Markets Today: Stock Index Futures Under Pressure as FOMC Meeting Begins

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are down -0.26%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.17%.

U.S. stock index futures this morning are moderately lower.  The markets are awaiting the conclusion of the 2-day FOMC meeting that begins today to see if the Fed will provide clues as to when it will end its rate-hike campaign. Also, the markets will focus on the debt limit showdown after Treasury Secretary Yellen said the government might run out of borrowing power to pay off its bills as early as the start of June.  

The markets are showing a 96% chance of a 25 bp rate hike by the Federal Reserve at the Tue/Wed FOMC meeting and have fully priced in a 25 bp rate hike by the ECB at Thursday’s ECB meeting.

Global bond yields are mixed.  The 10-year T-note yield is down -3.1 bp at 3.538%.  The 10-year German bund yield is up +6.2 bp at 2.375%, and the UK 10-year gilt yield rose to a 1-1/2 week high of 3.827% and is up +4.8 bp at 3.767%.

The Reserve Bank of Australia unexpectedly raised its benchmark interest rate by +25 bp to 3.85% and said inflation remained too high and further tightening may be required.

On the bearish side for stocks, Arista Networks tumbled more than -8% in pre-market trading after analysts said the company’s Q1 results and forecast for Q2 were strong but cited a lack of visibility for the second half of the year, especially regarding the company’s “cloud titan” customers.  Also, LendingTree fell more than -21% in pre-market trading after reporting Q1 revenue below consensus and cutting its full-year revenue forecast.  In addition, Chegg sank more than -40% after it warned that ChatGPT was threatening the growth of its homework-help services.

On the bullish side, Uber Technologies jumped more than +8% in pre-market trading after reporting a Q1 adjusted Ebitda above consensus. Also, Pfizer is up more than +2% after reporting Q1 revenue well above consensus.  In addition, NXP Semiconductors NV is up more than +4% after reporting better-than-expected Q1 revenue.

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.46%.  China’s Shanghai Composite remains closed for the Golden Week holidays, and Japan’s Nikkei Stock Index closed up +0.12%. 

The Euro Stoxx 50 index today is moderately lower. Weakness in real estate, energy, and media stocks is putting pressure on the overall market.  Retailers also declined after today’s report showed German Mar retail sales unexpectedly declined by the most in 5 months.  Also, today’s Eurozone Apr CPI report and the Q1 ECB Bank Lending Survey support the view that the ECB will slow its pace of interest rate hikes to 25 bp on Thursday.  Bank stocks are also climbing today, led by a nearly +4% increase in HSBC after it reported stronger-than-expected Q1 profits, announced a $2 billion stock buyback plan, and said it would resume paying quarterly dividends for the first time since 2019.

The ECB's quarterly Bank Lending Survey said credit standards "tightened further substantially" in Q1, and the decline in net demand from firms was more than foreseen by banks in the previous three months and the most since the global financial crisis.

The Eurozone Apr CPI rose +7.0% y/y, slightly stronger than expectations of +6.9% y/y.  However, the Apr core CPI eased to +5.6% y/y from +5.7% y/y in March, right on expectations.

Eurozone Mar M3 money supply eased to +2.5% y/y from +2.9% y/y in Feb, the slowest pace of increase in 8-1/2 years.

The Eurozone Apr S&P manufacturing PMI was revised upward by +0.3 to 45.8 from the initially reported 45.5.

German Mar retail sales unexpectedly fell -2.5% m/m, weaker than expectations of +0.4% m/m and the biggest decline in 5 months.

China’s Shanghai Composite Stock Index was closed today for the Golden Week holidays.  China’s markets will remain closed through Wednesday for the holidays. 

Japan’s Nikkei Stock Index today rose to a 16-month high and closed slightly higher. Strength in Japanese semiconductor-related stocks rose today following positive comments from peers Nvidia and NXP Semiconductors.  Nvidia said a new AI computer using its processors has begun shipping to customers, and NXP Semiconductors said it has “cautious optimism” for demand in the current quarter.  Japanese stocks fell back from their best levels after the Reserve Bank of Australia unexpectedly raised its benchmark interest rate by +25 bp to 3.85%.  Also, exporter stocks retreated after the yen recovered from a 7-week low against the dollar and moved higher.  Trading activity was subdued ahead of the FOMC results on Wednesday and as Japanese markets will be closed for the rest of the week for the Golden Week holidays.

