Daily Markets: Powell and the Fed in Focus

Today’s Big Picture

Asia-Pacific equity markets finished the day lower except for South Korea’s KOSPI, which gained 0.43% in a mixed day led by Technology Services. India’s SENSEX declined 0.45%, Japan’s Nikkei fell 0.92%, and Australia’s ASX All Ordinaries closed 1.66% lower on a broad decline led by Producer Manufacturing, Industrial Services, and Consumer Durables. Today sees markets in China, Hong Kong, and Taiwan closed to make this year’s Dragon Boat Festival which, depending on your source, is an attempt to counter the double bad luck of it being the fifth day of the fifth lunar month, a way to honor and worship dragons, or a harvest festival. China and Taiwan will be closed tomorrow as well. European markets are down in midday trading and U.S. futures point to a lower open.

We have more from Fed Chair Powell today as he finishes his two days of testimony in Washington before the US Senate Banking Committee. Odds are Powell’s comments will largely echo those from yesterday: "Inflation has moderated somewhat since the middle of last year. Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go... Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run." Fed fund futures traders are starting to get the hint, and aside from some slight variation in 2023, the current shape of the futures curve shows the market now expecting rate increases in early to mid-2024 instead of late this year.

Flanking Powell today will be several other Fed officials and the market will be questioning how aligned FOMC voting members are in their monetary policy thinking. Yesterday, Atlanta Fed President Raphael Bostic shared his “baseline is that we should stay at this level for the rest of the year” to assess the cumulative impact of monetary policy tightening on the economy.

Data Download

International Economy

Later this morning, the Flash reading for June Consumer Confidence in the Eurozone will be published and the market sees it dipping to -17.4 vs. May’s 17.0 figure. 

The Bank of England raised its benchmark rate to 5% from 4.50% earlier this morning, a bigger move than the market was expecting as inflation pressures persist.

Domestic Economy

At 10 AM ET, the National Association of Realtors is expected to show existing home sales likely fell to 4.25 million units in May from 4.28 million in April.

Federal Deposit Insurance Corporation Chairman Martin Gruenberg is scheduled to deliver remarks on strengthening bank capital requirements after several high-profile bank failures.

Indian Prime Minister Narendra Modi is in the U.S. for his first state visit, which is expected to result in major investments for India as the country makes its mark as a major potential counterweight to China.

U.S. futures prices for wheat, corn, and soybeans jumped to multi-month highs Wednesday, as traders were surprised by the latest Crop Progress report from the U.S. Department of Agriculture that showed some of the worst crop conditions in three decades.

Markets

Equities continued to trade off after Fed Chair Powell reiterated the position that despite the pause in the current rate hike cycle the Fed feels that additional rate hikes will be needed to wrangle inflation back toward its long-stated 2% target. Given this news, Technology (-1.48%) and Communication Services (-0.99%), along with Consumer Discretionary (-1.20%) saw the largest selloff as sectors came in mixed, led by Utilities (0.80%) and Energy (0.79%). Broad indexes reflected sector returns as the Russell 2000 fell 0.20%, the Dow declined 0.30%, the S&P 500 gave back 0.52% and the Nasdaq Composite closed 1.21% lower. Shares of Dollar Tree (DLTR) saw a 4.56% bounce yesterday after the company provided upbeat guidance for 2026 on a plan to spur organic growth within the retailer.

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

• Dow Jones Industrial Average: 2.43%
• S&P 500: 13.70%
• Nasdaq Composite: 29.00%
• Russell 2000: 5.78%
• Bitcoin (BTC-USD): 81.21%
• Ether (ETH-USD): 57.92%

Stocks to Watch

Before U.S. equity markets begin trading today, Accenture (ACN) and Darden Restaurants (DRI) are among the handful of companies issuing their latest quarterly results. 

KB Home (KBH) reported stronger than expected results for its May quarter with EPS of $1.94, well ahead of the $1.33 consensus. The number of homes delivered during the quarter rose 6% to 3,666 while the corresponding average selling price decreased by 3% to $479,500. Overall housing gross profit margin was pressured by price decreases and other homebuyer concessions as well as higher construction costs. Net orders for the quarter increased 1% to 3,936 compared to the 49% YoY drop witnessed in the February quarter. For its fiscal 2024, KB sees housing revenue of $5.80-$6.20 billion, up from its prior guidance of $5.20-$5.90 billion. 

Apple (AAPL) announced the availability of new software tools and technologies that enable developers to create groundbreaking app experiences for its Vision Pro.

Intel (INTC) will restructure its manufacturing business to an Internal Foundry Model that will create a foundry-like relationship between its manufacturing groups and its internal product business units. Under the new structure, Intel will move from a cost allocation to a market-based wafer test and packaging price from its manufacturing groups to its external and internal customers for both front end fab manufacturing and back end test and packaging services.

Spirit AeroSystems (SPR) will suspend factory production prior to the expiration of the contract in light of the decision to strike by the employees represented by the International Association of Machinists and Aerospace Workers.

DoubleVerify (DV) has expanded its quality solutions with Meta Platforms (META) for enabling media measurement and boosting advertiser performance on Facebook and Instagram Reels.

Overstock.com (OSTK) agreed to buy the intellectual property and digital assets of Bed Bath & Beyond (BBYQ) for $21.5 million out of bankruptcy

Tesla (TSLA)  has returned to the S&P 500 ESG index, the sustainable investing-focused market index after the company added environmental disclosures.

After Today’s Market Close

Smith & Wesson Brands (SWBI) is expected to report its latest 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

Friday, June 23

• Japan: Consumer Price Index – May
• Japan: Flash PMIs - June
• UK: Retail Sales – May
• Eurozone: S&P Global Flash PMIs - June
• US: S&P Global Flash PMIs – June

Thought for the Day

“All economic forecasts are subject to considerable uncertainty. There is always a wide range of plausible outcomes for important economic variables, including the federal funds rate.” ~ Jerome Powell

Disclosures

• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Intel (INTC) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
• Dollar Tree (DLTR) is a constituent of the Tematica BITA Big Spenders & Savers Index 
• Apple (AAPL) is a constituent of the Tematica Research Thematic Dividend All-Stars 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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