Morning Call For Wednesday, June 6

Overnight Markets And News

Jun E-mini S&Ps (ESM18 +0.21%) this morning are up +0.18% at a fresh 2-1/2 month high and European stocks are up +0.21% as trade war concerns subsided after China offered to boost purchases of American goods and the U.S. finalized a deal to allow China's ZTE Corp. to resume purchases from American suppliers. According to unnamed people familiar with the matter, China has offered to buy $25 billion a year more of crude oil, coal and farm products from the U.S. The offer comes as both countries continue to negotiate to avoid a trade war as the Trump administration has threatened to impose tariffs on at least $50 billion in Chinese imports after it publishes a final list of targets on June 15. Gains in European stocks were limited as EUR/USD (^EURUSD +0.53%) rose +0.45% to a 2-week high and the yield on the German 10-year bund rose to a 1-week high of 0.443% on hawkish commentary from ECB members. ECB Governing Council member Knot said, "it's reasonable to announce the end of the net asset purchases soon," and ECB Chief Economist Praet said the Jun 14 ECB meeting will be pivotal for reaching a decision on when to end QE. Asian stocks settled mostly higher: Japan +0.38%, Hong Kong +0.53%, China +0.03%, Taiwan +0.92%, Australia +0.50%, Singapore -0.44%, South Korea closed for holiday, India +0.79%. Reduced trade tensions between the U.S. and China gave Asian bourses a lift as China's Shanghai Composite rose to a 1-week high and Japan's Nikkei Stock Index climbed to a 2-week high. Another bullish factor for Japanese stocks was the rally in USD/JPY to a 2-week high, which bolstered the earnings prospects of exporters.

The dollar index (DXY00 -0.32%) is down -0.22% at a 2-week low. EUR/USD (^EURUSD +0.53%) is up +0.45% at a 2-week high on signs the ECB may announce the end of QE next week. USD/JPY (^USDJPY +0.37%) is up +0.36% at a 2-week high.

Sep 10-year T-note prices (ZNU18 -0-090) are down -8.5 ticks.

ECB Governing Council member Knot said inflation has been "stable" for a while, and less dependent on our monetary stimuli and "it's reasonable to announce the end of the net asset purchases soon."

ECB Chief Economist Praet said, "it's clear that next week the Governing Council will have to make the assessment on whether the progress so far has been sufficient to warrant a gradual unwinding of our net asset purchases."

The German May Markit construction PMI rose +3.0 to 53.9, the fastest pace of expansion in 4 months.

Japan Apr labor cash earnings rose +0.8% y/y, weaker than expectations of +1.3% y/y. Apr real cash earnings were unch y/y, weaker than expectations of +0.1% y/y.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -2.9% to 356.1 with purchase sub-index -1.9% to 242.7 and refi sub-index -4.7% to 970.7), (2) revised Q1 non-farm productivity (expected +0.6%, previous +0.7%) and revised Q1 unit labor costs (expected +2.8%, previous +2.7%), (3) Apr trade deficit (expected -$49.0 billion, Mar -$49.0 billion), (4) EIA weekly Petroleum Status Report.

Notable Russell 1000 earnings reports today include: Brown-Forman (consensus $0.22), Thor Industries (2.58), Signet Jewelers (-0.09).

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

Equity conferences this week: Jefferies Global Healthcare Conference on Tue-Wed, Bank of America Merrill Lynch Global Technology, Media & Telecom Conference on Tue-Thu, Robert W. Baird & Co. Global Consumer, Technology & Services Conference on Tue-Thu, NAREIT REITWeek Investor Conference on Tue-Thu, Apple Worldwide Developers Conference on Tue-Fri, Deutsche Bank Global Industrials & Materials Summit on Wed-Thu, Sandler O'Neill Global Exchange and Brokerage Conference on Wed-Thu, Baird Global Consumer, Technology & Services Conference on Thu, Gabelli Movie & Entertainment Conference on Thu, Piper Jaffray Consumer Marketplace Conference on Thu.

Market Comments

June S&P 500 E-minis (ESM18 +0.21%) this morning are up +5.00 points (+0.18%) at a new 2-1/2 month high. Tuesday's closes: S&P 500 +0.07%, Dow Jones -0.06%, Nasdaq +0.32%. The S&P 500 on Tuesday posted a 2-1/2 month high and closed higher on the unexpected +65,000 increase in U.S. Apr JOLTS job openings to a record higher of 6.698 million jobs (stronger than expectations of -200,000 to 6.350 million) and the +1.8 point increase in the U.S. May ISM non-manufacturing index to 58.6 (stronger than expectations of +0.8 to 57.6). U.S. stocks were undercut by carry-over weakness from a slide in European stocks after Italian government bond yields jumped on concern that the fiscal plans of Italy's new coalition government will violate EU fiscal rules.

