Dow futures -1% at 30695
S&P futures -1.05% at 3775
Nasdaq futures -1.17% at 11511
FTSE -1.16% at 7167
Dax -2.5% at 13034
Euro Stoxx -2.22% at 3518
A weak end to a weak quarter
US stocks are set to open steeply lower in a fitting end to a very weak quarter. Stocks are being hammered by fears that aggressive rate hikes to rein in hit super-hot inflation will, in turn, slow economic growth considerably.
Federal Reserve Chair Jerome Powell, BoE’s Bailey, and ECB’s Lagarde all pledged to bring inflation down, even if that comes at the cost of slowing economic growth too much. Powell was clear that the more significant risk here is inflation and that it could take time to bring inflation down.
Risk-off trade fueled by fears of the Fed moving too fast to hike rates has dominated across the quarter, which has seen the Nasdaq drop over 8% and puts the S&P500 on track for its worst quarter since Q1 2020 when COVID hit.
Personal Consumption Expenditure data is keeping the market focused on inflation. Core PCE, the Fed’s preferred gauge for inflation, cooled slightly in May to 4.7%, down from 4.9% in April. On a monthly basis, Core PCE rose 0.3%, down from 0.4%.
However, personal spending has slowed considerably, rising 0.2% MoM in April, down from 0.6% in March. Weaker spending suggests that a slowdown could be arriving.
Initial jobless claims rose by 231k, down slightly from 233k in the previous week. Jobless claims suggest that the jobs market remains robust, although there are signs of increasing job cuts in some sectors, such as tech.
In corporate news:
Walgreens Boots falls pre-market after the pharmacy chain posted a 76% fall in quarterly profits after taking a hit with its opioid settlement with Florida.
Constellation Brands rose 0.5% after beating quarterly earnings estimates.
Where next for the Nasdaq?
The Nasdaq failed to retake the multi-month falling trendline resistance and rebounded lower. The fall below the 20 sma and support at 11700 keeps the bears hopeful of further downside, as does the RSI below 50. Sellers are testing support at 11490, the May low, with a break below here opening the door to 11035 the 2022 low. Buyers will look for a move over 12225, the weekly high, to create a higher high and expose the 50 sma at 12315. A move above here opens the door to 12630, the mid-June high.
FX markets – USD rises, EUR falls.
USD is rising, extending gains from yesterday after Federal Reserve Chair Powell’s hawkish remarks.
EURUSD is falling towards 1.04, fresh two-week lows on risk aversion. Yesterday the ECB President Christine Lagarde failed to offer any fresh insight into the direction of monetary policy in the eurozone, pulling the EUR lower. German retail sales rebounded in May by 0.5% after tanking -5,4% in April.
GBP/USD is falling again, extending losses from the previous session after BoE Governor Andrew Bailey’s warned that the UK IS likely to see a sooner and deep slowdown than other major economies. This raises questions about the BoE’s ability to keep hiking. UK GDP data confirmed the earlier reading of 0.8% QoQ. The data also showed that household incomes declined 0.2%
GBP/USD -0.18% at 1.2137
EUR/USD -0.07% at 1.0474
Oil steadies ahead of OPEC decision
Oil prices are edging lower extending losses from yesterday. Central bankers making it clear that they a serious about fighting inflation raised fears of aggressive rate hikes and slower growth, hurting the demand outlook for oil and pulling the price lower
The downside is being capped by ongoing tight supply concerns, with few signs of new oil supply reaching the market. US and Iranian talks made no progress overnight, with the US stating how disappointed they were at the Iranian effort to revive the 2015 nuclear deal.
Meanwhile, political troubles in Ecuador and Libya continue to limit supply from those countries.
Looking ahead, OPEC is due to announce its production plan for August. The oil cartel is not expected to make any changes to production targets of 648,000 additional barrels per day agreed in the previous meeting at the start of the month.
WTI crude trades -0.4% at $111.67
Brent trades -0.3% at $114.72