Morning Markets
June E-Mini S&P 500 futures (ESM23) this morning are up +0.87%, and June Nasdaq 100 E-Mini futures (NQM23) are up +2.28%.
U.S. stock index futures this morning are moderately higher except for Nasdaq futures which are sharply higher due to a more than +25% surge in Nvidia in pre-market trading. The rally in Nvidia is leading technology stocks higher after it reported better-than-expected Q1 revenue and forecast stronger-than-expected Q2 revenue.
A resolution to the U.S. debt ceiling remains elusive. House Republican leader McCarthy said there are still a couple of issues out there, and negotiators will need to work 24/7 to get a deal done.
Late Wednesday, Fitch Ratings placed the U.S. AAA credit rating on watch, a sign of growing unease about the country’s ability to avert a default. However, Fitch said it still expects a resolution to the debt limit before June 1.
This morning’s U.S. Q1 GDP, initial unemployment claims, and Chicago Fed reports were all stronger than expected, pushing T-note yields higher. The markets have priced in a 37% chance of a 25 bp rate hike at the June 13-14 FOMC meeting.
U.S. weekly initial unemployment claims rose +4,000 to 229,000, showing a stronger labor market than expectations of 245,000.
U.S. Q1 GDP was revised upward to +1.3% (q/q annualized) from +1.1% as Q1 personal consumption was revised upward to 3.8% from 3.7%. The Q1 core PCE deflator was revised upward to 5.0% from 4.9%.
The U.S. Apr Chicago Fed national activity index unexpectedly rose +0.44 to 0.07, stronger than expectations of a decline to -0.20.
Global bond yields are higher. The 10-year T-note yield rose to a 2-1/2 month high of 3.784% and is up +3.9 bp at 3.781%. The 10-year German bund yield is up +1.1 bp at 2.483%, and the UK 10-year gilt yield is up +11.0 bp at 4.324%.
On the bullish side for stocks, Nvidia surged more than +25% in pre-market trading after reporting stronger-than-expected Q1 revenue and forecasting Q2 revenue well above consensus. Also, Best Buy is up more than +6% after reporting better-than-expected Q1 adjusted EPS. Nutanix is up more than +15% after forecasting Q3 revenue above consensus and raising its full-year revenue forecast.
On the bearish side, Snowflake sank more than -12% in pre-market trading after cutting guidance on its 2024 product revenue estimate. Also, UiPath is down more than -8% after forecasting Q2 revenue below consensus. American Eagle Outfitters is down more than -20% after forecasting full-year capex well below consensus.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +0.20%. China’s Shanghai Composite closed down -0.11%, and Japan’s Nikkei Stock Index closed up +0.39%.
The Euro Stoxx 50 index today is moderately higher. Strength in European semiconductor-equipment makers is leading technology stocks higher after Nvidia reported stellar quarterly earnings results and increased its revenue guidance on soaring demand for its chips that are used in artificial intelligence computing. The upside in European stocks is limited by economic concerns after today’s news showed German Q1 GDP was revised lower to show a contraction in the German economy. Stocks were also under pressure on hawkish comments from ECB Vice President Guindos that suggest he favors increasing interest rates further to bring down inflation.
German Q1 GDP was revised downward to -0.3% q/q and -0.2% y/y from unch q/q and +0.2% y/y.
The German Jun GfK consumer confidence index rose +1.6 to a 14-month high of -24.2, although weaker than expectations of -24.0.
ECB Vice President Guindos said the ECB's "future decisions will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to our 2% medium-term target." Once there, they'll "be kept at those levels for as long as necessary."
China’s Shanghai Composite Stock Index tumbled to a 4-1/4 month low and closed moderately lower. Stocks were undercut by China’s faltering recovery and the government’s reluctance to deploy large-scale stimulus measures. Stocks were also undercut by disappointing construction activity that shows China’s property market continues to stagnate due to the persistent financial troubles of real estate developers that are hampering new projects. In addition, infrastructure spending is being constrained by heavy debt loads of local governments that are having problems raising funds to pay for the projects.
Chinese electric vehicle makers and their supplies moved lower today, led by an -8% drop in XPeng after the electric carmaker reported weaker-than-expected Q1 revenue. A rally in semiconductor-related stocks lifted the overall market from its lows after Nvidia gave a bullish revenue outlook for the current quarter.
