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The Street
The Street
Business
Martin Baccardax

Stocks Slip Lower, 3M Settlement, Fed Bank Lending, CarMax Earnings On Deck, Meta News In Canada - 5 Things To Know

Five things you need to know before the market opens on Friday June 23:

1. -- Stock Futures Lower As Stagflation Risks Mount

U.S. equity futures moved lower Friday, while the dollar extended gains against its global peers and Treasury bond yields firmed, as investors grapple with hawkish central bank signaling set against weakening growth prospects in major economies around the world.

Treasury Secretary Janet Yellen told Bloomberg Television yesterday that the odds of a U.S. recession have "gone down" over the past weeks, thanks in part to a resilient job market, but softening PMI data from other parts of the world, as well as a fiercely inverted yield curve in the world's largest economy, have investors increasingly concerned over second-half growth prospects.

PMI data from Europe today, in fact, showed economic activity fell to the slowest pace in five months in June, with S&P Global's composite reading slipping to 50.3 points, just over the 50 point mark that separates growth from contraction.

S&P Global will publish PMI data for the U.S. later this morning, as traders push benchmark 2-year note yields to 4.761%, more than 102 basis points north of 10-year notes at 3.735%, following two-days of hawkish comments from Federal Reserve Chairman Jerome Powell.

Powell, who took questions from lawmakers on Capitol Hill as part of his semi-annual testimony on monetary policy, told lawmakers that the Fed is likely to raise rates at least two more times before the end of the year, a move that would lift the Fed Funds rate to between 5.5% and 5.75%.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, soared 0.72% higher in overnight trading to a two-week high of 103.135.

The firmer dollar, as well as fading demand prospects linked to weaker growth, pushed oil prices lower in overnight dealing, with WTI futures for August delivery falling $1.30 to $68.21 per barrel. Gold prices, too, were on the back foot and trading near a three-month low of $1,917.90.

On Wall Street, futures contracts tied to the S&P 500 were indicating a 22 point opening bell decline and those linked to the Dow Jones Industrial Average priced for a 105 point move to the downside. The tech-focused Nasdaq, which is set to snap an eight-week winning streak, was  looking at a steeper 105 point decline.

In overnight Asia trade, Japan's Nikkei 225 fell 1.45% to end its run of ten consecutive weekly gains, while the region-wide MSCI ex-Japan benchmark fell 1.3% into the close of trading.

London's FTSE 100 fell 0.14% following weaker-than-expected June PMI data while the region-wide Stoxx 600 was marked 0.06% higher as the euro eased to 1.0863 against the surging greenback.

2. -- 3M Shares Jump After $10.3 Billion 'Forever Chemicals' Settlement

3M Co. (MMM) shares moved firmly higher in pre-market trading after the industrial group reached a tentative agreement with a host of public water companies over the use of so-called 'forever chemicals'.

3M said the agreement will see it pay around $10.3 billion over the next ten years in order to settle suits linked to the use of per- and polyfluoroalkyl substances, also known as PFAs and often referred to as 'forever chemicals'. Payments could rise to as much as $12.5 billion, 3M said, depending on the levels of PFAs found in public water systems.

3M has pledged to stop making PFAs by 2025.

"We have reached the largest drinking water settlement in American history, which will be used to help filter PFAs from drinking water that is served to the public," 3M said in a statment. "The result is that millions of Americans will have healthier lives without PFAS in their drinking water." 

3M shares were marked 3.3.% higher in pre-market trading to indicate an opening bell price of $103.73 each.

3. -- Banks Keep Tapping Fed For Emergency Support As Stresses Linger

U.S. banks continued to tap the Federal Reserve's various lending programs this week, data late Thursday indicated, suggesting stress from the country's regional lending crisis earlier this spring continue to linger.

Banks borrowed $3.2 billion from the Fed's main discount window over the seven-day period ending on June 21, down from the $3.6 billion handed-out over the prior period. 

Borrowing from the Fed's Bank Term Funding Program, which allows banks to exchange high-quality assets for one-year loans, was up $700 million to $102.7 billion while its other credit" account, which has been used to allocate borrowing from the First Republic Bank, slipped $8 billion to $172.3 billion.

Fed Chair Jerome Powell told lawmakers on Capitol Hill earlier this week that there was a "clear need" to strengthen supervision over the broader banking system in the wake of First Republic sale to JPMorgan and the collapse of Silicon Valley Bank in early March, but suggested that enhanced rules on capital would likely apply to larger, as opposed to smaller, lenders in the system.

4. -- CarMax Earnings On Deck As Demand Cools, Prices Slide

CarMax (KMX) shares bumped higher in pre-market trading ahead of the used car retailer's first quarter earnings prior to the opening bell.

Analysts expect CarMax to see its adjusted bottom line nearly halve from last year to 79 cents per share, with revenues down 19.1% to $7.53 billion, as used car prices decline from 2022 peaks and broader consumer demand slows.  

Earlier this month, smaller rival Carvana (CVNA) issued a bullish near-term outlook, forecasting second quarter profits of around $50 million, thanks in part to ongoing cost-cuts and firming secondary car market. 

CarMax shares were marked 1.24% higher in pre-market trading to indicate an opening bell price of $79.29 each.

5. -- Meta To Pull Plug On Facebook News Access In Canada

Meta Platforms (META) said it will remove access to news feeds from Facebook and Instagram for users in Canada following the approval of the country's Online News Act.

The bill, which was passed by Canada's Senate late Thursday, effectively seeks payment by internet companies such as Meta and Google parent Alphabet (GOOGL) to the creators of news content found on their platforms. 

Google has said the new legislation, which is similar to rules put in place in Australia in 2021, is "unworkable" while Meta has insisted that news has "no economic value" to the company. 

"Today, we are confirming that news availability will be ended on Facebook and Instagram for all users in Canada prior to the Online News Act taking effect," Meta said in a statement. 

Meta Platforms shares were marked 0.66% lower in pre-market trading to indicate an opening bell price of $283.00 each. 

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