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Dow Futures Steady as Inflation Signals Mount; Clover Leads Reddit Surge

Meme stocks are the lone bright spark in Wall Street's languid June performance, as Reddit's army of retail investors take favored names to record highs and boost volumes on domestic exchanges.

The Wednesday Market Minute

  • Global stocks edge lower in muted trading as rangebound markets discount inflation signals ahead of tomorrow's key May CPI reading.
  • China PPI surges to a 12-year high in May as raw materials costs boost factory gate prices. 
  • U.S. crude prices extend gains, following the first close over $70 a barrel since 2018, as the EIA boosts its 2021 demand forecasts
  • Benchmark 10-year note yields ease to 1.499% in overnight trading while the dollar index gains 0.05% to trade at 90.019.
  • CDC data shows 140.4 million Americans have now been fully vaccinated against the coronavirus, with around 303.9 million doses administered as of Tuesday.
  • U.S. equity futures suggest a mixed open ahead of wholesale trade data at 10:00 am Eastern time.

U.S. equity futures languished near record highs Wednesday, while oil extended gains and Treasury yields slumped, as investors continue to discount inflation signals ahead of tomorrow's key CPI reading and meme stocks looked to prolong their grip on Wall Street.  

Benchmark 10-year Treasury note yields eased to a multi-week low of 1.499% in overnight trading, a curious move given that yesterday's April JOLTS job openings data rose to a record high 9.3 million, paving the way for higher wages to entice workers back into the labor market, and China's factory gate inflation rate surged 9% from last year, the fastest pace in more than twelve years.

If bond traders are content with the Federal Reserve's view that inflation pressures will ease over the second half of the year, it certainly provides a clam exterior for stocks, which remain rangebound ahead of tomorrow's May inflation reading - and likely for the next few weeks, when second quarter earnings reports from Wall Street's biggest banks begin to trickle in after the July 4 holiday. 

In the meantime, investor focused has in some ways switched to the extend surge in so-called meme stocks, which as captured the imagination of retail investors and Wall Street pros alike.

They've also seemingly provided a volume boost to the U.S. markets, even as volatility levels -- as measured by the CBOE's VIX index -- slump to the lowest levels in more than a year. Just over 11.8 billion shares changed hands on domestic exchanges yesterday, firmly ahead of the 10.75 billion average recorded over the past 20 trading days.

Many of the top meme stocks, including GameStop  (GME) - Get Report -- which reports quarterly earnings after the close of trading -- Bed, Bath & Beyond  (BBBY) - Get Report and AMC Entertainment  (AMC) - Get Report were on the move again Wednesday, alongside Wendy's Co.  (WEN) - Get Report, which closed at an all-time high of $27.87 last night as the restaurant chain chaired by activist Nelson Peltz found favor among the increasingly influential army of Reddit investors. 

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Chamath Palihapitiya-backed Clover Health Investments Corp.  (CLOV) - Get Report, another late-hour addition to the meme stock universe, was back on the rise, surging 17% in pre-market trading to $26.00 each.

The pre-market moves in meme stocks appear far more compelling than U.S. equity futures, which are indicating only modest changes for the three major indices to start the trading day.

Futures contracts tied to the Dow Jones Industrial Average suggest a falt open for the benchmark, while those linked to the S&P 500 are priced for a 7 point gain. Nasdaq Composite futures are indicating a 55 point opening bell bump.

Oil prices were back on the march Wednesday, as well, following the first close over $70 for U.S. crude futures in two-and-a-half years last night, with traders citing the Energy Department's 2021 demand forecast boost -- to 1.49 million barrels per day -- and a surprise decline in domestic stockpiles of 2.1 million barrels reported by the American Petroleum Institute.

WTI futures for July delivery were marked 23 cents higher at $70.28 per barrel while Brent contracts for August, the global benchmark, added 27 cents to trade at $72.49 per barrel.

In overnight trading, Asia stocks slipped lower in muted volumes, with the Nikkei 225 closing 0.35% in the red at 28,860.80 points and modest gains in China failing to support the MSCI ex-Japan benchmark, which drifted 0.37% lower heading into the close of trading.

European stocks, meanwhile held near record highs in early trading, with the Stoxx 600 down just 0.09% in a quiet session in Frankfurt.