Futures flat after strong Japanese GDP
Investors are looking for direction ahead of data on inflation, housing and the labor market.
U.S. equity futures were nearly unchanged in early premarket trade following a stronger than expected GDP report from Japan. Japan reported first quarter GDP rose 3.5% on an annualized basis, better than the 2.7% expected growth rate. Notably, the GDP deflator, a measure of inflation, fell to -1.2%, lower than the -0.9% expected, showing continued deflation in Japan.
In other news, the World Gold Council announced that global gold demand fell 13% in the first quarter with gold investment declining by nearly one half. However, the Council also said that supply constraints of gold bars were increasing as production slows.
Foreign direct investment into China fell once again in April to 1.21% annualized growth from 1.42% growth in the previous month, showing continued caution on investment in emerging markets.
Inflation in the eurozone continued to run below trend in April as core CPI inflation rose 1.0% vs. a year ago, in line with expectations and below March's 1.0%.
S&P 500 futures fell 1.1 points to 1,653.20.
The EUR/USD was lower at 1.2875.
Spanish 10-year government bond yields fell 2 basis points to 4.32%.
Italian 10-year government bond yields fell 2 basis points to 4.00%.
Gold fell 1.7% to $1,372.50 per ounce.
Asian shares were mixed overnight as Japanese shares sold off following the news that deflation persisted into the first quarter. The Japanese Nikkei Index fell 0.39% while the Shanghai Composite Index gained 1.22% and the Hang Seng Index rose 0.17%. Also, the Korean Kospi gained 0.79% and Australian shares fell 0.5%.
European shares were also mixed overnight on economic data. The Spanish Ibex Index fell 0.15% and the Italian FTSE MIB Index rose 0.39%. Meanwhile, the German DAX fell 0.2% and the French CAC 40 declined 0.31% while U.K. shares rose 0.06%.
Commodities were lower overnight on continued dollar strength. WTI crude futures slipped 0.77% to $93.57 per barrel and Brent crude futures declined 0.46% to $103.20 per barrel. Copper futures fell 0.55% to $324.70 per pound. Gold was lower and silver futures declined 2.04% to $22.20 per ounce.
Currency markets continued to show dollar strength overnight as the Swiss franc notably approached parity against the dollar. The EUR/USD was lower at 1.2875 and the dollar rose against the yen to 102.61. Overall, the Dollar Index gained 0.03% on gains against the Canadian dollar, the Swiss franc, the yen, the euro, and the pound. Notably, the Swiss franc continued to weaken against the dollar as the USD/CHF rose to 0.9671 and the Australian dollar continued to fall against the greenback to 0.9814.
Earnings reported Wednesday
Key companies that reported earnings Wednesday include:
Cisco (CSCO) reported third quarter earnings per share of $0.51 vs. $0.49 expected on revenue of $12.2 billion vs. $12.8 billion expected.
Deere and Co. (DE) reported second quarter earnings per share of $2.76 vs. $2.72 on revenue of $10.9 billion vs. $9.81 billion expected.
Macy's (M) reported first quarter earnings per share of $0.55 vs. $0.53 expected on in-line revenue of $6.39 billion.
Sketchers (SKX) reported first quarter earnings per share of $0.13 vs. $0.19 expected on revenue of $451.6 million vs. $443.21 million.
Stocks moving in the premarket included:
Southwest Airlines (LUV) shares rose 4.6% premarket after the company quadrupled its quarterly dividend to $0.04 from $0.01 per share and boosted its share buyback program to $1.5 billion from $1.0 billion.
Advanced Micro Devices (AMD) shares declined 6.62% to $4.09 premarket on some interesting options activity Wednesday. Traders were betting very bearishly on the stock by trading over 5,000 July $4.50 puts all at the ask, which means they would need the stock to decline to $3.96 to profit.
Medtronic (MDT) shares rose 1.96% premarket on M&A speculation in the biotech space.
Newmont Mining (NEM) shares declined 1.81% premarket as metals prices continued to slip.
Notable companies expected to report earnings Thursday include:
Autodesk (ADSK) is expected to report first quarter earnings per share of $0.45 vs. $0.47 a year ago.
J.C. Penney (JCP) is expected to report a first quarter loss of $0.86 per share vs. a loss of $0.25 per share a year ago.
Nordstrom (JWN) is expected to report first quarter earnings per share of $0.76 vs. $0.70.
Kohl's (KSS) is expected to report first quarter earnings per share of $0.58 vs. $0.63 a year ago.
Wal-Mart (WMT) is expected to report first quarter earnings per share of $1.15 vs. $1.09 a year ago.
On the economics calendar Thursday, CPI, housing starts and initial jobless claims are due out followed by the Philly Fed survey. In addition, Federal Reserve Presidents Eric Rosengren, Richard Fisher and John Williams are set to speak as well as Governor Sarah Bloom Raskin.
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Investors are anxious to see if hiring can maintain its strong pace in the second half of the year.
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