Markets Today: Stocks Under Pressure as Lower Crude Prices Weigh on Energy Stocks

Rich Asplund - Barchart - Tue Jun 6, 2023

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are down -0.10%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.13%.

U.S. stock index futures this morning are slightly lower. Weakness in energy stocks is weighing on the overall market, with WTI crude prices down more than -2% and giving up all of their gains from Sunday’s announcement of a Saudi Arabia crude supply cut. Also, weakness in European stocks today is weighing on U.S. stock index futures as semiconductor stocks are under pressure after Taiwan Semiconductor Manufacturing said capital spending this year would be at the lower end of its forecast.

The Reserve Bank of Australia today unexpectedly raised its cash rate by +25 bp to 4.10% from 3.85% and said recent data indicate upside risks to CPI and “some further tightening of monetary policy may be required.”

Global bond yields are mixed. The 10-year T-note yield is up +1.7 bp at 3.701%. The 10-year German bund yield is down -2.5 bp at 2.356%, and the UK 10-year gilt yield is up +1.8 bp at 4.226%.

On the bearish side for stocks, Mobileye Global dropped more than -5% in pre-market trading after Intel announced it would sell 35 million shares of its Mobileye stake with an option to sell 5.25 million more shares. Also, Ferguson Plc fell more than -3% after reporting weaker-than-expected Q3 adjusted EPS. In addition, energy stocks and energy service providers are falling in pre-market trading, with WTI crude oil down more than -2%.

On the bullish side, HealthEquity climbed more than +5% in pre-market trading after reporting Q1 revenue above consensus and raising its 2024 revenue forecast. Also, Thor Industries is up more than +9% after reporting Q3 net sales above consensus. In addition, Ciena is up more than +3% after reporting stronger-than-expected Q2 adjusted EPS.

Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.23%. China’s Shanghai Composite closed down -1.15%, and Japan’s Nikkei Stock Index closed up +0.90%.

The Euro Stoxx 50 index today is slightly lower. Weakness in chipmakers is leading the overall market lower today after a tepid outlook from Taiwan Semiconductor Manufacturing Co. Also, signs of weakness in the Eurozone economy are weighing on stocks after German factory orders unexpectedly declined in April and after Eurozone April retail sales were flat. An escalation of the war in Ukraine also weighed on stocks after Ukraine said Russian forces blew up a dam in the country’s south, unleashing a torrent of floodwater that threatens thousands of people and poses a potential threat to Black Sea grain supplies. Losses in stocks were contained as European government bond yields fell after the ECB’s monthly survey on inflation expectations fell significantly.

Eurozone Apr retail sales were unchanged m/m, weaker than expectations of +0.2% m/m.

German Apr factory orders unexpectedly fell -0.4% m/m, weaker than expectations of +2.8% m/m.

The ECB's monthly consumer inflation expectations survey for the next 12 months fell to 4.1% in Apr from 5.0% in Mar, and for the next three years ahead fell to 2.5% in Apr from 2.9% in Mar.

China’s Shanghai Composite Stock Index today retreated from a 2-week high and closed moderately lower. Chinese stocks today initially opened higher as property developers and real estate stocks rallied after a Bloomberg report said that Chinese authorities asked the country’s biggest banks to lower their deposit rates for at least the second time in less than a year. However, the Shanghai Composite gave up its gains and turned lower as chipmakers sold off after Taiwan Semiconductor Manufacturing Co, the biggest supplier of chips to Apple, said it expects capital expenditures for 2023 will wind up closer to $32 billion, near the lower end of a forecast range as the company struggles with a persistent chip demand slump.

Japan’s Nikkei Stock Index today extended its 2-1/2 month-long rally up to a new 32-year high. Japanese Mitsubishi Heavy Industrials and other Japanese aircraft industry suppliers rallied today after Reuters reported ANA is looking to increase its fleet with the Boeing 787. Also, technology stocks rose today after the Japanese government unveiled a plan to fund Japan’s chip venture Rapidus Corp and encourage Taiwan Semiconductor Manufacturing Co to add production capacity in Japan. Prime Minister Kishida’s New Capitalism economic policy will consider tax breaks and subsidies for companies investing in semiconductors, storage batteries, biomanufacturing, and data centers in a bid to stay competitive with the rest of the world.

Japanese economic news today was weaker than expected and bearish for stocks. Japan Apr household spending fell -4.4% y/y, weaker than expectations of -2.4% y/y and the biggest decline in more than two years. Also, Japan Apr labor cash earnings rose +1.0% y/y, weaker than expectations of +1.8% y/y.

Pre-Market U.S. Stock Movers

Mobileye Global (MBLY) dropped more than -5% in pre-market trading after Intel announced it would sell 35 million shares of its Mobileye stake with an option to sell 5.25 million more shares.

Ferguson Plc (FERG) fell more than -3% in pre-market trading after reporting Q3 adjusted EPS of $2.20, weaker than the consensus of $2.24.

Blue Bird Corp (BLBD) tumbled more than -8% in pre-market trading after holders Coliseum Capital and American Securities offered 5 million shares of the stock.

Energy stocks and energy service providers are falling in pre-market trading, with WTI crude oil down more than -2%. Chevron (CVX), Conoco Phillips (COP), Devon Energy (DVN), Diamondback Energy (FANG), Exxon Mobile (XOM), Occidental Petroleum (OXY), Marathon Oil (MRO), Schlumberger (SLB), and Valero Energy (VLO) are up more than +1%.

Unity Software (U) rose more than +5% in pre-market trading and added to Monday’s +17% gain after Apple said it’s working with the company for its new Vision Pro headset.

HealthEquity (HQY) climbed more than +5% in pre-market trading after reporting Q1 revenue of $244.4 million, above the consensus of $239.3 million, and raising its 2024 revenue forecast to $975 million-$985 million from a prior estimate of $960 million-$975 million, stronger than the consensus of $967.4 million.

Thor Industries (THO) jumped more than +9% in pre-market trading after reporting Q3 net sales of $2.93 billion, better than the consensus of $2.82 billion.

GitLab (GTLB) surged more than +27% in pre-market trading after reporting Q1 revenue of $126.9 million, better the consensus of $117.8 million, and raising its 2024 revenue forecast to $541 million-$543 million from a previous estimate of $529 million-$533 million, above the consensus of $531.8 million.

Lennox International (LII) gained more than +1% in pre-market trading after KeyBanc Capital Markets upgraded the stock to overweight from sector weight with a price target of $355.

Ciena (CIEN) climbed more than +3% in pre-market trading after reporting Q2 adjusted EPS of 74 cents, stronger than the consensus of 60 cents.

McCormick & Co (MKC) rose more than +1% in pre-market trading after Bank of America double-upgraded the stock to buy from underperform.

Today’s U.S. Earnings Reports (6/6/2023)

Casey's General Stores (CASY), Ciena Corp (CIEN), Core & Main Inc (CNM), JM Smucker (SJM), and Thor Industries (THO).

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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.