Stocks are set for a modestly firmer open Wednesday as investors enter June in much the same way they exited May: worried about inflation and eyeing central bank reactions.
U.S. equity futures edged modestly higher Wednesday, while the dollar extended gains against its global peers, as markets continue to gauge the impact of soaring inflation on global growth prospects and question central banks’ ability to tame it.
President Joe Biden met with Federal Reserve Chairman Jerome Powell in the White House yesterday, in fact, to plot a course for the world’s largest economy out of its inflation trap, which is hammering consumer confidence and squeezing discretionary budgets.
Biden vowed to “respect the Fed’s independence” but the messaging of the meeting — including photographs from the Oval Office — left observers in little doubt as to the importance of inflation on both the President’s economic agenda and the Democrats mid-term election prospects in November.
In the meantime, data from Europe showed another slowdown in manufacturing activity last month — amid the highest inflation rate on record — as surging input costs, supply chain disruptions and softening demand took their tool on the region’s most important economic driver.
Stocks Edge Higher, Fed, Salesforce, Pfizer And Elon Musk – 5 Things You Must Know
European stocks were marked modestly lower as a result, with the Stoxx 600 down 0.37% in mid-day Frankfurt trading following a 0.5% slide for the region-wide MSCI ex-Japan index in overnight trading.
Here in the U.S., investors will look to a Bank of Canada interest rate decision at 10:00 am Eastern time as the central bank looks to slow inflation, and a red-hot housing market, ahead of planned rate hikes from the Federal Reserve later this month. ISM manufacturing data for the month of May is also set to be released at 10:00 am Eastern time.
The Fed will also begin to deploy one its more powerful, but lesser-known, inflation-fighting tools Tuesday as it starts the slow reduction of its $9 trillion balance sheet.
The Fed will start selling around $47.5 billion worth of Treasury and mortgage-backed bonds each month, for the next three months, as part of its overall strategy to add upward pressure on market interest rates and slow demand in the world’s largest economy.
The pace of those sales will accelerate further, however, to around $95 billion a month by September, putting the Fed on pace to dump around $3 trillion worth of securities on to the market over a span of three years – a rate more than double the last time the Fed began its so-called “quantitative tightening” in 2018.
On Wall Street, futures tied to the Dow Jones Industrial Average indicating a 125 point opening bell gain while those linked the S&P 500 were priced for a 2 point bump. Futures linked to the tech-focused Nasdaq are indicating a 5 point opening bell slip.
In terms of individual stocks, Salesforce (CRM) – Get Salesforce, Inc. Report shares rose 8.4% in active pre-market trading after the enterprise software group posted stronger-than-expected first quarter earnings and boosted its near-term profit forecast.
Pfizer (PFE) – Get Pfizer Inc. Report edged 0.11% higher after the pharma group said it will exit its consumer health joint venture with Britain’s GlaxoSmithKline GSK.
