OPENING CALL
Stock futures inched higher on Wednesday ahead of the release of the consumer price index for March.
Economists expect annual inflation quickened to 3.4%.
The previous two CPI reports have come in hotter than expected, and together with last week's sturdy nonfarm payrolls data have caused investors to reduce bets on the number of likely interest rate cuts by the Federal Reserve this year.
Overseas Markets
Overseas stocks were mixed. Chinese shares closed lower, and Fitch Ratings cut its credit-rating outlook for the country .
The Nikkei 225 also fell, while Europe's Stoxx 600 rose.
Premarket Movers
Delta is expected to report first-quarter earnings of 36 cents a share on revenue of $12.5 billion, up 5.5% from the first quarter of 2023. Shares were rising almost 1% ahead of the report.
Nvidia was down 0.3%. Shares declined 2% on Tuesday and entered a correction, which is defined as a pullback of at least 10% from a recent high.
PriceSmart reported a 13% jump in fiscal second-quarter revenue to $1.29 billion. Comparable net merchandise sales rose 8.8% in the period. The stock rose 8.3%.
U.S.-listed shares of Taiwan Semiconductor Manufacturing rose 1% as the company said revenue in the January to March quarter rose 16.5% from a year earlier to NT$592.64 billion.
Post Close Movers
IN8bio said preclinical data on its potential cancer treatment showed an improved ability to kill leukemia cells without harming healthy cells. Shares rose 31%.
Smart Global posted a wider-than-expected loss in the fiscal second quarter, as sales dropped about 27% and missed estimates. Shares fell 7.6%.
Velo3D said it would sell stock and warrants in a public offering as the company looks for additional financing. Shares fell 21%.
Market Insight
The value of tech exits rebounded in the March quarter to $7.9 billion from $5.7 billion the previous quarter, and commanded the highest valuations by sector at 3.9X revenue, according to PitchBook.
The research firm's breakdown of U.S. private equity recorded 37 tech exits, the lowest count since 2Q 2020, which underscores the competition for top assets.
Overall, tech exits accounted for 11.9% of U.S. PE exit value and 18.4% of the exit count during the quarter.
Corporates accounted for more than two-thirds of exit value in 1Q, PitchBook said.
Meanwhile, the value of sponsor-to-sponsor exits hit a 10-year low--excluding 2Q 2020 in the height of the pandemic volatility.
The divergent deal trends underscore a stock-market rebound, which has helped corporates, and higher interest-rate environment that's chilled an industry often reliant on debt to finance a large share of deals.
Overall, deal value remains about 22.7% below the 2017-2019 average and around 75% below the 2021 peak quarterly exit activity, PitchBook said, adding that preliminary March-quarter data suggest a slight uptick in exit volume from the previous quarter.
Watch For:
CPI for March; Wholesale Inventories for February; EIA Weekly Petroleum Status Report; FOMC meeting minutes and economic forecast; Canada Building Permits for February; Bank of Canada Rate Decision
Today's Top Headlines/Must Reads:
- Why the March CPI Is Looming So Large for the Fed
- Bitcoin Price Falls. Investors Brace for Halving, New Wave of Crypto ETFs
- A Safe, Profitable Bet on the Green Transition
MARKET WRAPS
Forex:
Higher-than-expected inflation data for March should lift the dollar, Danske Bank Research said.
A monthly core CPI increase of 0.4% or higher could strengthen confidence in the Fed maintaining its current stance for a longer horizon, especially given strong March labor figures, Danske added.
"This would likely bolster the dollar within the G-10 space."
Danske hinted that CPI has exceeded expectations in the first months of this year.
Recent increases in oil prices could be lifting the dollar and pose a risk to BofA Global Research's expectations that the currency will fall by the end of the year.
BofA strategists remained negative on the dollar over the medium-term, and forecast EUR/USD to rise to 1.15 by year-end, as Fed interest-rate cuts should help lead the dollar lower, but elevated oil prices risk pushing the currency higher.
The Canadian dollar rose slightly against the dollar ahead of a Bank of Canada decision and updated macro forecasts where the overnight rate is expected to be kept 5.0%, Brown Brothers Harriman said.
Inflation is still close to 3%, leaving the probability of a 25 basis point rate cut--as priced by money markets--very low at around 14%, it added.
Still, there is a high likelihood of the BOC giving stronger hints about upcoming rate cuts. "The BOC could remove current guidance that 'it's too early to loosen the restrictive policy' and/or slash inflation projections."
