Markets Today: Stocks Decline as U.S. Debt Limit Talks Stall

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are down -0.43%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.51%.

U.S. stock index futures this morning are moderately lower as U.S. debt ceiling talks stall.  Republican negotiators said the White House is showing little urgency in negotiations, and Democratic negotiators said House Republican leader McCarthy is refusing to offer compromises.  Negotiators were working on returning to talks today amid the stalemate. 

U.S. stock indexes are also under pressure this morning on a slide in the Euro Stoxx 50 to a 1-3/4 month low on inflation concerns after UK Apr consumer prices rose more than expected. 

Global bond yields are mixed.  The 10-year T-note yield is down -1.0 bp at 3.682%.  The 10-year German bund yield is down -2.7 bp at 2.442%, and the UK 10-year gilt jumped to a 7-1/4 month high of 4.368% and is up +5.9 bp at 4.218%.

On the bearish side for stocks, Agilent dropped more than -8% in pre-market trading after cutting its full-year revenue forecast.  Also, Inuit is down more than -5% after reporting Q3 net revenue below consensus.  Analog Devices is down more than -5% after forecasting Q3 adjusted EPS below consensus.

On the bullish side, Palo Alto Networks is up more than +4% in pre-market trading after reporting Q3 billings above consensus and raising its full-year revenue forecast.  Also, VF Corp is up more than +4% after reporting stronger-than-expected Q4 adjusted EPS from continuing operations.  Kohl’s is up more than +12% after reporting Q1 net sales above consensus.

Overseas stock markets are lower.  The Euro Stoxx 50 is down -1.60%.  China’s Shanghai Composite closed down -1.28%, and Japan’s Nikkei Stock Index closed down -0.89%. 

The Euro Stoxx 50 index today fell to a 1-3/4 month low and is sharply lower.  Weakness in real estate and automakers is leading the overall market lower today. Also, miners and metal producers are under pressure as copper prices tumbled to a 5-3/4 month low.  Inflation concerns in Europe are weighing on stocks after UK Apr consumer prices rose +8.7% y/y, higher than expectations of +8.4% y/y.  Hawkish comments from ECB Governing Council member and Bundesbank President Nagel undercut stocks when he said, "Several rate hikes will still be necessary to reach a sufficiently restrictive level.”  On the positive side, Marks & Spencer Group Plc jumped more than +10% after reporting full-year earnings results that exceeded expectations.

The German May IFO business climate index fell -1.7 to 91.7, weaker than expectations of 93.0.

ECB Governing Council member and Bundesbank President Nagel said, "Several rate hikes will still be necessary to reach a sufficiently restrictive level.  And we will then have to maintain this level for a sufficiently long time until inflation has come down."

China’s Shanghai Composite Stock Index tumbled to a 4-1/4 month low and closed moderately lower.  Signs that China’s economic recovery is faltering are weighing on stocks and have prompted several global money center banks to cut their growth forecasts for China this year.  Ramped-up geopolitical concerns weighed on Chinese stocks as Japan joined the U.S. and Netherlands in imposing curbs on the export of chipmaking technology to China.  Technology stocks retreated today, led by a -7% drop in Lenovo Group after it reported weaker-than-expected Q4 profits.  The threat of another Covid wave has also sapped market sentiment as China is likely to see about 65 million infections a week toward the end of June, according to a senior Chinese health advisor.

Foreign investors continue liquidating their Chinese stock holdings as shares listed on the mainland saw net selling today of 4.5 billion yuan ($635 million) after 8 billion yuan ($1.1 billion) of outflows on Tuesday via the trading links with Hong Kong.   

Japan’s Nikkei Stock Index today closed moderately lower for a second day as it fell back from Tuesday’s 32-year high.  The impasse in U.S. debt ceiling negotiations sparked long liquidation and profit-taking in Japanese stocks.  Airlines and tourism-related stocks sold off today amid concerns that the latest Covid wave to sweep through China may curb travel through Asia.  Also, Japanese semiconductor stocks fell back for a second day on negative carryover from Tuesday when Japan said as of July 23 it will expand restrictions on exports of 23 types of chipmaking technology to China.  On the positive side, Japanese utility stocks gained, led by a +9% jump in Chugoku Electric after it announced full-year earnings and dividend forecasts that were above consensus.

Pre-Market U.S. Stock Movers

Agilent (A) dropped more than -8% in pre-market trading after cutting its full-year revenue forecast to $6.93 billion-$7.03 billion from a previous forecast of $7.03 billion-$7.10 billion, weaker than the consensus of $7.09 billion. 

Inuit (INTU) tumbled more than -5% in pre-market trading after reporting Q3 net revenue of $6.02 billion, weaker than the consensus of $6.09 billion. 

Analog Devices (ADI) dropped more than -5% in pre-market trading after forecasting Q3 adjusted EPS of $2.42-$2.62, weaker than the consensus of $2.64. 

Children’s Place (PLCE) sank more than -15% in pre-market trading after reporting a Q1 adjusted loss of -$2.00 per share, a larger loss than expectations of -$1.82, and forecast full-year adjusted EPS of $1.00 to $1.50, well below the consensus o $2.24.

Palantir (PLTR) slid more than -1% in pre-market trading on signs of insider selling after an SEC filing showed CEO Cohen sold $4.1 million of shares on Monday. 

PTC Therapeutics (PTCT) plunged more than -20% in pre-market trading after saying a trial of its vatiquinone for treatment of a rare neuromuscular disorder failed to meet its main endpoint.

SiteOne Landscape (SITE) fell -2% in pre-market trading after Barclays downgraded the stock to underweight from equal weight. 

PacWest Bancorp (PACW) is up more than +9% in pre-market trading after agreeing to sell its Civic Financial Services unit to Roc360 as part of efforts to shore up its liquidity.

Palo Alto Networks (PANW) climbed more than +4% in pre-market trading after reporting Q3 billings of $2.26 billion, above the consensus of $2.23 billion, and raised its full-year revenue forecast to $6.88 billion-$6.91 billion from a previous forecast of $6.85 billion-$691 billion, stronger than the consensus of $6.89 billion. 

VF Corp (VFC) rose more than +4% in pre-market trading after reporting Q4 adjusted EPS from continuing operations of 17 cents, better than the consensus of 14 cents.

Kohl’s (KSS) rallied more than +12% in pre-market trading after reporting Q1 net sales of $3.36 billion, stronger than the consensus of $3.34 billion.

Urban Outfitters (URBN) surged more than +11% in pre-market trading after reporting Q1 net sales of $1.11 billion, above the consensus of $1.09 billion.

Corning Incorporated (GLW) gained more than +1% in pre-market trading after it announced a 20% increase in display glass substrate prices.

Toll Brothers (TOL) rose nearly +2% in pre-market trading after reporting Q2 revenue of $2.51 billion, well above the consensus and raising its full-year delivery forecast to 8,900 to 9,500 from a prior forecast of 8,000 to 9,000, above the consensus of 8,565.

Today’s U.S. Earnings Reports (5/24/2023)

Analog Devices Inc (ADI), Kohl's Corp (KSS), Nutanix Inc (NTNX), NVIDIA Corp (NVDA), Petco Health & Wellness Co Inc (WOOF), Snowflake Inc (SNOW), Splunk Inc (SPLK), UiPath Inc (PATH).

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