June S&P 500 futures (ESM23) are up +0.63%, and June Nasdaq 100 E-Mini futures (NQM23) are up +1.74% this morning after three major U.S. benchmark indices finished the regular session in the red as talks between the White House and Republican representatives on raising the U.S. debt ceiling ended without a deal.

Debt ceiling negotiations between President Joe Biden’s team and representatives of House Speaker Kevin McCarthy showed little progress Wednesday. U.S. President Joe Biden offered to freeze government spending at current levels during debt talks with Republicans, which would shrink the deficit by $1 trillion, U.S. Treasury Secretary Janet Yellen said Wednesday. House Speaker Kevin McCarthy believes the two sides can reach a debt ceiling deal, although they are “still far apart” on some issues.

The minutes of the Federal Open Market Committee’s May 2-3 meeting showed that Federal Reserve policymakers “generally agreed” that the extent to which further hikes may be appropriate was less certain and preferred to keep the policy flexible. “Almost all” Fed officials said downside risks to growth and upside risks to unemployment had increased due to banking stresses, according to the minutes released Wednesday. Also, officials said that progress on core inflation had been slower than they had expected, with some participants saying that “based on their expectations that progress in returning inflation to 2 percent could continue to be unacceptably slow, additional policy firming would likely be warranted at future meetings.”

In Wednesday’s trading session, the benchmark S&P 500 notched a 1-1/2 week low, and the blue-chip Dow fell to a 1-3/4 month low. Analog Devices Inc (ADI) plunged over -7% and was the top percentage loser on the tech-heavy Nasdaq 100 after forecasting weaker-than-expected results for the upcoming quarter. Also, Agilent Technologies Inc (A) slid about -6% and was among the top percentage losers on the S&P 500 after the company issued downbeat FY23 revenue and EPS guidance. On the positive side, Palo Alto Networks Inc (PANW) climbed over +7% after the cybersecurity firm reported solid Q3 results and raised its full-year guidance for sales and billings.

Fed Governor Christopher Waller said Wednesday that incoming economic data would help determine whether the Fed should increase interest rates or hold them steady at its June meeting. At the same time, he added that policymakers would likely have to hike rates further this year to tame inflation. “I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2% objective,” Waller said.

Meanwhile, U.S. rate futures have priced in a 64.7% probability of no hike and a 35.3% chance of a 25 basis point rate increase at the next central bank meeting in June.

On the earnings front, NVIDIA Corporation (NVDA) surged over +24% in pre-market trading after the semiconductor giant reported upbeat Q1 results and blew away forecasts for the upcoming quarter.

In other news, Fitch Ratings put the United States’ AAA rating on watch for a possible downgrade on Wednesday.

Today, all eyes are focused on the U.S. GDP preliminary data in a couple of hours. Economists, on average, forecast that U.S. GDP will stand at +1.1% q/q in the first quarter, compared to the fourth-quarter value of +2.6% q/q.

Also, investors will likely focus on the U.S. GDP Price Index, which came in at +3.9% q/q in the fourth quarter. Economists foresee the first-quarter figure to be +4.0% q/q.

U.S. Pending Home Sales data will also be closely watched today. Economists foresee this figure to stand at +0.5% m/m in April, compared to the previous number of -5.2% m/m.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 250K, compared to last week’s value of 242K.

In addition, investors will be looking toward a speech from Boston Fed President Susan Collins.

In the bond markets, United States 10-Year rates are at 3.756%, up +1.04%.

The Euro Stoxx 50 futures are up +0.26% this morning, boosted by a rally in chip stocks, while concerns over the U.S. debt ceiling standoff and global economic slowdown kept gains limited. Revised data from the Federal Statistical Office on Thursday showed the German economy contracted in the first quarter of 2023, suffering its first recession since the start of the pandemic. Meanwhile, European chip stocks outperformed on Thursday following a bullish sales forecast from Nvidia, with BE Semiconductor (BESI.NA) and ASM International (ASM.NA) surging over +7%. In corporate news, Tate & Lyle Plc (TATE.L.EB) rose more than +1% after the food giant reported a 22% rise in full-year profit.