Sep 10-year T-notes (ZNU18 -0-090) this morning are down -8.5 ticks. Tuesday's closes: TYU8 +6.50, FVU8 +3.75. Sep 10-year T-notes on Tuesday closed higher on carry-over support from a rally in German bunds on Italian political risks. T-note prices fell back from their best levels on the stronger-than-expected U.S. economic data on Apr JOLTS job openings and the May ISM non-manufacturing index, which bolsters the case for tighter Fed policy.

The dollar index (DXY00 -0.32%) this morning is down -0.205 (-0.22%) at a 2-week low. EUR/USD (^EURUSD +0.53%) is up +0.0053 (+0.45%) at a 2-week high. USD/JPY (^USDJPY +0.37%) is up +0.40 (+0.36%) at a 2-week high. Tuesday's closes: Dollar Index -0.122 (-0.13%), EUR/USD +0.0019 (+0.16%), USD/JPY -0.03 (-0.03%). The dollar index on Tuesday closed lower on a decline in T-note yields, which is negative for the dollar's interest rate differentials. There was also strength in EUR/USD after Bloomberg reported that the Jun 14 ECB meeting will feature a live debate about when the ECB will end its asset purchases.

Metals prices this morning are mixed with Aug gold (GCQ18 -0.22%) -3.7 (-0.28%), Jul silver (SIN18 +0.25%) +0.017 (+0.10%) and Jul copper (HGN18 +0.72%) +0.018 (+0.55%). Tuesday's closes: Aug gold +4.80 (+0.36%), Jul silver +0.100 (+0.59%), Jul copper +0.0640 (+2.04%). Metals on Tuesday closed higher with Jul copper at a 6-week high. Metals prices were boosted by increased demand for precious metals from Italian political risks as Italian government bond yields jumped after a speech from Italian Prime Minister Conti raised concern about Italy's fiscal plans that may challenge EU rules. Metals prices were also boosted by a weaker dollar. Copper prices were boosted by labor unrest that may lead to a strike that curbs copper production at Chile's copper mine at Escondida, the world's biggest.

Jul WTI crude oil prices (CLN18 -0.58%) this morning are down -35 cents (-0.53%) and Jul gasoline (RBN18 -0.38%) is -0.0081 (-0.38%). Tuesday's closes: Jul crude +0.77 (+1.19%), Jul gasoline -0.0162 (-0.76%). Jul crude oil and gasoline on Tuesday settled mixed with Jul gasoline at a 4-week low. Crude oil prices were boosted by a weaker dollar and expectations for Wednesday's weekly EIA crude inventories to fall by -3.0 million bbl. Crude oil prices were undercut by a report that the Trump administration asked Saudi Arabia and several other OPEC producers to boost crude production by 1 million bpd in an attempt to reduce U.S. retail gasoline prices.

Overnight U.S. Stock Movers

Cigna (CI -0.10%) was upgraded to 'Buy' from 'Neutral' at Goldman Sachs with a price target of $212.

Manitowoc (MTW -3.45%) was upgraded to 'Buy' from 'Hold' at SunTrust Robinson Humphrey with a price target of $33.

Tesla (TSLA -1.89%) rose over 1% in after-hours trading after CEO Elon Musk said the company is likely to reach a production rate of 5,000 cars per week by the end of the month and that he sees positive cash flow in Q3 and Q4.

Madrigal Pharmaceuticals (MDGL +10.17%) lost more than 1% in after-hours trading after it announced that it had commenced an underwritten public offering of $200 million of its common stock.

United States Steel (X -1.10%) announced that it will restart the second blast furnace at its Granite City Works plant and hire about 300 people for the restart, which is scheduled for around October 1.

Kohl's (KSS +4.72%) was downgraded to 'Underweight' from 'Neutral' at Atlantic Equities LLP with a price target of $65.

Evergy (EVRG +0.46%) was rated a new 'Outperform' at Wolfe Research with a price target of $60.

Floor & Decor (FND -0.87%) was rated a new 'Outperform' at William Blair & Co.

NCI Building Systems (NCS +1.57%) jumped nearly 10% in after-hours trading after it reported Q1 adjusted Ebitda of $39.7 million, better than consensus of $34.4 million, and then forecast Q3 adjusted Ebitda of $56 million to $66 million, the midpoint well above consensus of $58.4 million.

Layne Christensen (LAYN +0.39%) rose almost 3% in after-hours trading after it reported Q1 revenue of $114.6 million.

ImmunoGen (IMGN +7.40%) slid 4% in after-hours trading after it announced that it intends to offer 12 million shares of its common stock in an underwritten public offering.