Page One
Briefing.com Summary:
*Rebound action in the early going will be led by the tech sector.
*President Trump has indicated the U.S will hit Iran hard "very hard" tonight and eventually take control of Kharg Island.
*Oracle (ORCL) is down big after announcing an additional capital raise to fund its AI initiatives.
There was a nice bid earlier in the equity futures market, driven by buy-the-dip interest in the tech sector, lower oil prices in spite of another round of military strikes by the U.S. and Iran, and perhaps even some glad tidings about the New York Knicks' epic comeback.
Things aren't as nice as before, however.
Currently, the S&P 500 futures are up 37 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 237 points and are trading 0.9% above fair value, and the Dow Jones Industrial Average futures are up 257 points and are trading 0.6% above fair value.
These indications still point to a higher start for the major indices, but they lost some of their rebound mojo for a few reasons.
The first is a post to Truth Social by President Trimp, who said, "The United States will be hitting Iran... VERY HARD TONIGHT. At some point in the not too distant future, we will be taking Kharg Island, and other oil infrastructure points, and assume total control of their Oil and Gas Markets, much like we have with Venezuela, which is working out brilliantly for both Venezuela and the United States of America."
That announcement triggered a turn in oil prices. WTI crude futures had been under $89.00/bbl, heartened by the understanding that last night's strikes did not destroy any additional energy infrastructure. WTI crude futures are now up 0.4% to $90.37/bbl following the president's terse remarks about his plans for Iran.
Another development letting some air out of the equity futures market is the elevated inflation readings in the Producer Price Index.
The Producer Price Index for final demand increased 1.1% month-over-month in May (Briefing.com consensus: 0.7%) following a downwardly revised 1.1% increase (from 1.4%) in April. Excluding food and energy, the index for final demand jumped 0.4% month-over-month (Briefing.com consensus: 0.4%) following a downwardly revised 0.7% increase (from 1.0%) in April.
On a year-over-year basis, the index for final demand was up 6.5%, while the index for final demand, excluding food and energy, was up 4.9%.
The key takeaway from the report is that producers aren't finding much price relief; hence, consumers won't find much price relief in the near-term either, unless producers choose to absorb the higher costs.
The 2-yr note yield is up two basis points to 4.15%, and the 10-yr note yield is unchanged at 4.54%. Treasuries have had a relatively calm reaction to the PPI data, which was softened by downward revisions to the prior month, as well as the ECB's decision to raise its key policy rates by 25 basis points.
Separately, the weekly initial and continuing jobless claims report didn't upset things much. Initial jobless claims for the week ending June 6 increased by 4,000 to 229,000 (Briefing.com consensus: 222,000), while continuing claims for the week ending May 30 increased by 24,000 to 1.795 million.
Jobless claims were higher in the latest week, but the key takeaway remains that they are not at levels that would connote a material degradation of the labor market.
Shifting gears, Oracle (ORCL) is seeing a material decline after its earnings report. Shares of ORCL are down 9.6% in pre-market trading. The issue for the stock isn't so much the results, which were better than expected, but the announcement that the company is planning an additional $40 billion capital raise through a combination of debt and equity financing that includes its previously announced $20 billion at-the-market equity issuance.
It is the latest reminder that the AI buildout is an expensive undertaking that is lacking (at this stage, anyway) material returns on investment.
The latter point aside, index investors will see some positive returns on their investment at the opening bell. What matters more, though, is what they see at the closing bell.