Germany’s GDP, Germany’s GfK Consumer Climate, and France’s Business Survey data were released today.

The German GDP has been reported at -0.3% q/q and -0.2% y/y in the first quarter, weaker than expectations of -0.1% q/q and +0.2% y/y. 

The German June Gfk Consumer Climate Index stood at -24.2, weaker than expectations of -24.0.

The French May Business Survey came in at 99, weaker than expectations of 101.

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.11%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.39%.

China’s Shanghai Composite today closed lower as a widening U.S.-China trade and technology dispute weighed on investor sentiment. Hong Kong-listed tech stocks suffered a massive sell-off on Thursday due to ongoing worries about the growing dispute over technology between the United States and China, with Tencent Holdings Ltd falling about -3% and Meituan dropping over -3%. Automobile stocks also lost ground following disappointing earnings from electric-vehicle maker XPeng Inc. Earlier this week, the chair of the U.S. House of Representatives committee on China urged the U.S. Commerce Department to put trade curbs on Changxin Memory Technologies after Beijing banned the sale of some chips by Micron Technology. Adding to the downbeat mood, Japan intends to tighten controls on semiconductor exports to China.

Japan’s Nikkei 225 Stock Index closed higher today after a two-day skid, boosted by gains in chip-related stocks. Shares of Advantest Corp jumped over +16% on Thursday, tracking a robust outlook from Nvidia. Other chipmakers, such as SUMCO Corp and Tokyo Electron Ltd, also gained ground. On the negative side, Riberesute Corp tumbled over -10% due to the arrest of its president on Wednesday on suspicion of violating moneylending regulations. Meanwhile, foreign investors bought a net 867.5 billion yen of Japanese stocks in the week ended May 20th, up from 808.9 billion yen the week before. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 3.60% to 19.00.

“Foreign investors are buying Japanese equities instead of U.S. equities because economic conditions are not good in the U.S. due to the banking problems, financial tightening, and the debt ceiling issue,” said Masayuki Kubota, a chief strategist at Rakuten Securities. 

Pre-Market U.S. Stock Movers

Snowflake Inc (SNOW) plunged over -13% in pre-market trading after the company reported upbeat Q1 results but lowered its full-year guidance.

American Eagle Outfitters Inc (AEO) tumbled more than -20% in pre-market trading after the mall retailer posted mixed Q1 results and issued soft Q2 revenue guidance.

Nutanix Inc (NTNX) climbed over +16% in pre-market trading after the company reported weaker-than-expected Q3 results but provided upbeat Q4 and FY23 revenue guidance.

Splunk Inc (SPLK) gained more than +7% in pre-market trading after the company posted better-than-expected Q1 results and issued an upbeat Q2 revenue outlook.   

Ford Motor Company (F) rose over +1% in pre-market trading after Daiwa upgraded the stock to neutral from underperform.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - May 25th

Costco (COST), RBC (RY), Medtronic (MDT), Toronto Dominion Bank (TD), NetEase (NTES), Workday (WDAY), Autodesk (ADSK), Marvell (MRVL), Canadian Imperial Bank (CM), Dollar Tree (DLTR), Ulta Beauty (ULTA), Best Buy (BBY), Deckers Outdoor (DECK), Burlington Stores (BURL), Ralph Lauren A (RL), RH (RH), Johnson Matthey (JMPLY), Weibo Corp (WB), Gap (GPS), CSW Industrials Inc (CSWI), GDS Holdings (GDS), ePlus (PLUS), Columbus McKinnon (CMCO), American Woodmark (AMWD), Mesa Labs (MLAB), Titan Machinery (TITN), Youdao (DAO), Silvercorp Metals (SVM), Movado (MOV), Genesco (GCO), Build-A-Bear Workshop (BBW), Baozun Inc (BZUN), Destination XL Group (DXLG).

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