Stocks Rise on Optimism About the Debt Ceiling

Rich Asplund - Barchart - Mon May 15, 2023

The S&P 500 Index ($SPX) (SPY) is up +0.09%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.01%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.35%.

U.S. stock index futures this morning are moderately higher on hopes a deal on the debt ceiling can be reached. President Biden will reconvene with House Speaker McCarthy on Tuesday after staff-level talks were held over the weekend. President Biden said the talks were “moving along,” and National Economic Director Brainard on Sunday said the negotiations were serious and constructive.

May Empire manufacturing index fell -42.6 to a 4-month low of -31.8, weaker than expectations of -3.9.

Hawkish comments this morning from Atlanta Fed President Bostic were bearish for stocks when he said high inflation suggests the Fed may need a bias to hike rates further, and he doesn't expect to cut interest rates until well into 2024.

Global bond yields are higher. The 10-year T-note yield is up +0.8 bp at 3.470%. The 10-year German bund yield is up +1.8 bp at 2.294%, and the UK 10-year gilt yield is up +0.2 bp at 3.780%.

On the bullish side for stocks, Sarepta Therapeutics soared more than +25% in pre-market trading after independent advisers to the U.S. FDA ruled that the company’s experimental gene therapy to treat Duchenne muscular dystrophy should be approved. Also, Shake Shack is up more than +4% in pre-market trading after Bloomberg News reported that activist investor Engaged Capital had taken a stake in the company and plans to push for board changes. In addition, Meta Platforms is up more than +1% after Loop Capital Markets upgraded the stock to buy from hold.

On the bearish side, H&R Block and Intuit tumbled more than -4% in pre-market trading after the Wall Street Journal reported that the IRS is considering creating a government-run alternative to the two tax preparation companies. Also, Camden Property Trust, Essex Property Trust, and UDR Inc are down more than -1% after being downgraded.

Overseas stock markets are higher. The Euro Stoxx 50 is up +0.02%. China’s Shanghai Composite closed up +1.17%, and Japan’s Nikkei Stock Index closed up +0.81%.

The Euro Stoxx 50 index today is modestly higher on positive quarterly corporate earnings results. According to Bloomberg Intelligence, about 70% of the MSCI Europe companies that reported results so far have beaten estimates this season. Siemens Energy AG is up more than +3% as it upgraded its revenue forecast for the year, citing strong orders for its energy transition technologies. Also, Axa SA is up more than +2% after boosting its profitability target for the year after Q1 sales rose more than expected. Stocks also found support after the European Commission raised its Eurozone 2023 GDP forecast. On the negative side, Eurozone Mar industrial production fell more than expected by the most in 8 months.

The European Commission slightly raised its Eurozone 2023 GDP forecast to +1.1% from a previous estimate of +1.0% and raised its 2023 inflation estimate to +5.8% from a prior estimate of +5.6% y/y, citing the strength of underlying pressures.

Eurozone Mar industrial production fell -4.1% m/m, weaker than expectations of -2.8% m/m and the biggest decline in 8 months.

The German Apr wholesale price index fell -0.5% y/y, the biggest decline in more than two years.

China’s Shanghai Composite Stock Index today recovered from a 2-1/2 week low and closed moderately higher. Chinese financial stocks soared today after state-owned Shanghai Securities News reported the Shanghai Stock Exchange would host a seminar to discuss topics including boosting the valuation of the country’s financial sector. Chinese renewable energy stocks also gained as several analysts cited stable product prices and funds shifting into electric vehicle-related businesses. Daiwa Securities said shares in lithium, inverters, battery materials, and energy storage companies are gaining as funds rotate out of state-owned enterprise stocks and toward stocks linked to green energy.

Japan’s Nikkei Stock Index today climbed to a 17-1/2 month high and closed moderately higher. Strong corporate earnings results are underpinning Japanese stocks today along with a weaker yen. Japanese stocks also rallied after Goldman Sachs said solid fundamentals and expectations for structural changes “justify a bullish stance” on Japanese equities. Warren Buffet’s recent endorsement of Japanese stocks sparked renewed foreign investment as overseas investors bought a net $22 billion worth of Japanese stocks and futures in April, according to data from Japan’s Ministry of Finance. Japanese utility stocks rose today after the Nikkei newspaper reported that government is likely to allow seven major power companies to raise charges from June. In addition, a decline in the yen today to a 1-1/2 week low against the dollar gave Japanese exporter stocks a lift.

Japan's Apr PPI eased to +5.8% y/y from +7.4% y/y in Mar, the slowest pace of increase in 20 months.

Japan’s Apr machine tool orders fell -14.4% y/y, the fourth consecutive month orders have declined.

Pre-Market U.S. Stock Movers

Sarepta Therapeutics (SRPT) soared more than +25% in pre-market trading after independent advisers to the U.S. FDA ruled that the company’s experimental gene therapy to treat Duchenne muscular dystrophy should be approved.

Cryptocurrency-exposed stocks are climbing in pre-market trading, with the price of Bitcoin up more than +3%. Marathon Digital (MARA) is up more than +4%, and Riot Platforms (RIOT) is up more than +3%. Also, Coinbase Global (COIN) and MicroStrategy (MSTR) are up more than +2%.

Shake Shack (SHAK) rose more than +4% in pre-market trading after Bloomberg News reported that activist investor Engaged Capital had taken a stake in the company and plans to push for board changes.

UniQure (QURE) jumped more than +6% in pre-market trading after the company agreed to sell a portion of the royalty rights from the net sales of its Hemgenix drug for up to $400 million.

Meta Platforms (META) gained more than +1% in pre-market trading after Loop Capital Markets upgraded the stock to buy from hold with a price target of $320.

Monday.com (MNDY) surged more than +15% in pre-market trading after reporting Q1 revenue of $162.3 million, well above the consensus of $155.4 million.

Albemarle (ALB) climbed more than +2% in pre-market trading after Baird upgraded the stock to outperform from neutral with a price target of $288.

Charles Schwab (SCHW) rose more than +2% in pre-market trading after Raymond James upgraded the stock to outperform from market perform with a price target of $63.

DuPont de Nemours (DD) climbed more than +2% in pre-market trading after Deutsche Bank upgraded the stock to buy from hold with a price target of $80.

H&R Block (HRB) and Intuit (INTU) tumbled more than -4% in pre-market trading after the Wall Street Journal reported that the IRS is considering creating a government-run alternative to the two tax preparation companies.

Camden Property Trust (CPT) dropped more than -1% in pre-market trading after Bank of America Global Research downgraded the stock to neutral from buy.

Essex Property Trust (ESS) lost more than -1% in pre-market trading Wolfe Research downgraded the stock to underperform from peer perform.

UDR Inc (UDR) slid more than -1% in pre-market trading after Wolfe Research downgraded the stock to peer perform from outperform.

Today’s U.S. Earnings Reports (5/15/2023)

Altus Power Inc (AMPS), Astra Space Inc (ASTR), Canoo Inc (GOEV), Cara Therapeutics Inc (CARA), Catalent Inc (CTLT), Costamare Inc (CMRE), Eightco Holdings Inc (OCTO), Fathom Digital Manufacturing (FATH), Fulcrum Therapeutics Inc (FULC), Li-Cycle Holdings Corp (LICY), Lightning eMotors Inc (ZEV), Mineralys Therapeutics Inc (MLYS), Ondas Holdings Inc (ONDS), Science 37 Holdings Inc (SNCE), SFL Corp Ltd (SFL), Terran Orbital Corp (LLAP), Workhorse Group Inc (WKHS).

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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.