Markets Today: Stock Index Futures Lower on Bank Jitters and ECB Rate Hike

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are down -0.30%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.12%.

U.S. stock index futures this morning are moderately lower.  Concern about the health of the U.S. banking system is weighing on the overall market, with regional bank stocks falling in pre-market trading.  U.S. stock index futures are also being weighed down on negative carryover from a fall in European stocks after the ECB raised interest rates. 

Stock index futures maintained moderate losses after this morning’s U.S. economic news showed Q1 nonfarm productivity fell more than expected, and Q1 unit labor costs rose more than expected.

Also weighing on stocks is the lack of clarity regarding the U.S. debt ceiling.  Treasury Secretary Yellen Monday said the Treasury Department may run out of cash to pay its bills as soon as June 1 unless the debt ceiling is raised.

U.S. weekly initial unemployment claims rose +13,000 to 242,000, showing a weaker labor market than expectations of 240,000.  However, weekly continuing claims unexpectedly fell -38,000 to 1.805 million, showing a stronger labor market than expectations of an increase to 1.865 million. 

U.S. Q1 nonfarm productivity fell -2.7%, weaker than expectations of -2.0%.  Also, Q1 unit labor costs rose +6.3%, stronger than expectations of +5.6%.

The U.S. Mar trade deficit narrowed to -$64.2 billion from -$70.6 billion in Feb, wider than expectations of -$63.1 billion.

Global bond yields are higher.  The 10-year T-note yield is up +5.1 bp at 3.386%.  The 10-year German bund yield is up +1.6 bp at 2.263%, and the UK 10-year gilt is up +3.9 bp at 3.734%.

On the bearish side for stocks, regional bank stocks are under pressure in pre-market trading as sentiment remains negative in the sector. PacWest Bancorp plunged more than -40% after confirming it is weighing strategic options for the company.  Also, Qualcomm is down more than -6% after forecasting weaker-than-expected Q3 revenue.  In addition, TripAdvisor is down more than -8% after reporting Q1 adjusted Ebitda below consensus.

On the bullish side, Cognizant Technology Solutions climbed more than +3% in pre-market trading after reporting stronger-than-expected Q1 revenue and forecasted Q2 revenue above consensus.  Also, Parker-Hannifin is up more than +2% after reporting Q1 net sales above consensus and raising its full-year adjusted EPS forecast.  In addition, Datadog is up more than +5% after reporting Q1 revenue above consensus and raising guidance on full-year revenue.

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.97%.  China’s Shanghai Composite closed up +0.82%, and Japan’s Nikkei Stock Index was closed for Greenery Day. 

The Euro Stoxx 50 index today tumbled to a 1-month low and is moderately lower.  European stocks are under pressure after the ECB raised the deposit facility rate by +25 bp to 3.25% and said, "The inflation outlook continues to be too high for too long."  Weakness in automakers, real estate and media stocks are leading the overall market lower. Also, weaker-than-expected Eurozone economic news is weighing on stocks after the Eurozone Apr composite PMI was revised downward, and German Mar exports fell more than expected.  On the positive side, Eurozone Mar PPI eased to the slowest pace of increase in 2 years.  Also, Shell Plc rose more than +2% after reporting stronger-than-expected Q1 adjusted profits and boosting its share buyback program by $4 billion.

The ECB, as expected, raised the deposit facility rate by +25 bp to 3.25% and said, "The inflation outlook continues to be too high for too long."  The ECB said that future rate decisions will make rates sufficiently restrictive and will be based on the inflation outlook.  Also, the ECB said it expects to halt reinvestments under its Asset Purchase Program as of July.

Eurozone Mar PPI eased to +5.9% y/y from +13.3% y/y in Feb, the slowest pace of increase in 2 years.

The Eurozone Apr composite PMI was revised downward by -0.3 to 54.1 from the initially reported 54.4.

German trade data was weaker than expected after German Mar exports fell -5.2% m/m, weaker than expectations of -2.2% m/m.  Also, Mar imports fell -6.4% m/m, weaker than expectations of -2.1% m/m and the biggest decline in nearly three years.

China’s Shanghai Composite Stock Index today closed moderately higher after reopening from the Golden Week holidays.  Travel and tourism stocks rallied today after China’s Ministry of Culture and Tourism reported that the number of domestic trips made over the five-day Golden Week holidays reached 274 million, up +19% from the pre-pandemic level in 2019 and almost +71% higher than last year. 

Also, Chinese healthcare stocks moved higher on positive sentiment following strong clinical results from U.S. peers, including Eli Lilly’s Alzheimer treatment.  However, there are growing concerns about the Chinese manufacturing outlook after the Caixin gauge of manufacturing activity unexpectedly contracted last month.  Also, energy producers fell after crude prices tumbled to 5-week lows Wednesday on global demand concerns. 

The China Apr Caixin manufacturing PMI fell -0.5 to 49.5, weaker than expectations of no change at 50.0.

Japan’s Nikkei Stock Index was closed today for Greenery Day and will be closed for the rest of the week. 

