Markets Today: Stocks Mixed as Debt Ceiling Bill Goes to the Senate

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are up +0.02%, and June Nasdaq 100 E-Mini futures (NQM23) are down -0.05%.

U.S. stock index futures this morning are mixed.  The broader market is finding support today on an easing of U.S. default concerns after the House late Wednesday passed a bill to raise the debt ceiling.  However, stock indexes fell back from their best levels after the May ADP employment change rose more than expected, which is hawkish for Fed policy. 

The debt ceiling agreement struck by White House negotiators and Republican leaders last Saturday was passed by the House late Wednesday in a 314-117 vote. The bill now goes to the Senate for a possible vote later today.

U.S. stock indexes have carryover support from a rally in European stocks on an easing of inflation concerns after Eurozone May CPI slowed more than expected and posted its smallest increase in 15 months.

The U.S. May ADP employment change rose +278,000, stronger than expectations of +170,000.

U.S. weekly initial unemployment claims rose +2,000 to 232,000, showing a stronger labor market than expectations of 235,000.

U.S. Q1 nonfarm productivity was revised upward to -2.1% from -2.7%, better than expectations of -2.4%.  Also, Q1 unit labor costs were revised downward to +4.2% from the initially reported +6.3%, better than expectations of +6.0%.

Global bond yields are lower and are supportive of stocks.  The 10-year T-note yield fell to a 2-week low of 3.610% and is down -3.1 bp at 3.612%.  The 10-year German bund yield is down -1.6 bp at 2.26%, and the UK 10-year gilt yield fell to a 1-week low of 4.133% and is down -4.7 bp at 4.135%.

On the bullish side of stocks, Nordstrom jumped more than +7% in pre-market trading after reporting Q1 total revenue above consensus.  Also, Veeva Systems is up more than +6% after reporting stronger-than-expected Q1 revenue and raising its 2024 revenue forecast. In addition, Chewy Inc surged more than +15% after reporting Q1 net sales above consensus and raising its full-year sales forecast.

On the bearish side, Dollar General sank more than -9% in pre-market trading after reporting Q1 comparable sales below consensus and lowering guidance on its 2024 comparable sales forecast.  Also, Salesforce.com is down more than -5% after forecasting 2024 revenue below consensus.  In addition, Okta Inc plunged more than -18% after reporting better-than-expected Q1 EPS but noted weakness in the outlook for current remaining performance obligations as a concern.   

Overseas stock markets are mostly higher.  The Euro Stoxx 50 is up +0.46%.  China’s Shanghai Composite closed unchanged, and Japan’s Nikkei Stock Index closed up +0.84%. 

The Euro Stoxx 50 index today is moving higher on positive carryover from Wednesday night’s action by the U.S. House in passing an agreement to raise the debt ceiling and avert default.  The bill now goes to the Senate.  Positive Eurozone economic news today is also pushing stocks higher. Eurozone consumer prices in May rose less than expected at the slowest pace in 15 months.  In addition, the Eurozone Apr unemployment rate fell to a record low 6.5%.  Finally, German retail sales in Apr posted their largest increase in 5 months.  On the negative side, hawkish comments from ECB President Lagarde pushed European government bond yields higher when she said, “There is no clear evidence that underlying inflation in the Eurozone has peaked.”  Also, European software stocks were under pressure today after U.S. peer Salesforce.com gave a lackluster outlook for future sales.

ECB President Lagarde said, "There is no clear evidence that underlying inflation in the Eurozone has peaked.  We have made clear that we still have ground to cover to bring interest rates to sufficiently restrictive levels."

Eurozone May CPI eased to +6.1% y/y from +7.0% y/y in Apr, weaker than expectations of +6.3% y/y and the smallest increase in 15 months. Also, May core CPI eased to +5.3% y/y from +5.6% y/y in Apr, weaker than expectations of +5.5% y/y.

The Eurozone May S&P manufacturing PMI was revised upward by +0.2 to 44.8 from the initially reported 44.6.

The Eurozone Apr unemployment rate fell -0.1 to a record low 6.5% (data from 1998), right on expectations.

German Apr retail sales rose +0.8 m/m, the biggest increase in 5 months.

China’s Shanghai Composite Stock Index today closed unchanged.  Chinese stocks erased early losses after a gauge of manufacturing activity unexpectedly expanded last month.  Also, China’s Lenovo moved higher after Goldman Sachs upgraded the stock to buy from neutral, citing expectations for a rise in demand for end devices due to new artificial intelligence functions.  Chinese stocks today initially opened lower on economic concerns. Bloomberg data shows China cut the issuance of infrastructure bonds by nearly half in May, a sign of slowing government investment at a time when China’s economy is already losing traction. 

