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North American Morning Briefing: Caution Dominates as Focus Shifts to Inflation Data, Fed


Major indexes were treading water on Tuesday ahead of the Federal Reserve's interest-rate decision and looming inflation data, in the wake of the stronger-than-expected jobs report.

Futures trading suggested the S&P 500 may slip below its fresh record close hit on Monday, with Dow and Nasdaq-100 futures also a tad lower.

The Fed is widely expected to hold its benchmark rate steady, so investors will focus on whether officials pencil in one or two rate cuts for later this year.

Overseas markets were mixed: European markets stabilized after investors took fright at the European Union election results. The Stoxx 600 index crept lower, as did yields on German benchmark 10-year bonds. In Asia, Hong Kong's Hang Seng fell about 1%.

Premarket Movers

Apple was down 0.7%. On Monday it unveiled Apple Intelligence, its long-awaited approach to generative artificial intelligence. The stock fell 1.9% after it made the announcements at its Worldwide Developers Conference.

Calavo Growers rose 10% after the company swung to a profit in its fiscal second quarter and posted a sales increase of 17%.

DXC Technology gained 3% after Reuters reported that Apollo Global and Kyndryl Holdings were in talks about a joint bid for the IT-services provider. Apollo and Kyndryl have discussed an acquisition offer for DXC of between $22 and $25 a share, sources told Reuters.

Eli Lilly rose 2.8% after the company's experimental Alzheimer's drug donanemab received support from an independent panel of advisers to the FDA.

Oracle edged up ahead of its fiscal fourth-quarter earnings scheduled for after the closing bell. Analysts expect Oracle to report an adjusted profit of $1.65 a share,

Yext was down 16% after it reported a first-quarter loss that was wider than a year earlier and reduced its full-year sales outlook.

Postmarket Movers

CoreCivic confirmed the government was ending a service agreement related to a Texas border facility, which accounted for about 16% of full-year revenue in 2023. Shares fell 5%.

Watch For:

FOMC meeting; Canada Building Permits for April; Oracle earnings

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The DXY dollar index was steady at around 105, as the Fed starts its two-day meeting, while the euro remained below $1.08, with the prospect of early parliamentary elections in France later this month adding pressure, UniCredit Research said.

"Today's light economic calendar is set to bring more range-bound activity, with the series of European Central Bank officials scheduled to speak throughout the day probably just reiterating that there is still a long way to go until eurozone inflation is defeated."

UBS Global Wealth Management said the dollar remains "richly valued" but it should peak in the third quarter.

"We maintain our view that the dollar should top out in the third quarter, with periods of strength offering opportunities to engage in volatility-selling strategies to pick up additional yield and reduce dollar exposure ahead of rate cuts later this year."

UBS also said the euro is likely to recover later in the year as the eurozone's economy improves, reaching $1.09 by the end of 2024 and $1.11 by March 2025.

"While political uncertainty could prove a near-term headwind for the euro, an improving growth outlook should help the currency later this year," UBS said.


Oil prices eased lower following Monday's rally as investors awaited key U.S. inflation data and the Federal Reserve's policy meeting outcome for more clarity on the path of rate cuts and how that will affect demand.


Gold futures continued to struggle to trade outside a recent narrow band.

After stronger-than-expected U.S. jobs data lowered Fed rate-cut expectations, and China's central bank halted its gold purchases the precious metal's price has drifted from its all-time high of $2,450 an ounce in May, ING said.

It said that if the Fed continues its cautious approach to monetary policy easing, gold risks a price pullback, and trading is likely to remain volatile in the coming months as the market reacts to macroeconomic drivers.

Given geopolitical safe-haven demand is also factored into the price, ING expects gold to fall slightly from current levels.

Gold Charts

Gold may rise ahead of this week's FOMC meeting and U.S. CPI report, based on charts, and City Index said.

Gold seems to be holding above support at 50% and 38.2% Fibonacci retracement levels and bullish divergences appear to have emerged on the daily and four-hour relative strength index charts.

A double-bottom pattern formed on the 4-hour chart at $2,286/oz, and prices have pulled back toward these lows after a move higher from double bottom. Bulls could seek to enter long positions around current levels on expectations for gold's rise into the key events.

China Aluminum

China's aluminum sector may see strong margin expansion this year, HSBC Global Research said, with the base metal up 10% year to date on the LME, supported by robust demand.

However, HSBC said there may be downward pressure when Yunnan province, an aluminum producing hub in China, capacity restarts completely.