Pre-Market U.S. Stock Movers

Arista Networks (ANET) tumbled more than -8% in pre-market trading after analysts said the company’s Q1 results and forecast for Q2 were strong but cited a lack of visibility for the second half of the year, especially regarding the company’s “cloud titan” customers.

LendingTree (TREE) plunged more than -21% in pre-market trading after reporting Q1 revenue of $200.5 million, weaker than the consensus of $207 million, and cut its full-year revenue forecast to $760 million-$800 million from a prior forecast of $935 million-$985 million, well below the consensus of $943.5 million. 

MGM Resorts International (MGM) slid more than -1% in pre-market trading after analysts said the company announced a slightly sparser events calendar for its Las Vegas business this year.

Zebra Technologies (ZBRA) dropped more than -6% in pre-market trading after forecasting Q2 adjusted EPS of $3.20-$3.40, well below the consensus of $4.15. 

Chegg (CHGG) sank more than -40% in pre-market trading after the company warned that ChatGPT was threatening the growth of its homework-help services. 

SoFi Technologies (SOFI) slid more than -1% in pre-market trading after Wedbush downgraded the stock to neutral from outperform.

Pfizer (PFE) climbed more than +2% in pre-market trading after reporting Q1 revenue of $18.28 billion, well above the consensus of $16.6 billion. 

Uber Technologies (UBER) jumped more than +8% in pre-market trading after reporting a Q1 adjusted Ebitda of $761 million, stronger than the consensus of $678.6 million. 

STAG Industrial (STAG) rallied more than +7% in pre-market trading after S&P Dow Jones Indices said the company would replace Axon Enterprise in the S&P MidCap 400, effective before the market opens on May 4.

NXP Semiconductors NV (NXPI) jumped more than +4% in pre-market trading after reporting Q1 revenue of $3.12 billion, better than the consensus of $3 billion, and forecast Q2 revenue of $3.10 billion-$3.30 billion, stronger than the consensus of $3.03 billion.

Marriot International (MAR) climbed more than +2% in pre-market trading after reporting Q1 adjusted EPS of $2.09, above the consensus of $1.85, and raised guidance on its full-year adjusted EPS estimate to $7.97-$8.42 from a prior estimate of $7.23-$7.91, stronger than the consensus of $7.71.

Graphic Packaging (GPK) rose more than +3% in pre-market trading after reporting Q1 net sales of $2.44 billion, above the consensus of $2.41 billion.

Dell Technologies (DELL) rose more than +2% in pre-market trading after Mogan Stanley upgraded the stock to overweight from equal weight. 

Today’s U.S. Earnings Reports (5/2/2023)

Advanced Micro Devices Inc (AMD), Amcor PLC (AMCR), AmerisourceBergen Corp (ABC), AMETEK Inc (AME), Assurant Inc (AIZ), Broadridge Financial Solutions (BR), Caesars Entertainment Inc (CZR), Clorox Co/The (CLX), Cummins Inc (CMI), DuPont de Nemours Inc (DD), Eaton Corp PLC (ETN), Ecolab Inc (ECL), Edison International (EIX), Expeditors International (EXPD), Extra Space Storage Inc (EXR), Ford Motor Co (F), Gartner Inc (IT), Howmet Aerospace Inc (HWM), IDEXX Laboratories Inc (IDXX), Illinois Tool Works Inc (ITW), Incyte Corp (INCY), Jack Henry & Associates Inc (JKHY), Leidos Holdings Inc (LDOS), Marathon Petroleum Corp (MPC), Marriott International Inc/MD (MAR), Match Group Inc (MTCH), Molson Coors Beverage Co (TAP), ONEOK Inc (OKE), Paycom Software Inc (PAYC), Pfizer Inc (PFE), Prudential Financial Inc (PRU), Public Service Enterprise Group (PEG), Sealed Air Corp (SEE), Simon Property Group Inc (SPG), Starbucks Corp (SBUX), Sysco Corp (SYY), T Rowe Price Group Inc (TROW), Welltower Inc (WELL), Zebra Technologies Corp (ZBRA), Zimmer Biomet Holdings Inc (ZBH).

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