Stocks Set to Open Lower as Investors Weigh Fed Rate Decision, Apple Earnings on Tap

Oleksandr Pylypenko - Barchart - Thu May 4, 2023

June S&P 500 futures (ESM23) are down -0.36%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.03% this morning after three major U.S. benchmark indices ended the regular session in the red as market participants digested Federal Reserve Chair Jerome Powell’s comments following the central bank’s widely expected 25 basis point rate hike.

The Federal Reserve raised interest rates by 25 basis points to a range of 5.00% to 5.25% on Wednesday, the highest level in nearly 16 years. Also, the central bank’s statement softened somewhat from March, indicating that the Fed may pause rate hikes at its June meeting. Federal Reserve Chairman Jerome Powell stated that policymakers would take a data-dependent approach in deciding on the federal funds rate. At the same time, Powell ruled out cutting interest rates because inflation was still not expected to come down quickly. The Fed chief also said that “conditions have broadly improved” in the banking sector since March.

“The Fed continues to walk the tightrope, and that is they’re trying to strike a balance between their inflation-fighting credibility while trying to engineer a soft landing,” said Michael Arone, a chief investment strategist at State Street Global Advisors.

Economic data on Wednesday showed that U.S. ADP Nonfarm Employment Change stood at +296K in April, above expectations of +148K, marking the highest monthly increase since July 2022. Also, U.S. April ISM Non-Manufacturing PMI stood at 51.9, stronger than expectations of 51.8.

In other news, shares of PacWest Bancorp (PACW) tumbled over -37% in pre-market trading after the regional lender confirmed an earlier report that it was evaluating strategic options, including a potential sale or capital raise. Western Alliance Bancorporation (WAL) slid over -17% in pre-market trading, while Zions Bancorporation (ZION) dropped more than -7% in pre-market trading.

First-quarter earnings season kicks into high gear, and investors await new reports from big-name companies, including Apple (AAPL), ConocoPhillips (COP), Booking (BKNG), Regeneron Pharma (REGN), Shopify Inc (SHOP), and Monster Beverage (MNST).

Today, all eyes are focused on the U.S. Initial Jobless Claims data in a couple of hours. Economists, on average, forecast that Initial Jobless Claims will come in at 240K, compared to last week’s value of 230K.

Also, investors will likely focus on U.S. Nonfarm Productivity preliminary data, which was at +1.7% q/q in the fourth quarter. Economists foresee the first-quarter figure to be -1.8% q/q.

U.S. Unit Labor Costs preliminary data will come in today. Economists foresee this figure to come in at +5.5% q/q in the first quarter, compared to the previous number of +3.2% q/q.

U.S. Trade Balance data will be reported today as well. Economists estimate this figure to be -63.30B in March, compared to the previous value of -70.50B.

In the bond markets, United States 10-Year rates are at 3.375%, down -0.83%.

The Euro Stoxx 50 futures are down -0.65% this morning as investors digested the latest rate hike by the U.S. Federal Reserve while awaiting the European Central Bank’s interest rate decision. The European Central Bank is widely expected to raise interest rates for the seventh time in a row, with a 25 basis point move appearing the most likely outcome. Meanwhile, energy stocks outperformed, boosted by more than a +2% rise in Shell Plc (SHEL.LN) after the oil giant reported strong quarterly profit and maintained the pace of share buybacks. In other corporate news, Henkel Ag & CO Kgaa (HEN.D.DX) fell about -1% after the company’s first-quarter sales volumes fell short of expectations.

Germany’s Trade Balance, Spain’s Services PMI, Italy’s Services PMI, France’s S&P Global Composite PMI, France’s Services PMI, Germany’s Composite PMI, Germany’s Services PMI, Eurozone’s S&P Global Composite PMI, Eurozone’s Services PMI, U.K.’s Composite PMI, U.K.’s Services PMI, and Eurozone’s PPI data were released today.

The German March Trade Balance stood at 16.7B, stronger than expectations of 16.1B.

