Markets Today: Stocks Climb on Hopes for Debt Ceiling Progress

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are up +0.30%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.14%.

U.S. stock index futures this morning are moderately higher on hopes for progress in the debt ceiling negotiations.  The talks have shifted to a narrower group of staff-level negotiators in hopes of yielding a deal to avert a U.S. default.  House Speaker McCarthy after his meeting with President Biden on Tuesday said that the two sides are “far apart” but that a deal was still possible by the end of the week.  President Biden today is leaving today for the G-7 summit in Japan but is cutting his 7-day trip short to return to Washington to work on the debt ceiling.

Stock index futures maintained moderate gains on mixed U.S. housing news after Apr housing starts unexpectedly rose +2.2% to 1.401 million, stronger than expectations of a decline to 1.400 million.  However, Apr building permits, a proxy for future construction, fell -1.5% m/m to 1.416 million, weaker than expectations of 1.430 million.

Global bond yields are lower.  The 10-year T-note yield is down -0.4 bp at 3.530%.  The 10-year German bund yield is down -4.3 bp at 2.310%, and the UK 10-year gilt yield is down -1.4 bp at 3.802%.

On the bullish side for stocks, regional bank stocks are climbing in pre-market trading, led by a +9% jump in Western Alliance after it reported Q2 deposit growth of +$2 billion as of May 12.   Also, Wix.com is up more than +7% after reporting stronger-than-expected Q1 revenue and forecasting full-year revenue above consensus.  Keysight Technologies is up more than +8% after reporting stronger-than-expected Q1 adjusted EPS and forecasting Q3 adjusted EPS above consensus.

On the bearish side, Doximity sank more than -11% in pre-market trading after forecasting Q1 revenue well below consensus.  Also, TJX Cos is down more than -2% after forecasting Q2 comparable sales below consensus.  In addition, Vivid Seats is down more than -12% after selling stockholder Hoya Topco LLC offered 16 million Class A shares via Citigroup and Morgan Stanley.

Overseas stock markets are mixed.  The Euro Stoxx 50 is up +0.14%.  China’s Shanghai Composite closed down -0.21%, and Japan’s Nikkei Stock Index closed up +0.84%. 

The Euro Stoxx 50 index today is slightly higher.  Strength in automakers is lifting the overall market after auto sales in Europe rose for the month consecutive month in April. Also, mining stocks rose as iron ore prices climbed after China reported an increase in new home prices.  In addition, Siemens AG is up more than +2% after raising its outlook for a second time in fiscal 2023 after revenue and orders jumped.  The company said it is sitting on a record order backlog of $114 billion due to strong demand while protracted supply-chain shortages are finally easing. On the negative side, London Stock Exchange Group Plc is down more than -4% after a consortium of investors, including Blackstone and Thomson Reuters, sold $3.4 billion worth of LSEG shares. 

ECB Governing Council member Rehn said, "We need to see that core inflation is clearly and sustainably on a downward trend before we stop tightening monetary policy."

Eurozone Apr new car registrations rose +17.2% y/y to 803,000; the ninth consecutive month registrations have increased.

China’s Shanghai Composite Stock Index today closed moderately lower.  Concern about the strength of China’s post-Covid recovery is weighing on stocks and the yuan due to recent weaker-than-expected economic news.  Chinese suppliers to Home Depot moved lower after the company reported disappointing Q1 sales.  Also, property stocks retreated after today’s economic news showed China Apr new home prices rose +0.32% m/m, less than March’s +0.44% gain.  Signs of renewed weakness have emerged in the housing market after housing sales and prices recovered briefly from an 18-month slump. High-frequency indicators in recent weeks show momentum in home purchases has fallen.  Property investment continues to contract, and consumers are reluctant to take out mortgages despite government attempts to prop up the market. 

China Apr new home prices rose +0.32% m/m, the third consecutive increase, but weaker than March's +0.44% m/m gain.