Foreign investors continue to flee Chinese stocks.  According to HSBC Holding Plc, global fund allocations for Chinese stocks dropped to a 7-month low in May.  Also, fund sales to domestic customers in China fell to their lowest level in 8 years in May. 

The China May Caixin manufacturing PMI unexpectedly rose +1.4 to 50.9, stronger than expectations of no change at 49.5.

Japan’s Nikkei Stock Index today closed moderately higher.  Positive carryover from the passage of a debt-limit deal Wednesday night by the U.S. House boosted Japanese stocks.  A jump in capital spending also gave stocks a boost after Japan's Q1 capital spending ex-software rose by the most in nearly five years.  Japanese insurance stocks rallied today on possible M&A activity as Lifenet Insurance jumped more than +8% after Oasis Management reported a 6.5% stake in the insurer.  Also, Toyota Motor climbed nearly +2% after it announced its plan to build a three-row electric sport utility vehicle at its plant in Kentucky. Foreign buyers continue to load up on Japanese stocks.  Overseas inflows into Japan rose for the eighth straight week through May 26. 

Japan's Q1 capital spending ex-software rose +10.0% y/y, stronger than expectations of +3.7% y/y and the biggest increase in 4-3/4 years.

The Japan May Jibun Bank manufacturing PMI was revised downward by -0.2 to 50.6 from the initially reported 50.8.

Pre-Market U.S. Stock Movers

Nordstrom (JWN) jumped more than +7% in pre-market trading after reporting Q1 total revenue of $3.18 billion, better than the consensus of $3.12 billion. 

Veeva Systems (VEEV) climbed more than +6% in pre-market trading after reporting Q1 revenue of $526.3 million, above the consensus of $515.7 million, and raising its 2024 revenue forecast to $2.36 billion-$2.37 billion from a prior forecast of $2.35 billion-$2.36 billion.

Chewy Inc (CHWY) surged more than +15% in pre-market trading after reporting Q1 net sales of $2.78 billion, stronger than the consensus of $2.73 billion, and raising its full-year sales forecast to $11.15 billion-$11.35 billion from a previous forecast of $11.1 billion-$11.3 billion, above the consensus of $11.23 billion.

Pure Storage (PSTG) climbed more than +5% in pre-market trading after reporting Q1 revenue of $589.3 million, above the consensus of $560.6 million. 

Alteryx (AYX) rose more than +5% in pre-market trading after Bank of America upgraded the stock to buy from neutral with a price target of $70. 

Lucid Group (LCID) dropped more than -12% in pre-market trading after it said it was raising about $3 billion in a common stock offering.

Dollar General (DG) sank more than -9% in pre-market trading after reporting Q1 comparable sales rose +1.6%, below the consensus of +3.81%, and lowered guidance on its 2024 comparable sales forecast to +1% to +2% from a prior view of +3% to +3.5%, well below the consensus of +3.28%.

Salesforce.com (CRM) tumbled more than -5% in pre-market trading after forecasting 2024 revenue of $34.5 billion-$34.7 billion, the midpoint below the consensus of $34.63 billion.

Okta Inc (OKTA) plunged more than -18% in pre-market trading after reporting better-than-expected Q1 EPS but noted weakness in the outlook for current remaining performance obligations as a concern.   

Crowdstrike Holdings (CRWD) sank more than -10% in pre-market trading after reporting better-than-expected Q1 EPS, but analysts noted a deceleration in billings growth that might weigh on the stock in the near term. 

Advanced Auto Parts (AAP) fell more than -2% in pre-market trading after JPMorgan Chase downgraded the stock to neutral from overweight.

Target (TGT) slid more than -1% in pre-market trading after JPMorgan Chase downgraded the stock to neutral from overweight.

Today’s U.S. Earnings Reports (6/1/2023)

Broadcom Inc (AVGO), ChargePoint Holdings Inc (CHPT), Cooper Cos Inc/The (COO), Dell Technologies Inc (DELL), Dollar General Corp (DG), Elastic NV (ESTC), Five Below Inc (FIVE), Guidewire Software Inc (GWRE), Hormel Foods Corp (HRL), Lululemon Athletica Inc (LULU), Macy's Inc (M), MongoDB Inc (MDB), SentinelOne Inc (S), VMware Inc (VMW), Zscaler Inc (ZS).

• Covered Call Screener Results For June 1st
• Simplify Your Screening With the Power of Trendseeker®
• Stock Index Futures Climb as Debt Ceiling Progress Boosts Sentiment, ECB Minutes in Focus
• Stocks Post Moderate Losses on Global Economic Concerns