigns that aim to improve consumer connection and drive demand from the mid-funnel, all the way to purchase.

Speaking at an investor conference, Wells Fargo (WFC) CFO Mike Santomassimo shared the bank expects upside for its net interest income going ahead. Previously, Wells Fargo issued guidance for a 10% higher net interest income this year.

BlackRock (BLK) is scheduled to host its investor day event where the management team is likely to discuss the outlook for the world's biggest asset manager.

Table, please! Netflix (NFLX) is venturing into the restaurant business with plans to launch Netflix Bites, a pop-up restaurant in Los Angeles on June 30. Netflix Bites will feature chefs who star in shows on the platform, including Dominique Crenn of "Iron Chef," Curtis Stone, and Nadiya Hussain, among others. Mixologists from the show "Drink Masters" will also create custom cocktails for the menu.

IPOs

Near-term the calendar for such activity looks rather thin. Readers looking to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Lennar (LEN) is slated to report its quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Thursday, June 15

• Japan: Core Machinery Orders – April
• China: Industrial Production, Retail Sales – May
• Eurozone: European Central Bank Interest Rate Decision
• US: Import/Export Prices, Retail Sales – May
• US: Philly Fed Index, Empire State Manufacturing Index – June
• US: Industrial Production & Capacity Utilization – May
• US: Business Inventories – April
• Jabil (JBL), Kroger (KR)
• Adobe (ADBE)

Friday, June 16

• Eurozone: Consumer Price Index – May
• Eurozone: Labor Cost Index – 1Q 2023
• US: University of Michigan Consumer Sentiment Survey (Preliminary) - June

Thought for the Day

"The road to success and the road to failure are almost exactly the same." — Colin R. Davis

Disclosures

• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Advanced Micro Devices (AMD) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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