Japan’s Nikkei Stock Index today climbed to a 19-month high as Japanese stocks extended their 2-month rally.  Stocks jumped on positive economic news after Japan's Q1 GDP grew at double the expected pace and after Japan Mar industrial production was revised upward.  Also, Japanese semiconductor-related stocks moved higher after the Yomiuri reported Prime Minster Kishida would meet with the heads of companies, including Taiwan Semiconductor Manufacturing, IBM, and Micron Technology, in an attempt to foster investment and partnerships.  In addition, Japanese exporters climbed today after the yen fell to a 2-week low against the dollar.

Japanese stocks also received a boost today after Goldman Sachs said that an alignment of interests among government, regulators, and the exchange, along with foreign and domestic investors, could create “one of these policy-driven sustainable bull markets that we get in Japan one a decade.”

Japan Q1 GDP rose +1.6% (q/q annualized), stronger than expectations of +0.8%.  The Q1 GDP deflator rose +2.0%, the largest increase in 8 years. 

Japan Mar industrial production was revised upward to +1.1% m/m from the initially reported +0.8% m/m.

Pre-Market U.S. Stock Movers

Western Alliance (WAL) jumped more than +9% in pre-market trading after reporting Q2 deposit growth of +$2 billion as of May 12.   Other regional bank stocks rose on the news, with PacWest (PACW) up more than +8%, and Citizens Financial Group (CFG), Truist Financial (TFC), Comerica (CMA), KeyCorp (KEY), Huntington Bancshares (HBAN), and M&T Bank (MTB) up more than +2%.

Wix.com (WIX) jumped more than +7% in pre-market trading after reporting Q1 revenue of $374.1 million, better than the consensus of $369.4 million, and forecasting full-year revenue of $1.52 billion-$1.54 billion, above the consensus of $1.52 billion. 

Keysight Technologies (KEYS) climbed more than +8% in pre-market trading after reporting Q1 adjusted EPS of $2.12, stronger than the consensus of $1.95 and forecast Q3 adjusted EPS of $2.00-$2.06, above the consensus of $1.96. 

Tesla (TSLA) rose more than +1% in pre-market trading after CEO Musk said the company would start advertising, a major shift for the company that has shunned traditional marketing to sell its vehicles. 

Wynn Resorts (WYNN) climbed more than +2% in pre-market trading after Barclays upgraded the stock to overweight from equal weight with a price target of $135. 

API Group (APG) rose more than +2% in pre-market trading after Baird upgraded the stock to outperform from neutral with a price target of $29.

Doximity (DOCS) sank more than -11% in pre-market trading after forecasting Q1 revenue of $106.5 million-$107.5 million, weaker than the consensus f $111.8 million.

TJX Cos (TJX) fell more than -2% in pre-market trading after forecasting Q2 comparable sales up +2% to +3%, below the consensus of +3.16%.

Vivid Seats (SEAT) dropped more than -12% in pre-market trading after selling stockholder Hoya Topco LLC offered 16 million Class A shares via Citigroup and Morgan Stanley.

Intapp (INTA) tumbled more than -5% in pre-market trading after the company offered 2 million shares and selling stockholders offered 4.25 million shares via Bank of America Securities and Barclays.

Knight-Swift Transportation (KNX) fell more than -2% in pre-market trading after Credit Suisse downgraded the stock to neutral from outperform, saying investors should be cautious of the trucking cycle and look to trim exposure. 

On Holding (ONON) slid more than -1% in pre-market trading after Williams Trading downgraded the stock to sell from hold.

Today’s U.S. Earnings Reports (5/17/2023)

Cisco Systems Inc (CSCO), Copart Inc (CPRT), Dynatrace Inc (DT), Synopsys Inc (SNPS), Take-Two Interactive Software (TTWO), Target Corp (TGT), TJX Cos Inc/The (TJX), Viasat Inc (VSAT), Wix.com Ltd (WIX).

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