Chinese EV Makers' Shares Drop Amid Tariffs Concerns

Chinese electric vehicle makers' shares dropped in Hong Kong amid concerns that more countries could increase tariffs on cars imported from China.

XPeng's shares were down 4.5% at 30.95 Hong Kong dollars (US$3.96) by midday Tuesday while Li Auto was off by 4.3% and NIO lost 3.3%. Geely Automobile and Great Wall Motor were down 3.15% and 2.6%, respectively. The benchmark Hang Seng Index was 1.7% lower.


Alibaba's New E-Commerce Strategy Faces Tough Competition

Alibaba's strategic shift to prioritize long-term growth over substantial near-term profits is showing some early success, but analysts say increasing competition could prevent the e-commerce giant from regaining its past market dominance.

Once a towering presence in the booming Chinese e-commerce market, the Hangzhou-based company had an impressive 83% market share when it went public in 2014. This dominance has significantly eroded, primarily due to the onslaught of rising competition and partly due to its tepid approach to enhancing technology and pricing strategies.


Investors on Tenterhooks for Fed's Latest Rate-Cut Projections

Investors will obsess Wednesday over whether Federal Reserve officials pencil in one or two interest rate cuts this year.

For policymakers, difficult decisions and looming divisions over whether and when to cut interest rates are a problem for later-not right now. Instead, the fixation on the quarterly rate projections obscures remarkable cohesion among rate-setters over their wait-and-see stance.


ECB's Lagarde Sees Multi-Meeting Rate Holds A Possibility

The European Central Bank may leave its key rate unchanged for more than one meeting as it awaits confirmation that inflation is on a path to its target, President Christine Lagarde said in an interview published Tuesday.

The ECB last week lowered its key interest rate, but said it wasn't committing to a particular path over coming meetings. It also raised its inflation forecast for this year and next.


Port of Baltimore Fully Restored After Key Bridge Collapse

The main channel to the Port of Baltimore fully reopened, nearly 11 weeks after a cargo ship lost power and slammed into the Francis Scott Key Bridge, shutting down one of the nation's busiest waterways.

Six construction workers were killed in the March 26 disaster, when a Singaporean containership leaving the port lost power around 1:30 a.m. and struck a bridge support column. A large section of the 1.6-mile span crumpled into the Patapsco River. Its wreckage blocked most of the port's 700-foot wide channel.


White House Prepares to Tap Derivatives Regulator to Oversee FDIC

The White House is close to naming derivatives regulator Christy Goldsmith Romero to head the Federal Deposit Insurance Corp., replacing the beleaguered banking agency's longtime chairman Martin Gruenberg.

Gruenberg bowed to pressure to resign from the FDIC in May after an external investigation found widespread sexual harassment and other misconduct at the agency and lawmakers in both parties berated his leadership. He said he would step down after a successor is confirmed by the Senate.




None Scheduled

Economic Calendar [ET]:

0830 Apr Building Permits


Expected Major Events for Tuesday

04:01/US: 3Q Manpower U.S. Employment Outlook Survey

06:00/JPN: May Preliminary Machine Tool Orders

06:00/UK: May UK monthly unemployment figures

08:30/UK: 1Q Mortgage Lenders and Administrators Return (MLAR) statistics

10:00/US: May NFIB Index of Small Business Optimism

12:30/CAN: Apr Building permits

12:55/US: 06/08 Johnson Redbook Retail Sales Index

14:00/US: 1Q Quarterly Services

20:30/US: API Weekly Statistical Bulletin

23:50/JPN: May Corporate Goods Price Index

All times in GMT. Powered by Kantar Media and Dow Jones.


Expected Earnings for Tuesday

ADF Group Inc (DRX.T) is expected to report $0.34 for 1Q.

Academy Sports & Outdoors Inc (ASO) is expected to report $1.17 for 1Q.

Anixa Biosciences Inc (ANIX) is expected to report for 2Q.

BowFlex Inc (BFXXQ) is expected to report $-0.06 for 4Q.

Broadway Financial Corp (BYFC) is expected to report for 1Q.

Casey's General Stores (CASY) is expected to report $1.72 for 4Q.

Enzo Biochem Inc (ENZ) is expected to report for 3Q.

Exicure Inc (XCUR) is expected to report for 4Q.

Ferrellgas Partners LP (FGPR) is expected to report for 3Q.

Fresh Tracks Therapeutics Inc (FRTX) is expected to report $-0.19 for 1Q.

(MORE TO FOLLOW) Dow Jones Newswires

June 11, 2024 06:19 ET (10:19 GMT)

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