Markets Today: Stocks Slip as Bank Stocks Fall and Chinese Imports Plunge

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are down -0.33%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.50%.

U.S. stock index futures this morning are moderately lower.  A drop of more than -15% in PacWest Bancorp in pre-market trading is leading regional bank stocks lower amid lingering worries about the health of regional U.S. banks.  Also, market sentiment declined after Chinese Apr imports plunged, a sign that China’s recovery is weaker than expected, reducing global growth prospects. 

The markets are awaiting Wednesday’s news on U.S. April consumer prices.  The consensus is for an Apr CPI report of +5.0% y/y, unchanged from March, and for Apr core CPI to ease to +5.5% y/y from +5.6% y/y in March.

Clarity regarding the U.S. debt ceiling is a bearish factor for stocks.  Treasury Secretary Yellen said Sunday that there are “simply no good options” for solving the debt limit stalemate other than Congress lifting the debt ceiling cap.  Yellen has said that the Treasury Department may run out of cash to pay its bills as soon as June 1 unless the debt ceiling is raised.  President Biden is scheduled to meet House Speaker McCarthy and other congressional leaders today to discuss the debt ceiling.

Global bond yields are mixed.  The 10-year T-note yield is down -1.0 bp at 3.498%.  The 10-year German bund yield is down -0.3 bp at 2.316%, and the UK 10-year gilt yield rose to a 2-1/2 week high of 3.828% and is up +5.0 bp at 3.831%.

On the bearish side for stocks, PayPal Holdings tumbled more than -5% in pre-market trading after reporting 433 million active customer accounts in Q1, below the consensus of 437.6 million, and warned that its adjusted operating margin wouldn’t grow as quickly as it had anticipated earlier. Also, Lucid Group is down more than -8% after reporting Q1 revenue below consensus.  In addition, Skyworks Solutions is down more than -9% after reporting Q2 adjusted EPS below consensus and forecasting Q3 adjusted EPS below estimates.

On the bullish side, McKesson climbed more than +3% in pre-market trading after reporting Q4 adjusted EPS above consensus and forecasting 2024 adjusted EPS above estimates.  Also, Palantir is up more than +15% after reporting stronger-than-expected Q1 revenue and said it was seeing unprecedented demand for its new artificial intelligence tool due this month.  DaVita is up more than +6% after reporting Q1 revenue above consensus and raising its full-year operating income estimate.

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.88%.  China’s Shanghai Composite closed down -1.10%, and Japan’s Nikkei Stock Index closed up +1.01%. 

The Euro Stoxx 50 index today is moderately lower.  Concerns about the European real estate sector is weighing on the overall market today after SBB, one of Sweden’s biggest commercial landlords, halted its dividend, a sign that the funding squeeze in the leveraged property sector is worsening.  The company also canceled a rights issue after S&P Global Ratings downgraded its credit rating to junk.  European stocks are also being undercut amid worries the ECB could increase interest rates higher and for longer on hawkish comments today from ECB Governing Council members Kazimir and Kazaks, who said the ECB needs to keep raising interest rates.  In addition, European mining stocks dropped after China’s Apr imports of iron ore fell to a 10-month low.  On the positive side, healthcare stocks moved higher today, led by a +5% gain in Fresenius SE after it reported better-than-expected Q1 revenue. 

ECB Governing Council member Kazimir said, "The battle against inflation is far from won," and the ECB will have to keep raising interest rates for longer than he anticipated.

ECB Governing Council member Kazaks said, "The ECB still has quite some ground to cover, and further rate increases will be necessary to tame inflation."  Also, market bets on ECB rate cuts in the spring of 2024 are "significantly premature."

China’s Shanghai Composite Stock Index today retreated from a 10-month high and closed moderately lower.  Concerns about the sustainability of China’s economic recovery sent stocks sliding today after trade news showed China’s Apr imports fell much more than expected. Also, Monday’s sharp rally in state-owned enterprises fizzled today and weighed on the overall market.  Chinese stocks today initially moved higher on strength in property stocks after Xinhua reported that Chinese regulators told property agents to lower commissions for housing sales and rentals. 

China's trade data was mixed as Apr exports rose +8.5% y/y, stronger than expectations of +8.0% y/y.  Conversely, Apr imports fell -7.9% y/y, weaker than expectations of -0.1% y/y.

