Dow Futures Gain Ahead of May Inflation Data; GameStop Slides After Loss

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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 are forecast to rise 3.5% from last year, the fastest pace since 1993, with a headline reading of 4.7%.
  • The European Central Bank will unveil its latest policy decision at 7:45 am Eastern time, with no changes expected in the pace of its bond purchases or record-low interest rates.
  • Benchmark 10-year note yields ease to 1.499% in overnight trading, following a solid auction of $38 billion in re-opened notes, while the dollar index gains 0.05% to trade at 90.173.
  • 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 ahead of the ECB rate decision at 7:45 am Eastern time and May inflation data at 8:30 am Eastern time.

U.S. equity futures remained mixed Thursday, with Treasury yields firmly in retreat, ahead of 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.

Headline consumer price inflation likely surged 4.7% from last year, economists have forecast for today’s 8:30 am Eastern time reading, with core prices rising by 3.5% to the fastest pace since 1993. 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 under the 1.5% threshold even after the sale of $38 billion in new notes that drew solid demand from both foreign and domestic investors. 

A hotter-than-expected CPI reading could change that today, 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 60 point opening bell gain for the 30-stock average, while those tied to the S&P 500 are priced for a 1.5 point bump. Nasdaq futures are looking at a 32 point decline, however, thanks in part to a 0.4% pre-market dip for Apple and a 0.7% move into the red for Tesla.

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 8 cents to trade at $72.30 per barrel while WTI crude was marked 2 cents higher at $69.98 per barrel.

In Europe, stocks were modestly lower ahead of the ECB rate decision at 1:45 PM Frankfurt time, although with no major changes expected in either the pace of the bank’s €1.85 trillion pandemic bond buying program, nor its record low lending rate of 0%, focus will shift 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.