Foreign investors continue liquidating their Chinese stock holdings as shares listed on the mainland saw net selling for a third day today as investors have sold more than $3 billion of Chinese stocks this week via the trading links with Hong Kong.
Japan’s Nikkei Stock Index today closed moderately higher after the government raised its monthly economic assessment in May for the first time in ten months as consumption, production, and exports improved. Japan’s Cabinet Office today said the economy is recovering at a moderate pace and that the trend is expected to continue with the jobs and income situation improving. It also upgraded its assessment of consumer spending, production, and exports. A decline in the yen today to a 5-3/4 month low against the dollar gave Japanese exporter stocks a boost. Also, BOJ Governor Ueda's comments supported stocks when he said we “will patiently” continue with monetary easing as there is still some way to go before reaching our 2% inflation goal.
Foreign investors were net buyers of Japanese stocks for a seventh week as they purchased a net 1.29 trillion yen ($9 billion) of Japan’s stocks and futures in the week ended May 19, according to data from the Tokyo Stock Exchange.
Pre-Market U.S. Stock Movers
Nvidia (NVDA) surged more than +25% in pre-market trading after reporting Q1 revenue of $7.19 billion, well above the consensus of $6.52 billion, and forecasting Q2 revenue of $11.00 billion-plus or minus 2%, stronger than the consensus of $7.18 billion. Other chipmakers rallied on the Nvidia news, with Advanced Micro Devices (AMD) up more than +6% and Marvell Technology (MRVL) and Micron Technology (MU) up more than +2%.
Best Buy (BBY) jumped more than +6% in pre-market trading after reporting Q1 adjusted EPS of $1.15, better than the consensus of $1.11.
Nutanix (NTNX) rallied more than +15% in pre-market trading after forecasting Q3 revenue of $448.6 million, above the consensus of $431.2 million, and raising its full-year revenue forecast to $1.84 billion-$1.85 billion from a previous forecast of $1.80 billion-$1.81 billion, stronger than the consensus of $1.80 billion.
Splunk (SPLK) climbed more than +8% in pre-market trading after reporting Q1 revenue of $751.5 million, stronger than the consensus of $719.7 million, and forecasting total 2024 annual recurring revenue of $4.13 billion-$4.18 billion, the midpoint above the consensus of $4.15 billion.
MetLife (MET) is up more than +2% in pre-market trading after it boosted its stock buyback plan by $1 billion.
Carnival (CCL) rose more than +2% in pre-market trading after Citigroup upgraded the stock to buy from hold with a price target of $14.
Leidos (LDOS)and Dycom Industries (DY) are up more than +1% in pre-market trading after Wells Fargo Securities upgraded the stocks to overweight from equal weight. Barclays downgraded the stock to underweight from equal weight.
Snowflake (SNOW) sank more than -12% in pre-market trading after cutting guidance on its 2024 product revenue estimate to $2.60 billion from a prior estimate of $2.71, weaker than the consensus of $2.71 billion.
UiPath (PATH) tumbled more than -8% in pre-market trading after forecasting Q2 revenue of $279 million-$284 million, weaker than the consensus of $283.9 million.
American Eagle Outfitters (AEO) plunged more than -20% in pre-market trading after forecasting full-year capex of $150 million-$175 million, the midpoint below the consensus of $171.5 million.
Dish Network (DISH) fell more than -3% in pre-market trading after Citigroup downgraded the stock to neutral from buy.
Digital Turbine (APPS) dropped more than -18% in pre-market trading after forecasting Q1 revenue of $140 million-$145 million, weaker than the consensus of $148.6 million.
Today’s U.S. Earnings Reports (5/25/2023)
Autodesk Inc (ADSK), Best Buy Co Inc (BBY), Burlington Stores Inc (BURL), Costco Wholesale Corp (COST), Deckers Outdoor Corp (DECK), Dollar Tree Inc (DLTR), Gap Inc/The (GPS), Marvell Technology Inc (MRVL), Medtronic PLC (MDT), Ralph Lauren Corp (RL), RH (RH), Ulta Beauty Inc (ULTA), Workday Inc (WDAY).
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.