The Spanish April Services PMI came in at 57.9, weaker than expectations of 59.9.

The Italian April Services PMI was at 57.6, stronger than expectations of 56.5.

The French April S&P Global Composite PMI has been reported at 52.4, weaker than expectations of 53.8.

The French April Services PMI came in at 54.6, weaker than expectations of 56.3.

The German April Composite PMI stood at 54.2, stronger than expectations of 53.9.

The German April Services PMI was at 56.0, stronger than expectations of 55.7.

Eurozone April S&P Global Composite PMI has been reported at 54.1, weaker than expectations of 54.4.

Eurozone April Services PMI was at 56.2, weaker than expectations of 56.6.

U.K. April Composite PMI stood at 54.9, stronger than expectations of 53.9.

U.K. April Services PMI came at 55.9, stronger than expectations of 54.9.

Eurozone March PPI has been reported at -1.6% m/m and +5.9% y/y, compared to expectations of -1.7% m/m and +5.9% y/y.

China’s Shanghai Composite Index (SHCOMP) closed up +0.82%, while the Japanese market was closed for a holiday.

China’s Shanghai Composite today closed higher as upbeat holiday travel data overshadowed a contraction in factory output. A private sector survey showed on Thursday that China’s factory activity unexpectedly shrank in April, reinforcing concerns about an uneven economic recovery after the country eased its anti-COVID curbs earlier this year. Also, the Ministry of Culture and Tourism said on Wednesday that the number of domestic trips made over the Labor Day holidays stood at 274 million, up 19% from the pre-pandemic level in 2019. However, Chinese tourists spent 148 billion yuan during these trips, only 0.7% higher than the pre-pandemic level. Meanwhile, shares of China Tourism Group Duty Free Corp. plunged over -4%, while shares of the country’s largest carrier, China Southern Airlines Co., slid more than -6%. At the same time, insurance and bank stocks outperformed, with Ping An Insurance Group Co. of China Ltd. rising more than +3% after the company reported a surge in earnings.

The Chinese April Caixin Manufacturing PMI stood at 49.5, weaker than expectations of 50.3.

Pre-Market U.S. Stock Movers

Qualcomm Incorporated (QCOM) plunged over -6% in pre-market trading after the company reported mixed Q2 results and posted below-consensus Q3 guidance.

SolarEdge Technologies Inc (SEDG) climbed more than +11% in pre-market trading after the company reported upbeat Q1 results and issued solid Q2 revenue guidance.

Qorvo Inc (QRVO) rose over +6% in pre-market trading after the company delivered better-than-expected Q4 results.

MercadoLibre Inc (MELI) gained more than +3% in pre-market trading after the company reported upbeat Q1 results.

Tripadvisor Inc (TRIP) dropped over -6% in pre-market trading after the Massachusetts-based travel platform reported weaker-than-expected Q1 adjusted EPS.

Upwork Inc (UPWK) tumbled more than -12% in pre-market trading after the company reported better-than-expected Q1 results but issued downbeat Q2 revenue guidance.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Thursday - May 4th

