Stocks Set to Open Higher on Tech Boost, Fed Minutes Awaited

Stock index futures were supported by a rebound in technology stocks at the start of a week that will once again test investors' appetite for the AI trade. South Korean memory chipmaker Samsung Electronics is scheduled to report preliminary second-quarter earnings on Tuesday. Also, Elon Musk's rocket and AI company SpaceX (SPCX) is set to join the Nasdaq 100 index before the opening bell on Tuesday. SK Hynix's $29 billion U.S. listing is set to follow just a few days later, in what would rank among the biggest share sales in history.

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Meanwhile, the price of WTI crude fell nearly -1% on Monday as flows through the Strait of Hormuz persisted and OPEC+ agreed to increase crude production. Treasuries rose as traders continued to scale back their expectations for Federal Reserve rate hikes, with the benchmark 10-year yield falling two basis points to 4.47%.

Investor focus this week is also on the minutes of the Federal Reserve's latest policy meeting and comments from Fed officials.

In Thursday's trading session, Wall Street's major indices closed mixed. Chip and AI infrastructure stocks plunged, with Sandisk (SNDK) sinking over -14% to lead losers in the S&P 500 and Nasdaq 100, and KLA Corp. (KLAC) tumbling more than -11%. Also, Tesla (TSLA) slumped over -7% after the EV maker's Q2 deliveries failed to impress investors. In addition, Jabil Inc. (JBL) fell more than -9% after announcing plans to offer a mixed shelf of debt securities, without disclosing the offering size. On the bullish side, Genuine Parts (GPC) surged over +12% and was the top percentage gainer on the S&P 500 after Bloomberg reported that the company has attracted a cash bid for its auto-parts division from O'Reilly Automotive.

The Labor Department's report released on Thursday showed that nonfarm payrolls rose by 57K in June, weaker than expectations of 114K. At the same time, the U.S. June unemployment rate unexpectedly fell to a 1-year low of 4.2%, stronger than expectations of no change at 4.3%. In addition, U.S. June average hourly earnings rose +0.3% m/m and +3.5% y/y, in line with expectations. Finally, U.S. weekly initial jobless claims unexpectedly fell by -1K to 215K, compared with the 219K expected.

"A labor market that is still expanding, but no longer overheating, allows the Fed to remain patient while assessing price pressures. If disinflation continues as expected, policymakers will have little reason to move away from a holding pattern in the second half of the year," said Andrew Dubinsky at UBS Chief Investment Office.

San Francisco Fed President Mary Daly said on Thursday that inflation should begin to ease, but that significant uncertainties remain around the economic outlook. "We continue to have policy in a slightly restrictive position, so inflation should come down," Daly said.

Meanwhile, U.S. rate futures have priced in a 75.9% chance of no rate change and a 24.1% chance of a 25 basis point rate hike at the conclusion of the Fed's July meeting.

This week, the minutes of the Fed's first policy meeting under Kevin Warsh as chairman will be the main highlight. Market participants want to see whether Mr. Warsh's pledge to overhaul Fed communications extends to the minutes, after the central bank issued a much shorter policy statement following its rate decision in mid-June. Fed officials left interest rates unchanged last month but released projections showing growing concern that they may need to raise interest rates to counter rising price pressures. However, Warsh said last week that inflation risks had come down in recent weeks. Against that backdrop, investors will be looking for further clues on whether the Fed could raise interest rates in the coming months.

"The minutes could offer a greater insight into the Federal Open Market Committee's thinking. We presume they will be in the same form as have been previously, although we do note that the statement released at the time of the [rate] announcement was in a slimmed-down form," according to Ellie Henderson at Investec.

Market watchers will also keep a close eye on speeches from Fed officials. Fed Governor Christopher Waller, New York Fed President John Williams, and Dallas Fed President Lorie Logan are scheduled to speak this week.

The U.S. economic calendar is relatively light this week, with highlights including Trade Balance, Consumer Credit, Existing Home Sales, and Initial Jobless Claims.

On the earnings front, only two S&P 500 companies are scheduled to report quarterly results this week: PepsiCo (PEP) and Delta Air Lines (DAL).

Today, investors will focus on the U.S. ISM Non-Manufacturing PMI and S&P Global Services PMI, set to be released in a couple of hours. Economists expect the June ISM services index to be 54.2 and the S&P Global services PMI to be 51.4, compared to the previous month's values of 54.5 and 50.7, respectively.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.47%, down -0.51%.