Markets Today: Signs of Progress in Debt Ceiling Talks Boost Stocks

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are up +0.28%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.12%.

U.S. stock index futures this morning are moderately higher.  Signs of progress on a deal to raise the debt ceiling are lifting stock index futures after President Biden and House Speaker McCarthy postponed a meeting on the debt ceiling that was planned for today.  According to staff involved with the discussions, the delay reflects some headway in the debt ceiling talks.  However, higher T-note yields today are limiting gains in technology stocks.

Market sentiment also improved today as officials from China and the U.S. are taking steps to repair ties between the countries after U.S. Security Adviser Sullivan met with top Chinese diplomat Wang Yi to ease tensions.

The banking turmoil has prompted investors to withdraw from financial stocks and move into technology stocks.  Bank of America said EPFR Global data show investors poured $3.8 billion into technology stocks in the week through May 10, the largest inflow since December 2021.  Conversely, investors pulled $2.1 billion from financial stocks, the largest redemption in a year. 

Fed Governor Bowman said inflation rates remain much too high, and she expects interest rates will need to stay restrictive for some time. 

The U.S. Apr import price index ex-petroleum fell -0.1% m/m, the third consecutive month prices have fallen but a smaller decline than expectations of -0.3% m/m.

Global bond yields are higher.  The 10-year T-note yield is up +2.6 bp at 3.410%.  The 10-year German bund yield is up +3.6 bp at 2.261%, and the UK 10-year gilt yield is up +6.0 bp at 3.767%.

On the bullish side for stocks, Tesla is up more than +2% in pre-market trading after raising prices on its Model X and Model S cars in the U.S., the third price increase in less than a month.  Also, Amylyx Pharmaceuticals is up more than +10% after reporting Q1 net product revenue above consensus.  In addition, News Corp is up more than +4% after reporting stronger-than-expected Q3 revenue.

On the bearish side, SiriusPoint Ltd sank more than -15% in pre-market trading after Dan Loeb said he is no longer exploring an acquisition of the company.  Also, Fox Corp is down more than -2% after Wells Fargo Securities downgraded the stock, and Twilio is down more than -1% after Mizuho Securities downgraded the stock.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.24%.  China’s Shanghai Composite closed down -1.12%, and Japan’s Nikkei Stock Index closed up +0.90%. 

The Euro Stoxx 50 index today is moderately higher.   Gains in consumer durables and bank stocks are leading the overall market higher.  European banks have reported strong earnings results for the last quarter and haven’t had a run on deposits like their U.S regional bank peers.  According to Morgan Stanley, 80% of European banks have beaten estimates this season, the ninth consecutive quarter of exceeding expectations.  Luxury goods makers are also climbing, led by a +6% jump in Richemont after it reported Q1 earnings that beat estimates as sales in China rebounded following the end of Covid Zero policies.  The company also announced plans to buy back 10 million of its A shares, representing 1.7% of its capital.  However, higher European government bond yields are negative for stocks as hawkish comments from ECB Governing Council member and Bundesbank President Nagel pushed bond yields higher.

ECB Governing Council member and Bundesbank President Nagel said inflation is much too strong, and more ECB rate hikes currently look necessary.

China’s Shanghai Composite Stock Index today fell to a 2-week low and closed moderately lower.  Concern about the sustainability of China’s economic recovery is weighing on equity prices after this week’s borrowing and inflation news showed the recovery is waning.  Property stocks retreated today on signs the rebound in China’s housing market is fizzling after a brief rebound.  High-frequency indicators in recent weeks show momentum in home purchases has slowed.  Also, the fall in iron ore prices this week to below $100 a ton reflects the subdued demand for Chinese homebuilding.  

On the positive side, Chinese technology stocks moved higher after e-commerce firm JD.com reported better-than-expected earnings results.  Also, geopolitical concerns eased slightly on news of a meeting between top U.S. and Chinese officials. 

Japan’s Nikkei Stock Index today rallied to a 17-month high and closed moderately higher.  Better-than-expected corporate earnings results from domestic companies pushed Japanese stocks higher today.  Amada, Asahi Group, Concordia Financial, Daifuku, Dowa, Harmonic Drive, and others all reported stellar earnings.  Also, Honda Motor and KDDI announced stock buybacks, further boosting market sentiment. In addition, a decline in government bond yields boosted Japanese stocks after the 10-year JGB bond yield today fell to a 5-week low of 0.365%. 

Pre-Market U.S. Stock Movers

Tesla (TSLA) is up more than +2% in pre-market trading after raising prices on its Model X and Model S cars in the U.S., the third price increase in less than a month. 

Amylyx Pharmaceuticals (AMLX) jumped more than +10% in pre-market trading after reporting Q1 net product revenue of $71.4 million, better than the consensus of $59 million, citing strong sales of its amyotrophic lateral sclerosis drug. 

Blue Bird (BLBD)  surged more than +25% in pre-market trading after reporting Q2 adjusted Ebitda of $19.8 million, well above the consensus of $10.1 million, and raising its full-year adjusted Ebitda estimate to $55 million-$65 million from a prior estimate of $40 million-$46 million, stronger than the consensus of $40.6 million.

News Corp (NWSA) climbed more than +4% in pre-market trading after reporting Q3 revenue of $2.45 billion, above the consensus of $2.38 billion.

Fox Corp (FOXA) dropped more than -2% in pre-market trading after Wells Fargo Securities downgraded the stock to equal weight from overweight. 

SiriusPoint Ltd (SPNT) sank more than -15% in pre-market trading after Dan Loeb said he is no longer exploring an acquisition of the company. 

Twilio (TWLO) slid more than -1% in pre-market trading after Mizuho Securities downgraded the stock to neutral from buy. 

Today’s U.S. Earnings Reports (5/12/2023)

AirSculpt Technologies Inc (AIRS), Alpine Immune Sciences Inc (ALPN), American Realty Investors Inc (ARL), Athira Pharma Inc (ATHA), Aura Biosciences Inc (AURA), Berkshire Grey Inc (BGRY), Boston Omaha Corp (BOC), Daily Journal Corp (DJCO), DICE Therapeutics Inc (DICE), Edgio Inc (EGIO), Embecta Corp (EMBC), Enochian Biosciences Inc (ENOB), Erasca Inc (ERAS), Home Point Capital Inc (HMPT), Humacyte Inc (HUMA), Kezar Life Sciences Inc (KZR), Kinnate Biopharma Inc (KNTE), Latch Inc (LTCH), Mitek Systems Inc (MITK), NextDecade Corp (NEXT), Nkarta Inc (NKTX), Nutex Health Inc (NUTX), Outlook Therapeutics Inc (OTLK), Point Biopharma Global Inc (PNT), PolyMet Mining Corp (POM), Spectrum Brands Holdings Inc (SPB), Talaris Therapeutics Inc (TALS), Transcontinental Realty Invest (TCI).

• Stock Index Futures Climb as Investors Weigh Economic Outlook, U.S. Debt Ceiling Talks Remain in Focus
• Stocks Settle Mixed as Tech Gains on Alphabet and Lower Bond Yields
• Stock Buybacks Remain Strong for Mega-Cap Tech Companies
• Stocks Weighed Down by Weakness in Disney and Regional Bank Stocks