Japan’s Nikkei Stock Index today closed moderately higher on positive corporate earnings results.  Japanese pharmaceutical stocks rallied today, led by a +6% gain in Kissei Pharma, after reporting better-than-expected full-year earnings and announcing a share buyback of as much as 6 billion yen.  Also, steel makers rose, led by a +15% surge in JFE after it reported higher-than-expected forecasts for net income and dividend guidance. The yen rose slightly today and weighed on exporter stocks after BOJ Governor Ueda said he intends to scrap the yield curve control program once “we have an inflation outlook indicating that sustainable and stable 2% inflation will be achieved.”

Today’s economic news was bearish for Japanese stocks after Japan's Mar household spending unexpectedly fell -1.9% y/y, weaker than expectations of +0.8% y/y and the biggest decline in a year.  Also, Mar labor cash earnings rose +0.8% y/y, weaker than expectations of +1.0% y/y.

Pre-Market U.S. Stock Movers

Regional bank stocks are under pressure in pre-market trading, led by a -15% fall in PacWest Bancorp (PACW).  Also, First Horizon (FHN) is down more than -3% and Western Alliance Bancorp (WAL) is down more than -2%.  In addition, Zions Bancorp (ZION), Truist Financial (TFC), Comerica (CMA), KeyCorp (KEY), and US Bancorp (USB) are down more than -1%. 

PayPal Holdings (PYPL) tumbled more than -5% in pre-market trading after reporting 433 million active customer accounts in Q1, below the consensus of 437.6 million, and warned that its adjusted operating margin wouldn’t grow as quickly as it had anticipated earlier.

Lucid Group (LCID) sank more than -8% in pre-market trading after reporting Q1 revenue of $149.4 million, well below the consensus of $197.8 million.

Skyworks Solutions (SWKS) dropped more than -9% in pre-market trading after reporting Q2 adjusted EPS of $2.02, below the consensus of $2.03 million, and forecast Q3 adjusted EPS of $1.67, well below the consensus of $2.10.

Waters (WAT) fell more than -3% in pre-market trading after reporting Q1 adjusted EPS of $2.49, below the consensus of $2.62, and forecasting Q2 adjusted EPS of $2.52-$2.62, weaker than the consensus of $2.89.

International Flavors & Fragrances (IFF) slid more than -1% in pre-market trading after lowering its full-year sales estimate to $12.3 billion from a prior view of $12.5 billion, below the consensus of $12.41 billion.

Under Armour (UAA) tumbled more than -8% in pre-market trading after forecasting full-year EPS of 47 cents-51 cents, weaker than the consensus of 62 cents.

McKesson (MCK) climbed more than +3% in pre-market trading after reporting Q4 adjusted EPS of $7.19, above the consensus of $7.14, and forecast 2024 adjusted EPS of $26.10-$26.90, the midpoint above the consensus of $26.15.

Premier (PINC) jumped more than +3% in pre-market trading after saying it was exploring strategic options for the company, including a sale.

Palantir (PLTR) surged more than +15% in pre-market trading after reporting Q1 revenue of $525 million, better than the consensus of $506.1 million, and said it was seeing unprecedented demand for its new artificial intelligence tool due this month. 

Mobileye Global (MBLY) rose more than +2% in pre-market trading after Porsche said it entered into a strategic collaboration with the company to offer automated assistance and navigate-on-pilot functions based on the Mobileye SuperVision technology platform. 

DaVita (DVA) jumped more than +6% in pre-market trading after reporting Q1 revenue of $2.87 billion, stronger than the consensus of $2.83 billion, and raising its full-year operating income estimate to $1.48 billion-$1.63 billion from a previous estimate of $1.40 billion-$1.60 billion, above the consensus of $1.48 billion.

Trex Co (TREX) climbed more than +4% in pre-market trading after reporting Q1 net sales of $238.7 million, better than the consensus of $237.5 million, and forecasting Q2 net sales of $310 million-$320 million, stronger than the consensus of $308.4 million. 

Today’s U.S. Earnings Reports (5/9/2023)

Air Products and Chemicals Inc (APD), Akamai Technologies Inc (AKAM), Axon Enterprise Inc (AXON), Catalent Inc (CTLT), Celanese Corp (CE), Duke Energy Corp (DUK), Electronic Arts Inc (EA), Fox Corp (FOXA), Henry Schein Inc (HSIC), Jacobs Solutions Inc (J), Lincoln National Corp (LNC), Occidental Petroleum Corp (OXY), TransDigm Group Inc (TDG), Waters Corp (WAT), Wynn Resorts Ltd (WYNN).

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