U.S. Stocks May Move Back To The Downside In Early Trading

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to move back to the downside after ending the previous session modestly higher.

Traders may look to cash in on yesterday’s slim gains, which lifted the Nasdaq and the S&P 500 to new record closing highs.

Overall trading activity is likely to remain relatively subdued, however, as investors look ahead to two major economic events on Wednesday.

Early trading on Wednesday is likely to be driven by reaction to the Labor Department’s closely watched report on consumer price inflation in the month of May.

Economists expect consumer prices to inch up by 0.1 percent in May after climbing by 0.3 percent in April, while core consumer prices, which exclude food and energy prices, are expected to increase by 0.3 percent for the second straight month.

The annual rate of growth by consumer prices is expected to come in unchanged at 3.4 percent, but the annual rate of core consumer price growth is expected to slow to 3.5 percent in May from 3.6 percent in April.

The data could have a significant impact on the outlook for interest rates ahead of the Federal Reserve’s monetary policy announcement later in the day.

While the Fed is widely expected to leave interest rates unchanged, traders are likely to pay close attention to the accompanying statement as well as officials’ latest projections for the economy and interest rates.

Extending the lackluster performance seen last Thursday and Friday, stocks showed a lack of direction during trading on Monday. The major averages bounced back and forth across the unchanged line before eventually closing modestly higher.

Despite the choppy trading, the Nasdaq and the S&P 500 reached new record closing highs. The Nasdaq climbed 59.40 points or 0.4 percent to 17,192.53, the S&P 500 rose 13.80 points or 0.3 percent to 5,360.79 and the Dow edged up 69.05 points or 0.2 percent to 38868.04.

Traders seemed reluctant to make more significant moves ahead of several key events later this week, including the Federal Reserve’s monetary policy meeting.

The Fed is due to announce its latest monetary policy decision on Wednesday, when the central bank is widely expected to leave interest rates unchanged.

Since the decision is largely seen as a foregone conclusion, traders are likely to pay closer attention to Fed officials’ latest projections for the economy and rates.

Ahead of the Fed announcement, the Labor Department is scheduled to release its report on consumer price inflation in the month of May.

Reports on producer prices, import and export prices and consumer sentiment and inflation expectations may also attract attention later in the week.

Oil service stocks showed a substantial move to the upside on the day, driving the Philadelphia Oil Service Index up by 2.9 percent. The rally by oil service stocks came amid a notable increase by the price of crude oil.

An increase by the price of gold also contributed to considerable strength among gold stocks, as reflected by the 1.6 percent gain posted by the NYSE Arca Gold Bugs Index.

Semiconductor stocks also turned in a strong performance, resulting in a 1.4 percent advance by the Philadelphia Semiconductor Index.

Computer hardware, natural gas and retail stocks also saw some strength on the day, while telecom stocks moved notably lower, adding to the steep losses posted last Friday.

Commodity, Currency Markets

Crude oil futures are slipping $0.30 to $77.44 a barrel after surging $2.21 to $77.74 a barrel on Monday. Meanwhile, after inching up $2 to $2,327 an ounce in the previous session, gold futures are rising $4.90 to $2,331.90 an ounce.

On the currency front, the U.S. dollar is trading at 156.90 yen compared to the 157.04 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0730 compared to yesterday’s $1.0765.

Asia

Asian stocks ended mostly lower on Tuesday as gains by the far right in voting for the European Parliament added uncertainty to the EU’s political landscape and investors awaited key U.S. inflation data and the outcome of the Federal Reserve’s policy meeting.

Market participants see diminished prospects for easing this year, with many analysts expecting the first rate cut by the Federal Reserve only in November.

The dollar held in a tight range and gold held near one-month lows, while oil edged down slightly after Monday’s 3 percent rally on hopes of strong summer demand for fuel and potential U.S. crude purchases for its petroleum reserve.

