Markets Today: Stocks Slightly Higher on Signs of Progress in Debt Ceiling Talks
U.S. stock index futures this morning are slightly higher on signs that U.S. lawmakers are making progress on a deal to raise the debt ceiling. However, stock indexes fell back from their best levels after this morning’s stronger-than-expected U.S personal spending and core PCE deflator reports pushed bond yields higher and boosted market expectations for a 25 bp Fed rate hike at the June 13-14 FOMC meeting to 56%.
Bloomberg reported that Republican and White House negotiators are moving closer to an agreement to raise the debt limit and cap federal spending for two years, although the terms are tentative and a final accord is still not in hand.
U.S. Apr personal spending rose +0.8% m/m, stronger than expectations of +0.5% m/m. Apr personal income rose +0.4% m/m, right on expectations.
The U.S. Apr PCE core deflator, the Fed's preferred inflation gauge, rose +0.4% m/m and +4.7% y/y, stronger than expectations of +0.3% m/m and +4.6% y/y.
U.S. Apr capital goods orders nondefense ex-aircraft and parts, a proxy for capital spending, unexpectedly rose +1.4% m/m, stronger than expectations of a decline of -0.1% m/m and the biggest increase in 16 months.
Global bond yields are mixed. The 10-year T-note yield rose to a 2-1/2 month high of 3.839% and is up +1.8 bp at 3.835%. The 10-year German bund yield climbed to a 2-1/2 month high of 2.557% and is up +1.9 bp at 2.541%, and the UK 10-year gilt yield is down -1.1 bp at 4.363%.
On the bullish side for stocks, Marvell Technology surged more than +16% in pre-market trading after reporting Q1 net revenue above consensus and projecting fiscal 2024 artificial intelligence (AI) revenue to “a least double” from a year ago. Also, the Gap is up more than +10% after reporting an unexpected Q1 adjusted EPS profit. Workday is up more than +8% after reporting Q1 subscription revenue above consensus and raising the lower end of its 2024 subscription revenue estimate.
On the bearish side, Ulta Beauty tumbled more than -8% in pre-market trading after forecasting 2024 comparable sales below consensus. Also, Big Lots is down more than -14% after reporting a larger-than-expected Q1 adjusted loss per share. MongoDB is down more than -3% after Guggenheim Securities downgraded the stock to sell.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.20%. China’s Shanghai Composite closed up +0.35%, and Japan’s Nikkei Stock Index closed up +0.37%.
The Euro Stoxx 50 index today shook off early losses and moved higher on hopes that a deal to raise the U.S. debt ceiling was near. An increase in European bond yields is limiting gains in stocks on hawkish comments today from ECB Governing Council member Vujcic who said, "Inflation momentum in the Eurozone is still persistent.” Weakness in bank and telecommunication stocks is outweighing gains in mining stocks. Also, a gauge of economic sentiment in Italy fell to a 5-month low in May, weighing on stocks.
The Italy May economic sentiment index fell -1.7 to a 5-month low of 108.7.
ECB Governing Council member Vujcic said, "Inflation momentum in the Eurozone is still persistent, especially the core and food components."
China’s Shanghai Composite Stock Index today posted moderate gains. Asian semiconductor makers and stocks related to artificial intelligence (AI) moved higher today on the heels of the surge in Nvidia on Thursday after it reported stronger-than-expected demand for its chips to power AI applications. Limiting gains in Chinese stocks is the downgrade of the sector by Citigroup and Jeffries. Citigroup cut its global allocation of Chinese equities to neutral from overweight, saying there’s “no sense that any large stimulus is imminent” to support China’s economy. Jeffries also reduced its allocation of Chinese stocks to neutral and said other Asian stock markets, particularly India, will benefit as production moves out of China.
