The Thursday Market Minute
- Global stocks mixed heading into Thursday's crucial reading of May CPI, which could provide the sternest test to date to the Fed's 'transitory' inflation narrative.
- Core prices rose 3.5% from last year, the fastest pace since 1992, with a faster-than-expected headline reading of 5%.
- The European Central Bank made no changes to its benchmark lending rate of 0% and said emergency bond market support would remain in place "until it judges that the coronavirus crisis phase is over".
- Benchmark 10-year note yields rise to 1.526% following a solid auction of $38 billion in re-opened notes and the inflation figures.
- Retail equity volumes return to January peaks amid the broader June market lull, with new names such as Aethlon Medical, GEO Group and World Wrestling Entertainment added to the list of meme-stock gainers.
- GameStop posts a first quarter loss, names two Amazon executives to key leadership role and unveiled plans for a 5 million share sale after the close of trading Wednesday.
- CDC data shows 141 million Americans have now been fully vaccinated against the coronavirus, with around 304.7 million doses administered as of Wednesday.
- U.S. equity futures suggest a mixed open following faster-than-expected May inflation data and another decline in weekly jobless claims.
U.S. equity futures turned higher Thursday, with Treasury yields holding firm at multi-week lows, following a crucial reading of May inflation that could both define the Federal Reserve's near-term policy path and shake global markets from their recent June lull.
Annual headline inflation soared to 5% last month, BLS data indicated, while so-called core inflation was pegged at 3.5%, the fastest pace since 1992. Weekly jobless claims, meanwhile, fell to a fresh post-pandemic low of 376,000 for the period ending on June 5, further confirming the labor market's slow but steady recovery.
Following on from April's decade-high reading of 4.2%, the May inflation data could challenge the Fed's insistence that inflation pressures will ease over the second half of the year as supply chain bottlenecks ease and base effects -- such as last year's oil price collapse -- fall out of headline calculations.
Bond markets, however, appear far more sanguine: benchmark 10-year note yields hit a multi-month low of 1.472% yesterday, and held just over the 1.52% threshold even after the sale of $38 billion in new notes that drew solid demand from both foreign and domestic investors and the May headline rate shocked markets at 5%.
A hotter-than-expected CPI reading could change that hold later in the session, however, and ignite some movement in stocks, which have remained rangebound for much of the past three weeks -- although within touching distance of all-time highs -- as volumes ease and volatility slumps to a one-year low.
In the meantime, retail investors have stepped into the void, taking daily activity back to its January peak and triggering big moves in so-called meme stocks, including favorites such as GameStop (GME) - Get Report but also new names like Aethlon Medical (AEMD) - Get Report, which surged nearly 400% in yesterday's session alone.
Bluechip names such as Apple (AAPL) - Get Report, Tesla (TSLA) - Get Report and Merck (MRK) - Get Report are the most active stocks on the pre-market leaderboard this morning, however, suggesting normal service may resume as we head towards the May CPI reading at 8:30 am and the European Central Bank's interest rate decision at 7:45 am.
Futures contracts tied to the Dow Jones Industrial Average suggest a 160 point opening bell gain for the 30-stock average, while those tied to the S&P 500 are priced for a 12 point bump. Nasdaq futures are looking at a 15 point advance.
GameStop shares were also on the move following last night's 'tape bomb' of information from the Reddit retail favorite, falling 7.4% to $280.30 after posting a first quarter loss, named two former Amazon executives to key leadership roles, unveiled plans for a 5 million share sale and revealed a request for documents from the Securities and Exchange Commission.
Away from equities, global oil prices were trading modestly higher again Thursday, taking WTI crude past $70 a barrel, even after disappointing data on gasoline demand from the Energy Department yesterday raised questions about the pace of driving and domestic travel over the summer months.
Brent crude contracts for August delivery, the global benchmark, added 41 cents to trade at $72.63 per barrel while WTI crude was marked 37 cents higher at $70.32 per barrel.
In Europe, stocks moved lower after the European Central Bank made, as expected, no changes to either the pace of the bank's €1.85 trillion pandemic bond buying program, nor its record low lending rate of 0%. Focus now shifts to President Christine Lagarde's press conference at 8:30 am Eastern time.
Overnight in Asia, Japan's Nikkei 225 closed 0.34% higher at 28,958.56 points after Prime Minister Yoshihide Suga indicated the country's vaccine rollout should be completed by November at the latest, adding to optimism of a quicker-than-expected recovery for the region's second-largest economy.
The MSCI ex-Japan index, meanwhile, was marked 0.47% higher heading into the close of trading.