Markets Today: Stocks Rally as U.S. CPI Eases

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are up +0.37%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.45%.

U.S. stock index futures this morning erased overnight losses and pushed higher after U.S. consumer prices eased in April.  Bond yields also fell on the U.S. Apr CPI report, which was dovish for Fed policy.

The U.S. Apr CPI eased to 4.9% y/y from 5.0% y/y in Mar, better than expectations of no change at 5.0% y/y and the smallest increase in 2 years.  Apr CPI ex-food and energy eased to 5.5% y/y from 5.6% y/y in Mar, right on expectations.

U.S. debt ceiling talks Tuesday yielded little results, but White House officials and Republican leaders pledged additional negotiations.  On Friday, President Biden will meet again with congressional leaders, including House Speaker McCarthy.  Treasury Secretary Yellen 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.

Global bond yields are lower.  The 10-year T-note yield is down -6.5 bp at 3.454%.  The 10-year German bund yield is down -5.5 bp at 2.295%, and the UK 10-year gilt yield is down -3.3 bp to 3.822%.

On the bullish side for stocks, Exact Sciences jumped more than +12% in pre-market trading after reporting Q1 revenue above consensus and raising its full-year revenue forecast.  Also, Syneos Health is up more than +17% after a consortium that includes Elliot Investment Management, Patient Square Capital, and Veritas Capital were said to be in advanced talks to acquire the company.  In addition, Rivian Automotive is up more than +6% after reporting a Q1 adjusted loss per share that was smaller than expected.

On the bearish side, Airbnb sank more than -12% in pre-market trading after forecasting Q2 revenue below consensus.  Also, Coherent Corp is down more than -10% after reporting Q3 revenue below consensus and cutting its full-year revenue estimate. In addition, Twilio plunged more than -16% after forecasting Q2 revenue well below consensus.

Overseas stock markets are lower.  The Euro Stoxx 50 is down -0.28%.  China’s Shanghai Composite closed down -1.15%, and Japan’s Nikkei Stock Index closed down -0.41%. 

The Euro Stoxx 50 index today is moderately lower on weakness in consumer durable stocks, retailers, and telecom companies.  Also, an unexpected decline in Italy’s Mar industrial activity sparked concerns about growth in the Eurozone.  Hawkish comments from ECB President Lagarde and ECB Executive Board member Schnabel weighed on stocks on concern the ECB will keep raising interest rates to contain inflation.  On the positive side, European bank stocks outperformed after earnings from Credit Agricole and ABN Amro topped estimates.  Also, Vestas Wind Systems rose more than +4% after the company returned to a profit.

Italy Mar industrial production unexpectedly fell -0.6% m/m, weaker than expectations of +0.3% m/m and the biggest decline in 5 months.

ECB President Lagarde said the inflation outlook could face "significant upside risks," and the ECB still has "more ground to cover."

ECB Executive Board member Schnabel said the ECB will continue lifting borrowing costs "with full determination until there are signs that core inflation is also falling on a sustained basis."

China’s Shanghai Composite Stock Index today closed moderately lower.  The recent rally in Chinese state-owned enterprises lost momentum for a second day as investors took profits on their recent run-up.  Also, rising geopolitical tensions weighed on stocks as China ramped up its anti-espionage crackdown that may discourage foreign investment in the country.  Capvision Pro Corp, a foreign consulting firm, became the first public target with a raid by security officials aired on state television.  On the positive side, Chinese automakers rose after China reported Apr passenger vehicle sales jumped +55.5% y/y.

Japan’s Nikkei Stock Index today closed moderately lower on caution ahead of Wednesday’s U.S. consumer price report.  Japanese steel makers declined, led by an -8% fall in Nippon Steel after the company’s full-year profit target missed estimates.  On the positive side, shares of Japanese trading companies that Warren Buffet invested in, such as Sumitomo, Mitsubishi, and Itochu, rallied to record highs after reporting better-than-expected earnings and announcing share buybacks. 

Today’s economic news was bearish for Japanese stocks after the Japan Mar leading index CI fell -0.7 to 97.5, weaker than expectations of 97.9.

