5 Things to Know Before the Stock Market Opens

Consumer Price Index (CPI) report for July is due this morning, with moderate gains expected by economists; Cisco Systems (CSCO) is expected to report lower fourth-quarter results after the bell; Kellanova (K) shares are jumping in premarket trading as candy giant Mars reportedly closes in on buying the Pop-Tarts maker for about $30 billion; Starbucks (SBUX) shares are edging lower after soaring Tuesday on news the Seattle-based coffee chain has hired Chipotle Mexican Grill’s (CMG) Brian Niccol as its new Chief Executive Officer (CEO); and activist Elliott Investment Management, which has been in Starbucks’ crosshairs, intends to nominate 10 directors to the 15-person board at Southwest Airlines (LUV). U.S. stock futures are little changed after major indexes soared yesterday after the latest Producer Price Index (PPI) data showed a lower-than-expected uptick in wholesale prices during July. Here’s what investors need to know today.

1. Consumer Inflation Expected to Be Steady, Makes Fed Rate Cut Case

The Consumer Price Index (CPI), due to be released at 8:30 a.m. ET, is expected to show prices increased at an annual rate of 3.0%—the same as it was in June—according to economists surveyed by The Wall Street Journal and Dow Jones Newswires. For the closely watched core CPI figure, which strips out volatile food and energy costs, economists expect an annual rate of 3.2%, just a tick down from 3.3% in June and stubbornly above the Federal Reserve‘s target of 2%. Still, the Producer Price Index (PPI) report released Tuesday showed wholesale inflation chalking up a smaller gain than expected, fortifying economists’ confidence that inflation is trending down.

2. Cisco Expected to Post Lower Q4 Results

Cisco Systems (CSCO) is expected to report year-over-year declines in quarterly sales and profits after the bell, with the networking-equipment pioneer possibly announcing another round of job cuts. Cisco’s revenue for its fiscal fourth quarter is expected to fall 11% to $13.54 billion, according to consensus analysts’ estimates compiled by Visible Alpha, with earnings per share (EPS) down 47% at $0.52. Reuters reported last week that the company may also announce another round of layoffs as it pivots its focus to higher-growth areas like cybersecurity and artificial intelligence (AI). Cisco shares are little changed in premarket trading.

3. Kellanova Jumps as Mars Reportedly Close to $30B Deal

Kellanova (K) shares are jumping 8% in premarket trading as candy giant Mars reportedly closes in on an all-cash deal to buy the maker of Pop-Tarts and Pringles at a nearly $30 billion valuation. Mars, which makes M&M’s and Skittles, plans to pay $83.50 per share for Kellanova, according to The Wall Street Journal, which along with Reuters flagged the potential transaction earlier this month. A deal by Mars for Kellanova, which was spun out of Kellogg last year, would expand the privately held firm’s access to snack foods. Kellanova shares closed at $74.50 Tuesday.

4. Starbucks Edges Lower After Soaring on Hiring of Chipotle CEO Niccol

Starbucks (SBUX) shares are edging lower in premarket trading after surging 24.5% to be the S&P 500’s top performer Tuesday on its announcement that it hired Chipotle Mexican Grill (CMG) Brian Niccol as its new Chief Executive Officer (CEO). The sudden replacement of CEO Laxman Narasimhan came amid reported pressure from activist investors Elliott Investment Management and Starboard Value. Niccol, who turned around Chipotle as the fast-casual chain struggled to move past a 2016 E. coli outbreak, will have to deal not just with activist investors’ demands but also slumping U.S. sales and a slowdown in China.

5.  Elliott Intends to Nominate 10 Southwest Airlines Board Directors

Elliott Investment Management is preparing to launch a proxy fight for Southwest Airlines (LUV), saying it intends to nominate 10 directors to the airline’s 15-person board. Elliott, which manages funds that own around 11% of the Dallas-based airline, has been fighting to change the board and leadership at Southwest, whose stock is down more than 10% this year as it struggles with weak bookings. Last month, the airline implemented a so-called “poison pill” shareholder rights plan to prevent being taken over by Elliott, and also announced a series of steps to boost revenue, including ending its long-held practice of open seating. Southwest shares are up about 1.5% in premarket trading.

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