China’s Shanghai Composite Index dropped 0.8 percent to 3,028.05 as trading resumed after a long holiday weekend. Electric vehicle makers slumped as traders awaited the European Commission’s decision on provisional duties. Hong Kong’s Hang Seng Index tumbled 1.0 percent to 18,176.34.

Japanese markets ended slightly higher, tracking a weaker yen heading into Friday’s BOJ policy meeting. The central bank is expected to trim monthly purchases or clarify plans to proceed with a slow but steady taper after the conclusion of a two-day meeting.

The Nikkei 225 Index rose 0.3 percent to 39,134.79, while the broader Topix Index settled 0.2 percent lower at 2,776.80. Among the top gainers, Kokusai Electric jumped 3.8 percent and Tokyo Electron added 2.2 percent.

Seoul stocks edged higher, with the Kospi inching up 0.2 percent to 2,705.32, tracking overnight gains on Wall Street. Top battery maker LG Energy Solution climbed 1 percent and leading pharmaceutical company Celltrion gained 1.6 percent.

Australian markets fell sharply, with material, gold mining and property developers pacing the decliners. BHP, Rio Tinto and Fortescue Metals Group shed 2-3 percent.

Gold miners Newmont, Northern Star and Evolution plummeted 3-6 percent. The benchmark S&P/ASX 200 Index gave up 1.3 percent to close at 7,755.40, marking its worst single-day loss in seven weeks. The broader All Ordinaries Index ended down 1.3 percent at 8,005.90.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished marginally lower at 11,785.48.

Europe

European stocks have moved mostly lower on Tuesday as investor focus shifts to Wednesday’s U.S. consumer price data and the Federal Reserve’s interest rate decision.

The Fed is widely expected to leave interest rates unchanged, but traders will pay close attention to officials’ updated projections for the economy and rates.

Meanwhile, the latest employment data from the U.K. painted a mixed picture of the economy.

The U.K. unemployment rate ticked up to 4.4 percent from 4.3 percent in the three months to April, the highest rate since September 2021, but wage growth jumped to 5.9 percent, raising concerns that higher wages can feed into consumer prices and potentially stall the central bank’s progress with inflation.

While the French CAC 40 Index has slumped by 1.2 percent, the U.K.’s FTSE 100 Index is down by 0.9 percent and the German DAX Index is down by 0.8 percent.

The euro was little changed after having hit a one-month low the day before following French President Emmanuel Macron’s decision to call a snap national election due to a strong showing for far right parties in the European Parliament elections.

French bonds stabilized after yields on the country’s 10-year debt reached their highest level this year on Monday.

In corporate news, Rio Tinto has fallen after the mining giant agreed to acquire Mitsubishi Corp.’s 11.65 percent stake in Boyne Smelters for an undisclosed sum.

Transport operator FirstGroup has also moved to the downside after reporting a decrease in annual revenue.

Societe Generale shares have also dipped to extend losses from the previous session after reports that the French lender is facing hurdles in selling its securities services unit.

Atos SE, an information technology service and consulting company, has moved sharply lower.

The company announced that between the two proposals received on its financial restructuring, it chose the Onepoint consortium consisting of Onepoint, Butler Industries and Econocom, and a group of some of the company’s financial creditors.

Meanwhile, Senior Plc., an international manufacturer of high-tech components, has rallied after securing various long-term production contracts from Collins Aerospace.

U.S. Economic Reports

The Treasury Department is scheduled to announce the results of this month’s auction of $39 billion worth of ten-year notes at 1 pm ET.

Stocks In Focus

Shares of Calavo Growers (CVGW) are surging in pre-market trading after the farming company reported fiscal second quarter results that exceeded analyst estimates on both the top and bottom lines.

Pharmaceutical company Eli Lilly (LLY) is also likely to see initial strength after a panel of FDA advisors recommended approval of the company’s Alzheimer’s treatment donanemab.

Shares of General Motors (GM) may also move to the upside after the auto giant said its board has approved the repurchase of up to $6 billion of the company’s outstanding common stock.