June S&P 500 futures (ESM23) are trending up +0.18% this morning as market participants weighed the latest updates on negotiations in Washington to reach a debt-ceiling deal while awaiting a key speech from Fed Chair Jerome Powell.
In Thursday’s trading session, the tech-heavy Nasdaq 100 notched a 1-year high, boosted by gains in chip stocks and a more than +9% jump in Netflix Inc (NFLX) after the streaming giant said its recently launched ad-supported tier reached about 5 million active users per month. Also, the benchmark S&P 500 rose to a 9-month high, helped in part by an over +11% surge in Take-Two Interactive Software Inc (TTWO) after the company reported above-consensus Q4 net bookings. In addition, Walmart Inc (WMT) rose more than +1% after the retail giant reported upbeat Q1 results and raised its full-year guidance, helping keep the blue-chip Dow in positive territory.
Data on Thursday showed the U.S. Philadelphia Fed manufacturing index rose to a 4-month high of -10.4 in May, stronger than expectations of -19.8. At the same time, the Labor Department report showed claims for state unemployment benefits fell -22K to a seasonally adjusted 242K last week, stronger than expectations of 254K. Also, U.S. existing home sales came in at 4.28M in April, weaker than expectations of 4.30M.
Dallas Fed President Lorie Logan stated on Thursday that she remained concerned about whether inflation was falling quickly enough. Logan also said the current economic data doesn’t argue for a pause in rate hikes yet. “We haven’t yet made the progress we need to make. And it’s a long way from here to 2% inflation,” she said.
U.S. rate futures have priced in a 63.3% probability of no hike and a 36.7% chance of a 25 basis point rate increase at the next central bank meeting in June.
Meanwhile, Democratic negotiators told President Joe Biden on Friday that their discussions with Republicans to prevent a U.S. default are making “steady progress.” House Speaker Kevin McCarthy said Thursday that negotiators could reach an agreement in principle to increase or suspend the debt ceiling as early as this weekend.
Today, market participants will be closely watching the speech by Federal Reserve Chair Jerome Powell at a Fed conference in Washington for clues on the future path of interest rates.
Also, investors will likely focus on speeches from New York Fed President John Williams and Fed Governor Michelle Bowman.
The U.S. economic data slate is mainly empty on Friday.
In the bond markets, United States 10-Year rates are at 3.644%, down -0.33%.
The Euro Stoxx 50 futures are up +0.76% this morning as market participants turned more optimistic that U.S. lawmakers could soon reach a debt-limit deal and avoid a catastrophic U.S. default. Gains in financial services and mining stocks are leading the overall market higher. Meanwhile, ECB President Christine Lagarde is scheduled to speak at Brazil’s central bank conference due later in the day. In corporate news, shares of Smiths Group Plc (SMIN.LN) rose about +1% after the U.K. engineering group reported strong Q3 results and raised its 2023 revenue guidance.
U.K.’s GfK Consumer Confidence and Germany’s PPI data were released today.
U.K. May GfK Consumer Confidence stood at -27, in line with expectations.
The German April PPI has been reported at +0.3% m/m and +4.1% y/y, stronger than expectations of -0.5% m/m and +4.0% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.42%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.77%.
China’s Shanghai Composite today closed lower, partly weighed down by shares of internet giants. Also, Hong Kong-listed tech giants led the declines on Friday, with Alibaba Group plunging about -6% after the e-commerce giant’s latest quarterly revenue growth disappointed investors. On the positive side, semiconductor stocks outperformed, with Shenzhen Longsys Electronics Co Ltd rising over +1% and TongFu Microelectronics Co Ltd climbing more than +6%.
“The recovery in China is slowing down. We all expected it wouldn’t be a straight line - you will go through waves,” said Ashish Shah, a chief investment officer at Goldman Sachs Asset Management.
At the same time, Japan’s Nikkei 225 Stock Index closed higher today and hit a 33-year high amid optimism over raising the U.S. debt ceiling. Data on Friday showed Japan’s core inflation nationwide re-accelerated in April following months of easing. Meanwhile, Ricoh Co. Ltd. surged over +7% and was the top percentage gainer on the Nikkei following news that the office equipment company was considering joining forces with a Toshiba unit to develop and manufacture copiers and printers. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 15.13% and hit a new 1-month high of 20.47.
The Japanese April National Core CPI stood at +3.4% y/y, in line with expectations.
The Japanese Tertiary Industry Activity Index came in at -1.7% m/m, weaker than expectations of +0.3% m/m.
Pre-Market U.S. Stock Movers
Farfetch Ltd Class A (FTCH) soared over +20% in pre-market trading after the London-based luxury e-commerce company reported better-than-expected Q1 results.
Ouster Inc (OUST) climbed more than +8% in pre-market trading after the company confirmed that the U.S. International Trade Commission had voted to investigate the unfair trade practices of Hesai.
Bloom Energy Corp (BE) gained about +6% in pre-market trading after JPMorgan upgraded the stock to overweight from neutral.
Applied Materials Inc (AMAT) fell more than -1% in pre-market trading even after the semiconductor equipment company posted upbeat Q2 results.
EOG Resources Inc (EOG) rose over +1% in pre-market trading after Mizuho upgraded the stock to buy from neutral.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - May 19th
Deere&Company (DE), RBC Bearings (RBC), Catalent Inc (CTLT), Foot Locker (FL), D Wave Quantum (QBTS).
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