Overnight Markets and News

Jun E-mini S&Ps (ESM18 +0.14%) this morning are up +0.18% on optimism progress was being made in trade talks between the U.S. and China on reports that China had offered to reduce its annual trade surplus with the U.S. by $200 billion through increased imports of American products, according to an anonymous Trump administration official. The U.S. merchandise trade deficit with China hit a record $375 billion last year. European stocks fell back from a 3-1/2 month high and are down -0.19% on Italian political risks. Italy's MIB Stock Index is down -1.17% and the 10-year Italy bond yield jumped 11 bp to a 10-month high of 2.22% after the Five Star Movement and the League reached an accord that aims to ramp up spending on the poor and cut taxes in a direct challenge to the European Union. The accord demands a review of EU budget rules, an end to economic sanctions on Russia and pledges to roll-back pension reforms that raised the retirement age. Asian stocks settled mostly higher: Japan +0.40%, Hong Kong+0.34%, China +1.24%, Taiwan -0.03%, Australia -011%, Singapore -0.21%, South Korea +0.34%, India -0.86%. China's Shanghai Composite climbed to a 5-week high on strength in energy stocks along with optimism that progress will be made on U.S.-China trade talks. Japan's Nikkei Stock Index rallied to a 3-1/2 month high, led by a jump in exporters, as USD/JPY rose to a 3-3/4 month high.

The dollar index (DXY00 +0.14%) is up +0.17% at a 5-month high. EUR/USD (^EURUSD -0.09%) is down -0.12%. USD/JPY (^USDJPY +0.20%) is up +0.22% at a 3-3/4 month high after Japan Apr national CPI rose +0.6% y/y, weaker than expectations of +0.7% y/y and the slowest pace of increase in 5 months, which is dovish for BOJ monetary policy and undercut the yen.

Jun 10-year T-note prices (ZNM18 +0-010) are little changed, up +0.5 of a tick.

Cleveland Fed President Mester said "the U.S. economy is near both Fed monetary goals of maximum employment and price stability, and the outlook is one of the most favorable we have seen in a long time."

ECB Governing Council member Nowotny said he's among policymakers who think the ECB "shouldn't wait too long with normalizing monetary policy, given the situation of the economy."

German Apr PPI rose +0.5% m/m and +2.0% y/y, stronger than expectations of +0.3% m/m and +1.8% y/y.

Japan Apr national CPI rose +0.6% y/y, weaker than expectations of +0.7% y/y and the slowest pace of increase in 5 months. Apr national CPI ex fresh food rose +0.7% y/y, weaker than expectations of +0.8% y/y and the smallest pace of increase in 7 months. Apr national CPI ex fresh food & energy rose +0.4% y/y, right on expectations.

U.S. Stock Preview

Key U.S. news today includes: (1) Cleveland Fed President Loretta Mester (voter) speaks on ‘Macroprudential and Monetary Policy’ at an ECB conference in Frankfurt, (2) Dallas Fed President Robert Kaplan (non-voter) speaks in a moderated Q&A at an event at a University of Texas at Dallas event.

Notable Russell 1000 earnings reports today include: Deere (consensus $3.31), Campbell Soup (0.61).

U.S. IPO's scheduled to price today: none.

Equity conferences this week: none.

Market Comments

June S&P 500 E-minis (ESM18 +0.14%) this morning are up +5.00 points (+0.18%). Thursday's closes: S&P 500 -0.09%, Dow Jones -0.22%, Nasdaq -0.41%. The S&P 500 on Thursday closed lower on the increase in the 10-year T-note yield to a new 6-3/4 year high of 3.12% and on the +11,000 increase in U.S. weekly jobless claims, more than expectations of +4,000. Stocks were supported by the unexpected +11.2 point increase in the U.S. May Philadelphia Fed business outlook survey to a 1-year high of 34.4, stronger than expectations of -2.2 to 21.0. There was also strength in energy stocks as crude oil prices rose 0.14% to a new 3-1/2 year high.

June 10-year T-notes (ZNM18 +0-010) this morning are up +0.50 of a tick. Thursday's closes: TYM8 -1.00, FVM8 +0.75. Jun 10-year T-notes on Thursday fell to a new contract low and the 10-year T-note yield rose to a 6-3/4 year high of 3.12%. T-note prices were undercut by signs of strength in the U.S. economy after weekly continuing claims fell to a 44-1/2 year low and the May Philadelphia Fed business outlook survey climbed to a 1-year high. T-note prices were also undercut by increased inflation expectations after the 10-year T-note breakeven inflation rate rose to a 3-3/4 year high of 2.20%.