Pre-Market U.S. Stock Movers

Airbnb (ABNB) sank more than -12% in pre-market trading after forecasting Q2 revenue of $2.35 billion-$2.45 billion, with the midpoint below the consensus of $2.42 billion. 

Coherent Corp (COHR) tumbled more than -10% in pre-market trading after reporting Q3 revenue of $1.24 billion, weaker than the consensus of $1.34 billion, and cutting its full-year revenue estimate to $5.08 billion-$5.15 billion from a previous estimate of $5.35 billion-$5.50 billion, well below the consensus of $5.39 billion.

Twilio (TWLO) plunged more than -16% in pre-market trading after forecasting Q2 revenue of $980 million-$990 million, weaker than the consensus of $1.05 billion.

Dutch Bros (BROS) tumbled more than -8% in pre-market trading after forecasting full-year revenue of $950 million-$1.0 billion, the midpoint below the consensus of $986.3 million. 

Occidental Petroleum (OXY) fell more than -1% in pre-market trading after reporting Q1 adjusted EPS of $1.09, below the consensus of $1.23.

Southern Copper (SCCO) dropped more than -2% in pre-market trading after Goldman Sachs downgraded the stock to sell from neutral.

Rivian Automotive (RIVN) climbed more than +6% in pre-market trading after reporting a Q1 adjusted loss per share of -$1.25, narrower than the consensus of -$1.43. 

Exact Sciences (EXAS) jumped more than +12% in pre-market trading after reporting Q1 revenue of $602.5 million, better than the consensus of $543.1 million, and raising its full-year revenue forecast to $2.38 billion-$2.42 billion from a previous forecast of $2.27 billion-$2.32 billion, above the consensus of $2.30 billion. 

Syneos Health (SYNH) surged more than +17% in pre-market trading after a consortium that includes Elliot Investment Management, Patient Square Capital, and Veritas Capital were said to be in advanced talks to acquire the company. 

Upstart (UPST) soared more than +30% in pre-market trading after reporting Q1 revenue of $102.9 million, better than the consensus of $100.2 million, and forecasting Q2 revenue of about $135 million, above the consensus of $129.2 million.

Celsius Holdings (CELH) rallied more than +7% in pre-market trading after reporting Q1 revenue of $259.9 million, well above the consensus of $219.5 million. 

Toast (TOST) climbed more than +5% in pre-market trading after raising its full-year revenue forecast to $3.71 billion-$3.80 billion from a prior forecast of $3.57 billion-$3.66 billion, stronger than the consensus of $3.66 billion.

RingCentral (RNG) jumped more than +8% in pre-market trading after reporting Q1 software subscription revenue of $508.3 million, stronger than the consensus of $503.9 million, and raising the lower-end of its full-year software subscription revenue estimate to $2.09 billion-$2.10 billion from a previous estimate of $$2.08 billion-$2.10 billion.

Today’s U.S. Earnings Reports (5/10/2023)

Allegro MicroSystems Inc (ALGM), Amdocs Ltd (DOX), AppLovin Corp (APP), Coherent Corp (COHR), Copa Holdings SA (CPA), Crane Co (CR), Crane NXT Co (CXT), DoubleVerify Holdings Inc (DV), First Citizens BancShares Inc/ (FCNCA), Genpact Ltd (G), Ginkgo Bioworks Holdings Inc (DNA), Jazz Pharmaceuticals PLC (JAZZ), Middleby Corp/The (MIDD), New York Times Co/The (NYT), Paycor HCM Inc (PYCR), Performance Food Group Co (PFGC), Reynolds Consumer Products Inc (REYN), Ritchie Bros Auctioneers Inc (RBA), Robinhood Markets Inc (HOOD), ROBLOX Corp (RBLX), STERIS PLC (STE), Syneos Health Inc (SYNH), Tetra Tech Inc (TTEK), Trade Desk Inc/The (TTD), Unity Software Inc (U), UWM Holdings Corp (UWMC), Valvoline Inc (VVV), Walt Disney Co/The (DIS), Wendy's Co/The (WEN).

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