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Set for a soft start

Posted June 10, 2024 at 9:30 am
Patrick J. O’Hare

It is shaping up to be a soft start for the stock market, which is biding its time in front of some key events this week while taking in the latest – and surprising – results from the European Parliament elections over the weekend.

The latter saw far-right parties achieve some sizable gains and hastened a call by French President Emmanuel Macron for a snap election to be held June 30. With the heightened uncertainty, European bourses have started the week on a defensive note, although overall losses are still fairly modest in scope in most cases. France’s CAC 40 (-1.6%) is the negative outlier.

The U.S. market for its part is drifting along. Currently, the S&P 500 futures are down 10 points and are trading 0.2% below fair value, the Nasdaq 100 futures are down 43 points and are trading 0.2% below fair value, and the Dow Jones Industrial Average futures are down 71 points and are trading 0.2% below fair value.

NVIDIA (NVDA), which begins trading today following a 10-for-1 stock split, is 1.1% lower in pre-market action. That has created a drag on the futures market that is being offset a bit by Apple (AAPL), which is up 0.3% in front of the Worldwide Developers Conference it is conducting today where it is expected to provide an update on its AI initiatives.

The price action in these stocks will be focal points throughout the session and potential market movers.

Other items that will round into focus will include the New York Fed’s release of its Survey of Consumer Expectations at 11:00 a.m. ET and the results of the $58 billion 3-year note auction at 1:00 p.m. ET.

The 2-yr note yield is up one basis point to 4.88% and the 10-yr note yield is up four basis points to 4.47% following a rough outing on Friday in the wake of the better-than-expected employment report for May. The rough outing Friday was tied to a belief that the employment report will leave the Fed reluctant to cut rates soon.

The probability of a rate cut at the September FOMC meeting is just 50.8% now versus 59.6% a week ago, so it is effectively a toss-up in the market’s mind. That makes Wednesday the most pivotal day of this week, as it will start with the May Consumer Price Index at 8:30 a.m. ET and will be followed at 2:00 p.m. ET by the FOMC decision and an updated Summary of Economic Projections (SEP). Fed Chair Powell will hold his press conference at 2:30 p.m. ET.

The last SEP in March showed a median estimate of three rate cuts by the end of 2024, but with some sticky inflation readings of late, market participants are inclined to think the updated SEP will show a downward shift in the median estimate for rate cuts this year.

Separately, it was announced that KKR (KKR)CrowdStrike (CRWD), and GoDaddy (GDDY) will be replacing Robert Half (RHI)Comerica (CMA), and Illumina (ILMN) in the S&P 500 prior to the open on June 24. These stocks are all on the move (no pun intended) in pre-market action along with Southwest Airlines (LUV), which is up 7% on a Wall Street Journal report that activist investor Elliott Investment Management has taken a nearly $2 billion position in the stock, and Diamond Offshore (DO), which is up 9% on the news that it is being acquired by Noble Corp. (NE) in a cash-and-stock deal.

Originally Posted June 10, 2024 – Set for a soft start

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