Japan’s Nikkei Stock Index today closed moderately higher. Japanese technology stocks rose today on positive carryover from Thursday’s sharp rally in U.S. technology stocks, sparked by Nvidia’s bullish outlook for artificial intelligence demand. Also, shares of Japanese heavy industry companies moved higher after JPMorgan Chase upgraded its view on the sector “to bullish from bearish” as external factors look favorable. JPMorgan Chase also said Japanese equities might see further boosts from both foreign and domestic investors if the current excitement about Japanese equities is matched by policy. In addition, JPMorgan said, “Valuation metrics for Japanese equities look attractive relative to their global counterparts as shown by the relative PE multiplies and relative Price/Book ratios of Japanese over global equities.”
Japanese price reports today were negative for stocks. Japan Apr PPI services prices eased to +1.6% y/y from +1.7% y/y in Mar, stronger than expectations of +1.4% y/y. Also, Japan's Tokyo May CPI ex-fresh food and energy rose +3.9% y/y, the fastest pace of increase in 41 years.
Pre-Market U.S. Stock Movers
Marvell Technology (MRVL) surged more than +16% in pre-market trading after reporting Q1 net revenue of $1.32 billion, stronger than the consensus of $1.30 billion, and projecting fiscal 2024 artificial intelligence (AI) revenue to “a least double” from a year ago.
The Gap (GPS) soared more than +10% in pre-market trading after reporting an unexpected Q1 adjusted EPS profit of +1 cent, better than the consensus of a loss of -16 cents.
Workday (WDAY) jumped more than +8% in pre-market trading after reporting Q1 subscription revenue of $1.53 billion, above the consensus of $1.52 billion and raising the lower-end of its 2024 subscription revenue estimate to $6.55 billion-$6.58 billion from a previous estimate of $6.53 billion-$6.58 billion, with the midpoint above the consensus of $6.56 billion.
Ford Motor (F) rose more than +2% in pre-market trading after it said it entered into a pact with Tesla that will allow Ford electric vehicle customers to access more than 12,000 Tesla Superchargers across the U.S. and Canada starting in spring 2024.
Autodesk (ADSK) gained more than +1% in pre-market trading after raising its 2024 adjusted EPS forecast to $7.07-$7.41 from a previous forecast of $6.98-$7.32, the midpoint above the consensus of $7.22.
PDD Holdings (PDD) rallied more than +14% in pre-market trading after reporting Q1 revenue of 37.64 billion yuan, well above the consensus of 32.32 billion yuan.
RingCentral (RNG) climbed more than +3% in pre-market trading after Needham upgraded the stock to buy from hold with a price target of $42.
Ulta Beauty (ULTA) tumbled more than -8% in pre-market trading after forecasting 2024 comparable sales up +4% to +5%, weaker than the consensus of +5.18%.
Big Lots (BIG) sank more than -14% in pre-market trading after reporting a Q1 adjusted loss per share of -$3.40, much wider than the consensus of -$1.74 per share.
MongoDB (MDB) fell more than -3% in pre-market trading after Guggenheim Securities downgraded the stock to sell from neutral with a price target of $210.
Domo Inc (DOMO) dropped more than -4% in pre-market trading after forecasting Q2 revenue of $78.5 million-$79.5 million, weaker than the consensus of $79.8 million.
Today’s U.S. Earnings Reports (5/26/2023)
Big Lots Inc (BIG), Booz Allen Hamilton Holding Co (BAH), Buckle Inc/The (BKE), Edgio Inc (EGIO), Hibbett Inc (HIBB), Latch Inc (LTCH), Mitek Systems Inc (MITK).
More Stock Market News from Barchart
- S&P Futures Tick Higher Ahead of Key U.S. Inflation Data, U.S. Debt-Ceiling Talks in Focus
- Nvidia Drives Tech Stocks Higher and Outweigh Debt-Ceiling Concerns
- U.S. Credit Rating at Risk from Debt-Ceiling Impasse
- Stocks Mostly Higher as Nvidia’s Blowout Earnings Boost Tech Stocks
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.
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