Five things you need to know before the market opens on Thursday June 1:
1. -- Stock Futures Nudge Higher On Debt Ceiling Deal Relief
U.S. equity futures bumped higher Thursday, while the dollar gave back gains against its global peers and Treasury yields eased, as markets breathed a sigh of relief after the passage of a debt ceiling deal by House lawmakers that should put the issue to rest for at least the next two years.
The Fiscal Responsibility Act, which effectively reduces spending by $1.5 trillion over the next ten years in exchange for a two-year suspension of the debt ceiling, found broad support from lawmakers last night, gaining 314 votes -- including more Democrats than Republicans -- and easily moving to the Senate for a confirming vote later in the week.
"This agreement is good news for the American people and the American economy," said President Joe Biden. "I urge the Senate to pass it as quickly as possible so that I can sign it into law."
Market reaction, however, has been largely muted, with only a modest pullback in Treasury bond yields, suggesting investors are looking to the Senate vote before fully embracing the deal.
At the same time, comments from a series of Federal Reserve officials, including incoming vice chairman Philip Jefferson, suggest the central bank is prepared to pause its rate-hike cycle next month in Washington in order to better assess the impact of the 500 basis points of increases its put into place over the past 14 months.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.18% lower in overnight dealing at 104.127, while the CME Group's FedWatch is now pricing in a 33.2% chance of a 25 basis point increase on June 14, down from a session high of 72.2% yesterday following a stronger-than-expected tally of unfilled jobs for the month of April published by the Labor Department.
Benchmark 2-year Treasury note yields eased were pegged at 4.453% while 10-year notes held at 3.676%, with markets again focused on the likely flood of new issuance over the coming weeks, estimated to be at least $600 billion, as the Treasury rebuilds the reserves it had depleted since breaching the debt ceiling on January 19.
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 were indicating a 14 point opening bell gain while those linked to the Dow Jones Industrial Average were priced for an 80 point move to the upside. The tech-focused Nasdaq was looking at a 30 point gain.
European stocks were also higher, with the region-wide Stoxx 600 rising 0.79% from a two-month low ahead of regional inflation figures. Overnight in Asia, the region-wide MSCI ex-Japan index was marked 0.13% higher into the close of trading while Japan's Nikkei 225 gained 0.84%.
2. -- ADP Jobs Data In Focus As Markets Look to Friday Payrolls
Jobs data will be in focus again Thursday as investors look to payroll processing group ADP's National Employment Report, as well as the Labor Department's tally of weekly jobless claims, ahead a crucial May non-farm payroll report on Friday.
ADP's monthly estimate, which underwent a broad overhaul last summer, is expected to show that around 165,000 new jobs were created in May when its published at 8:15 am eastern time, a sharp decline from the 296,000 reported in the month of April.
Fifteen minutes later, the Labor Department is likely to show weekly claims for new unemployment benefits rose modestly over the period ending on May 27 to 235,000.
The National Federation of Independent Businesses will also publish its monthly report on hiring intentions, seen as a good predictor of the Labor Department's non-farm payroll tally, at 1:00 pm eastern time.
Friday's May employment report, due at 8:30 am eastern time, is also forecast to show a notable decline in hiring compared to the previous month, with 180,000 new positions created and monthly average hourly earnings easing to 0.4%.
3. -- Salesforce Slides After Sluggish Revenue Growth, Muted Near-Term Outlook
Salesforce (CRM) shares moved firmly lower in pre-market trading after the enterprise software group posted its slowest revenue growth rate in more than a decade, casting a pall over its otherwise solid first quarter earnings report.
Salesforce said revenues were up 10.3% from last year to $8.25 billion, the slowest rate of gain since 2011, with adjusted earnings rising 72.44% to $1.69 per share, topping Street forecasts by around 8 cents.
Looking into the current quarter, which ends in June, Salesforce said it sees sales in the region of $8.51 billion to $8.53 billion, a growth rate of just 10% compared to 2022 levels.
We're laser focused on our short-term and long-term restructuring, improving productivity and performance, prioritizing our core innovations, and delivering for our shareholders.," said CEO Marc Benioff. "Just like the cloud, mobile, and social, well, AI, this revolution is a new innovation cycle."
Salesforce shares were marked 5.5% lower in pre-market trading to indicate an opening bell price of $211.19 each.
4. -- Nordstrom Surges After Surprise Q1 Profit, Margin Improvement
Nordstrom (JWN) shares surged higher in pre-market trading after the upscale retailer posted a surprise first quarter profit that countered concerns for a broader spending slowdown heading into the summer months.
Nordstrom said its adjusted profit for the three months ending in April, the group's fiscal first quarter, were pegged at 7 cents per share, up from a loss of 6 cents per share last year and besting the Street's forecast of another 8 cent loss. Group revenues, Nordstrom said, fell 11% to 3.57 billion, but came in well ahead of analysts' estimates of a $3.12 billion tally
Nordstrom, a recent new investment for billionaire activist Ryan Cohen, was also able to reduce its overall inventory by 7.8% while improving its gross margin by 110 basis points.
"One of our big key priorities this year around inventory productivity was, first and foremost, starting the year with cleaner and more current inventories," said chief accounting officer Michael Maher. "Collectively what that means is that we're operating on leaner inventory levels, more current inventory levels, with less to markdown, less susceptible to shrink. And you just get better margins and better productivity out of that."
Nordstrom shares were marked 6.8% higher in pre-market trading to indicate an opening bell price of $16.34 each..
5. -- Broadcom Earnings On Deck As Chipmaker Rides AI Demand Wave
Broadcom (AVGO) shares moved higher in pre-market trading ahead of the chipmaker's first quarter earnings slated for after the closing bell.
Broadcom, which told investors earlier this year that it was seeing an "urgency in our hyperscale customers" to secure AI-related chips as the new technology grips capital spending plans around the world, is expected to see adjusted earnings rise 11.1% from last year to $10.08 per share, with sales rising 7.5% to $8.71 billion.
Much like its larger rival, Nvidia (NVDA), which lifted its near-term sales forecast by around 50% from previous levels amid the new AI boom, investors are likely to focus on CEO Hock Tan's second quarter forecast and chip sector commentary.
Broadcom shares were marked 0.04% higher in pre-market trading to indicate an opening bell price of $800.28 each, although the stock is still up more than 43% so far this year.