This could cause USD/CAD to rise sustainably above 1.3600, Brown Brothers Harriman said.
Bonds:
W ith 10-year Treasury yields north of 4%, U.S. bonds offer great value, Russell Investments said.
Although near-term recession risks have fallen from their peak, a soft landing still isn't guaranteed, it said.
"Treasurys can serve as an attractive diversifier and cushion the portfolio if a recession does materialize."
Russell Investments said Treasurys continue to offer an attractive current yield.
Energy:
Oil prices were little changed as markets assess diplomatic efforts in the Middle East and wait for key inflation data for more cues on the interest-rate path.
Reports citing figures from the American Petroleum Institute indicate a bigger-than-expected build in U.S. crude inventories last week, a bearish sign for the oil market ahead of official inventory data due later in the day.
Meanwhile, the EIA raised its Brent estimates for the year to $89 a barrel from $87 previously on expectations of strong global oil inventory draws this quarter and persistent geopolitical risks.
Market watchers now await oil-market monthly reports from OPEC and the IEA for a broader snapshot on the supply and demand outlook.
Brent crude is expected to trade in a range of $85 to $95 a barrel in the coming months on stronger oil-demand growth and the partial unwinding of OPEC+ output cuts in the second half of the year, according to UBS.
The bank lifted its forecast for both Brent and WTI by $5 a barrel compared to its previous estimates, saying it now expects the U.S. oil gauge between $80 and $90 a barrel.
Coal
Metallurgical coal prices look well supported, suggests UBS. It raised its long-term price forecast by $20/ton to $200/ton to move above consensus expectations of $190/ton.
UBS said supply constraints, especially in Australia, will keep the market in a structural deficit as Indian coal demand accelerates over time. UBS sees little capex being channeled toward new developments at a time when coal reserves at existing operations are depleting. Mine operators will also find it hard to lower operating costs.
Metals:
Gold futures rose 0.5% to $2,374.7 a troy ounce, hovering below Tuesday's record $2,384.5 an ounce as market focus turns to the inflation data release.
The price of the precious metal is closely linked to interest rates and the consumer price index and Fed meeting minutes will provide insight into any potential plans for interest rate cuts, and the path toward monetary easing.
Chinese central bank demand also remained strong as it continued to diversify out of dollars and into gold, GOLDX said.
Commerzbank Research said there may be a rational bubble in the gold market .
After better-than-expected labor-market data last week, gold edged lower but recovered quickly, as investors may have seen it as a buying opportunity, they write.
TODAY'S TOP HEADLINES
Chinese EV Maker XPeng Makes Inroads in Hong Kong, Macau
Chinese electric-vehicle maker XPeng is gearing up to sell its cars in Hong Kong and Macau, part of efforts to expand beyond the overcrowded market in mainland China.
The Guangzhou-based company, which competes with the likes of heavyweights such as BYD and Tesla, said in a statement Wednesday that it is entering the Hong Kong market via a dealer partnership with Malaysia's Sime Darby Motors.
Jack Ma Praises Alibaba's Leadership, Restructuring in Rare Memo
Alibaba co-founder Jack Ma praised the company's top leadership and the ongoing restructuring exercise in a memo to employees, a rare move for the billionaire since stepping away from the spotlight in recent years.
"Not only must we have the courage to admit and correct yesterday's mistakes in a timely manner, but we must also reform for future. This is why we keep moving forward," according to a copy of the internal letter seen by The Wall Street Journal and verified by two sources who viewed it on Alibaba's internal portal.
Tesla Stock Rides the Power of Tweets From Elon Musk
Tesla stock rose for a second consecutive session Tuesday, closing at $176.88, above prevailing prices before the company's terrible first-quarter delivery report.
That's the power of an Elon Musk tweet.
Philips Reaches Final Pact With U.S. Justice Department, FDA on Ventilator Recall
Philips said it reached a final agreement with the U.S. Justice Department and Food and Drug Administration on terms of a settlement related its Respironics ventilators, and backed its medium-term guidance.
The Dutch health-technology group said Wednesday that under the consent decree, Philips Respironics will continue to prioritize completing the remediation of the sleep and respiratory care devices under Respironics' voluntary June 2021 recall.
Private-Equity Fundraising Shows Signs of Small Rebound in the First Quarter
The pace of private-equity fundraising picked up slightly as the year began, though people in the market cautioned that it is still too early to declare a recovery after two difficult years.
(MORE TO FOLLOW) Dow Jones Newswires
04-10-24 0617ET