The dollar index (DXY00 +0.14%) this morning is up +0.157 (+0.17%) at a 5-month high. EUR/USD (^EURUSD -0.09%) is down -0.0014 (-0.12%). USD/JPY (^USDJPY +0.20%) is up +0.24 (+0.22%) at a 3-3/4 month high. Thursday's closes: Dollar Index +0.077 (+0.08%), EUR/USD -0.0013 (-0.11%), USD/JPY +0.37 (+0.34%). The dollar index on Thursday closed higher on stronger-than-expected U.S. May Philadelphia Fed business outlook index that rose to a 1-year high and was hawkish for Fed policy. The dollar was also boosted by the rise in the 10-year T-note yield to a new 6-3/4 year high of 3.12%, which improved the dollar's interest rate differentials.

Metals prices this morning are weaker with Jun gold (GCM18 -0.24%) -3.5 (-0.27%), Jul silver (SIN18 -0.37%) -0.081 (-0.49%), and Jul copper (HGN18 -0.74%) -0.022 (-0.70%). Thursday's closes: Jun gold -2.10 (-0.16%), Jul silver +0.110 (+0.67%), Jul copper +0.0185 (+0.60%). Metals on Thursday settled mixed with Jun gold at a 4-3/4 month low. Metals prices were undercut by a stronger dollar and by the rally in stocks, which reduced the safe-haven demand for precious metals. Copper found support on signs of strength in the U.S. economy after weekly continuing claims fell -87,000 to a 44-1/2 year low of 1.707 million and the May Philadelphia Fed business outlook survey unexpectedly rose +11.2 to a 1-year high of 34.4.

Jun WTI crude oil prices (CLM18 +0.08%) this morning are up +3 cents (+0.04%) and Jun gasoline (RBM18 +0.53%) is +0.0109 (+0.49%). Thursday's closes: Jun crude +0.10 (+0.14%), Jun gasoline 0.0068 (-0.30%). Jun crude oil and gasoline on Thursday settled mixed with Jun crude at a 3-1/2 year high. Crude oil prices were supported by the anticipation of a drop in Iranian oil imports this year as renewed U.S. sanctions take effect. Crude oil prices were also boosted by the increase in the crack spread to an 8-1/4 month high, which provides incentive for refiners to boost their crude purchases to refine the crude into gasoline. Crude oil prices were undercut by a stronger dollar.

Overnight U.S. Stock Movers

Amgen (AMGN +0.49%) rose nearly 2% in pre-market trading after its Aimovig drug won FDA approval for the preventive treatment of migraines in adults.

Yelp (YELP +2.73%) was upgraded to 'Buy' from 'Neutral' at B Riley FBR with a price target of $58.

Nordstrom (JWN -0.27%) slid 7% in after-hours trading after it reported Q1 comparable store sales rose +0.6%, weaker than consensus of +1.0%.

Spotify (SPOT -1.63%) was rated a 'Strong Buy' at Raymond James with a price target of $190.

Cerner (CERN +1.08%) jumped 7% in after-hours trading after the Veterans Affairs Department said it awarded the company a 10-year IT contract valued at up to $10 billion.

PayPal Holdings (PYPL +1.76%) acquired iZettle for $2.2 billion.

Raven Industries (RAVN +2.43%) may open to the downside this morning after it reported after-hours Thursday Q1 revenue of $111.1 billion, weaker than consensus of $117 million.

Applied Materials (AMAT -2.19%) fell almost 3% in after-hours trading after it forecast Q3 net sales of $4.33 billion to $4.53 billion, the midpoint below consensus of $4.53 billion.

Marriott International (MAR -1.53%) was upgraded to 'Outperform' from 'In-line' at Evercore ISI with a price target of $155.

Boot Barn Holdings (BOOT -0.12%) dropped nearly 4% in after-hours trading after 7.21 million shares of its common stock were offered between $23.50 and $24.00 a share via JPMorgan Chase and Jeffries.

Host Hotels (HST) was upgraded to 'Outperform' from 'In-line' at Evercore ISI with a price target of $23.

AmTrust Financial Services (AFSI +0.60%) climbed nearly 7% in after-hours trading after billionaire investor Carl Icahn reported a 9.38% stake in the company.

Dicerna Pharmaceuticals (DRNA -0.04%) rose 3% in after-hours trading after its drug to treat primary hyperoxaluria, Synthetic Double-Stranded Rna Oligonucletide Conjugates To N-Acetyl-D-Galactosamine Amniosugar Residues, was granted orphan drug status by the FDA.

Advanced Micro Devices (AMD unch) gained more than 1% in after-hours trading after it was rated a new 'Outperform' at Cowen with a price target of $18.

Quotient Ltd (QTNT +0.86%) jumped almost 12% in after-hours trading after it announced it completed the MosaiQ verification and validation phase for its initial blood grouping.