Stock Market Update

The stock market is on course for a modestly lower start as futures on the S&P 500 trade nine points below fair value.

The early weakness follows yesterday's rebound from a weak start, which was brought on by a downgrade of the U.S. credit rating by Moody's. The tone is much more subdued this morning after a night that was fairly light with respect to economic data and the overall news flow.

The People's Bank of China lowered its one-year (3.00%) and five-year (3.50%) loan prime rates by ten basis points each, which the market had expected. Elsewhere, Japan had a weak 20-yr bond auction, underscoring limited liquidity after years of tight control over the bond market by the Bank of Japan.

Treasuries are slightly higher with the 10-yr yield down two basis points at 4.46%.

In U.S. corporate news:

• Home Depot (HD 387.40, +8.02, +2.1%): rising after missing Q1 EPS expectations on above-consensus revenue and reaffirming its FY26 guidance.
• Amer Sports (AS 34.57, +3.18, +10.1%): jumping after beating Q1 expectations, issuing in-line guidance for Q2, and raising its outlook for FY25.
• Cigna (CI 330.10, +8.14, +2.5%): reaffirmed its FY25 EPS guidance.
• HP Enterprise (HPE 17.95, +0.49, +2.8%): Evercore ISI upgraded the stock to Outperform from In Line with a $22 target.
• AES (AES 11.56, -0.15, -1.3%): Jefferies downgraded the stock to Underperform from Hold with a $9 target.

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Tuesday on a mostly higher note. Japan's Nikkei +0.1%, Hong Kong's Hang Seng +1.5%, and China's Shanghai Composite +0.4%
  • In economic data:
    • Hong Kong's April Unemployment Rate 3.4% (last 3.2%)
  • In news:
    • The People's Bank of China reduced its one-year (3.00%) and five-year (3.50%) loan prime rates by ten basis points each, which the market had expected.
    • India is reportedly discussing a three-tranche structure for a trade deal with the U.S. while Japanese officials will meet with their U.S. counterparts on Friday.
    • Japan had a weak 20-yr bond auction, which helped send yields on longer tenors to fresh multi-year highs.
    • The Reserve Bank of Australia lowered its cash rate by 25 basis points to 3.85%, as expected.
• Major European indices trade in the green. Germany's DAX +0.6%, U.K.'s FTSE +0.6%, France's CAC +0.5%
  • In economic data:
    • Eurozone's March Current Account surplus EUR50.9 bln (expected surplus of EUR35.9 bln; last surplus of EUR34.3 bln). March Construction Output 0.1% m/m (last -1.16%)
    • Germany's April PPI -0.6% m/m (expected -0.3%; last -0.7%); -0.9% yr/yr (expected -0.6%; last -0.2%)
  • In news:
    • Bank of England Chief Economist Pill said that cutting rates by 25 basis points per quarter is too rapid due to a stubborn inflation outlook.
    • British Prime Minister Starmer touted a freshly-signed trade deal with the EU.