Pre-Market U.S. Stock Movers

Regional bank stocks are under pressure in pre-market trading as sentiment remains negative in the sector.  PacWest Bancorp (PACW) plunged more than -40% after confirming it is weighing strategic options for the company.  Also, Western Alliance Bancorp (WAL) sank more than -20%.  In addition, Zions Bancorp (ZION), Truist Financial (TFC), Comerica (CMA), and KeyCorp (KEY) are down more than -2%. 

Qualcomm (QCOM) tumbled more than -6% in pre-market trading after forecasting Q3 revenue of $8.1 billion-$8.9 billion, weaker than the consensus of $9.25 billion.

TripAdvisor (TRIP) sank more than -8% in pre-market trading after reporting Q1 adjusted Ebitda of $33 million, well below the consensus of $39.7 million.

Option Care Health (OPCH) plunged more than -19% in pre-market trading after forecasting full-year net revenue of $4.15 billion-$4.38 billion, the midpoint below the consensus of $4.28 billion.

 

First Horizon Corp (FHN) plummeted more than -50% in pre-market trading after it said it terminated its agreement to merge with TD Bank. 

MetLife (MET) fell more than -2% in pre-market trading after reporting Q1 adjusted EPS of $1.52, weaker than the consensus of $1.81.

Cognizant Technology Solutions (CTSH) climbed more than +3% in pre-market trading after reporting Q1 revenue of $4.81 billion, stronger than the consensus of $4.73 billion, and forecasting Q2 revenue of $4.83 billion-$4.88 billion, with the midpoint above the consensus of $4.85 billion.

Parker-Hannifin (PH) rose more than +2% in pre-market trading after reporting Q1 net sales of $5.1 billion, better than the consensus of $4.78 billion, and raised its full-year adjusted EPS forecast to $8.70-$9.40 from a prior view of $7.70-$8.40, stronger than the consensus of $8.15. 

Arconic (ARNC) surged more than +25% in pre-market trading after Apollo Global Management said it was near a deal to acquire the company for about $3 billion.

Datadog (DDOG) jumped more than +5% in pre-market trading after reporting Q1 revenue of $481.7 million, above the consensus of $468.9 million, and raised guidance on full-year revenue to $2.08 billion-$2.10 billion from a prior view of $2.07 billion-$2.09 billion, stronger than the consensus of $2.08 billion. 

Cardinal Health (CAH) gained more than +2% in pre-market trading after reporting Q3 adjusted EPS of $1.74, well above the consensus of $1.48. 

Qorvo (QRVO) rallied more than +7% in pre-market trading after reporting Q4 adjusted revenue of $632.7 million, above the consensus of $622.2 million and forecast Q1 revenue of $620 million-$660 million, the midpoint better than the consensus of $628.5 million. 

Confluent (CFLT) jumped more than +5% in pre-market trading after reporting a Q1 adjusted loss per share of -9 cents, narrower than the consensus of -14 cents, and forecast a Q2 adjusted loss per share of -6 cents to -8 cents, a smaller loss than the consensus of -10 cents.

Today’s U.S. Earnings Reports (5/4/2023)

Alliant Energy Corp (LNT), Ameren Corp (AEE), American Electric Power Co Inc (AEP), American International Group Inc (AIG), Apple Inc (AAPL), Aptiv PLC (APTV), Ball Corp (BALL), Becton Dickinson & Co (BDX), Bio-Rad Laboratories Inc BIO), Booking Holdings Inc (BKNG), BorgWarner Inc (BWA), Cardinal Health Inc (CAH), ConocoPhillips (COP), Consolidated Edison Inc (ED), Coterra Energy Inc (CTRA), EOG Resources Inc (EOG), Expedia Group Inc (EXPE), Federal Realty Investment Trus (FRT), Fortinet Inc (FTNT), Huntington Ingalls Industries (HII), Insulet Corp (PODD), Intercontinental Exchange Inc (ICE), Iron Mountain Inc (IRM), Kellogg Co (K), Live Nation Entertainment Inc (LYV), Martin Marietta Materials Inc (MLM), Mettler-Toledo International I (MTD), Microchip Technology Inc (MCHP), Moderna Inc (MRNA), Monolithic Power Systems Inc (MPWR), Monster Beverage Corp (MNST), Motorola Solutions Inc (MSI), 

NRG Energy Inc (NRG), Organon & Co (OGN), Paramount Global (PARA), Parker-Hannifin Corp (PH), PG&E Corp (PCG), Pinnacle West Capital Corp (PNW), PPL Corp (PPL), Quanta Services Inc (PWR), Regency Centers Corp (REG), Regeneron Pharmaceuticals Inc (REGN), Royal Caribbean Cruises Ltd (RCL), Sempra Energy (SRE), Stanley Black & Decker Inc (SWK), Targa Resources Corp (TRGP), Teleflex Inc (TFX), Vulcan Materials Co (VMC), Westrock Co (WRK), Xylem Inc/NY (XYL), Zoetis Inc (ZTS).

• Build Up Your Portfolio’s Defense With These 3 Highest Yielding Dividend Aristocrats!
• Bear Call Spread Screener Results For May 4th
• Stocks Set to Open Lower as Investors Weigh Fed Rate Decision, Apple Earnings on Tap
• Stocks Retreat as Powell Dashes Hopes of Fed Rate Cuts