Apple (AAPL), ConocoPhillips (COP), Booking (BKNG), Regeneron Pharma (REGN), Zoetis Inc (ZTS), Becton Dickinson (BDX), Shopify Inc (SHOP), EOG Resources (EOG), Canadian Natural (CNQ), Monster Beverage (MNST), ICE (ICE), Moderna (MRNA), Ferrari NV (RACE), Motorola (MSI), Sempra Energy (SRE), Fortinet (FTNT), American Electric Power (AEP), BCE Inc (BCE), Microchip (MCHP), Parker-Hannifin (PH), AIG (AIG), Atlassian Corp Plc (TEAM), Block (SQ), PG E (PCG), Consolidated Edison (ED), TELUS (TU), Aptiv (APTV), Banco Bradesco (BBD), Constellation Energy (CEG), Kellogg (K), Quanta Services (PWR), DoorDash (DASH), Vulcan Materials (VMC), Ameren (AEE), Martin Marietta Materials (MLM), Wheaton Precious Metals (WPM), Insulet (PODD), Monolithic (MPWR), Datadog (DDOG), Cardinal Health (CAH), PPL (PPL), Xylem (XYL), Coterra Energy (CTRA), Pembina Pipeline (PBA), Royal Caribbean Cruises (RCL), Rocket (RKT), Ball (BALL), Targa Resources (TRGP), Iron Mountain (IRM), Live Nation Entertainment (LYV), Blue Owl Capital (OWL), Westlake Chemical (WLK), Bio-Rad Labs (BIO), Alliant Energy (LNT), Expedia (EXPE), Stanley Black Decker (SWK), Teleflex (TFX), Bruker (BRKR), Coinbase Global (COIN), Icahn Enterprises (IEP), Godaddy Inc (GDDY), Magellan (MMP), BorgWarner (BWA), Carlyle Group (CG), Ryan Specialty Group Holdings (RYAN), Floor & Decor (FND), Paylocity Holdng (PCTY), Lamar (LAMR), Regency Centers (REG), DraftKings (DKNG), Open Text (OTEX), Reinsurance of America (RGA), Pinnacle West (PNW), Regal Beloit (RRX), Bill Com (BILL), Black Knight (BKI), Cognex (CGNX), HF Sinclair (DINO), Dolby Labs (DLB), Karuna Therapeutics (KRTX), Federal Realty (FRT), Huntington Ingalls Industries (HII), Americold Realty (COLD), NRG (NRG), Texas Roadhouse (TXRH), WestRock Co (WRK), WESCO (WCC), OGE Energy (OGE), Planet Fitness Inc (PLNT), Topbuild Corp (BLD), Dropbox (DBX), Novocure Ltd (NVCR), ITT (ITT), MasTec (MTZ), Arrow Electronics (ARW), Berry Global (BERY), R1 RCM (RCM), Jones Lang LaSalle (JLL), Energy of Minas Gerais (CIG), Organon Co (OGN), Clearway Energy C (CWEN), Agree Realty (ADC), Option Care Health (OPCH), Lancaster Colony (LANC), MDU Resources (MDU), Globus Medical (GMED), New Fortress Energy (NFE), Lantheus Holdings Inc (LNTH), Shift4 Payments Inc (FOUR), Altair Engineering (ALTR), TELUS International (TIXT), Starwood Property (STWD), Post (POST), Api Group Corp (APG), AAON (AAON), XPO (XPO), NewJersey Resources (NJR), ATI Inc (ATI), PENN Entertainment (PENN), Cirrus (CRUS), Fox Factory (FOXF), Dun And Bradstreet (DNB), Power Integrations (POWI), Vontier (VNT), Cable One Inc (CABO), Teradata (TDC), Azek Company (AZEK), LYFT (LYFT), Onto Innovation (ONTO), Powerschool Holdings (PWSC), MACOM Tech (MTSI), iRhythm Tech (IRTC), Focus Financial Partners (FOCS), Qualys (QLYS), Beacon Roofing (BECN), Gates Industrial Corp (GTES), Playtika (PLTK), Rithm Capital (RITM), Cytokinetics Inc (CYTK), Select Medical (SEM), Physicians Realty Trust (DOC), MP Materials (MP), Clearwater Analytics Holdings (CWAN), Wayfair Inc (W), Cogent (CCOI), Installed Building (IBP), AMN Healthcare Services (AMN), Prothena (PRTA), Intellia Therapeutics Inc (NTLA), Acushnet Holdings (GOLF), Envestnet (ENV), Quaker Chemical (KWR), Bumble (BMBL), Main Street Capital (MAIN), Enovis (ENOV), SSR Mining (SSRM), Privia Health Group (PRVA), Blackline (BL), Blueprint Medicines Corp (BPMC), Goodyear Tire & Rubber Co (GT), Ultragenyx (RARE), Peloton Interactive (PTON), Enerplus (ERF), Prestige Brand (PBH).

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On the date of publication, Oleksandr Pylypenko 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.