Markets Today: Stocks Gain as Senate Passes Debt Ceiling Bill

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are up +0.51% at a 9-1/2 month high, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.31%.

U.S. stock index futures this morning are moderately higher after Congress late Thursday night passed legislation to suspend the debt ceiling.  However, stocks indexes fell back from their best levels as bond yields jumped after U.S. May nonfarm payrolls rose more than expected, which is hawkish for Fed policy.

The Senate late Thursday passed the legislation to suspend the U.S. debt ceiling in a 63-36 vote.  The bill now goes to President Biden to sign and become law.

U.S. May nonfarm payrolls rose +339,000, stronger than expectations of +195,000 and the largest increase in 4 months.  Also, Apr was revised higher to +294,000 from the initially reported +253,000.  The May unemployment rate rose +0.3 to 3.7%, above expectations of 3.5%.

U.S. May average hourly earnings eased to +4.3% y/y from +4.4% in Apr, more dovish than expectations of no change at 4.4%.

Global bond yields are higher.  The 10-year T-note yield is up +4.8 bp at 3.643%.  The 10-year German bund yield is up +5.2 bp at 2.300%, and the UK 10-year gilt yield is up +4.3 bp at 4.159%.

On the bullish side for stocks, Lululemon Athletica surged more than +14% in pre-market trading after reporting Q1 net revenue above consensus and raising its 2024 net revenue forecast.  Also, MongoDB is up more than +25% after reporting stronger-than-expected Q1 adjusted EPS and boosting guidance on 2024 adjusted EPS.  Zscaler is up more than +2% after reporting Q3 revenue above consensus and forecasting stronger-than-expected full-year revenue.

On the bearish side, SentinelOne plunged more than -35% in pre-market trading after reporting weaker-than-expected Q1 revenue and cutting its 2024 revenue forecast.  Also, Dell Technologies is down more than -3% after reporting Q1 net revenue of $20.9 billion versus $26.1 billion y/y and said it sees full-year sales declining about 15% as the recovery in PC sales may take a bit longer than expected.  In addition, Costco Wholesale is down more than -1% after reporting an unexpected -0.3% decline in May total comparable sales versus the consensus of a +0.5% increase. 

Overseas stock markets are higher.  The Euro Stoxx 50 is up +1.17%.  China’s Shanghai Composite closed up +0.79%, and Japan’s Nikkei Stock Index closed up +1.21%. 

The Euro Stoxx 50 index today is moderately higher on positive carryover from the Senate’s passage on Thursday night of the agreement to suspend the debt ceiling and avert default.  The bill now goes to President Biden for his signature to become law.  Market sentiment also improved after Chinese stocks rallied today when Bloomberg reported that China is working on new measures to support the property market.  Positive Eurozone economic news today is also pushing stocks higher after French Apr manufacturing production rose more than expected.  On the negative side, European bond yields rose on hawkish comments from ECB Governing Council members Vasle and Makhlouf, who said more ECB rate hikes are needed to tame inflation. 

French Apr manufacturing production rose +0.7% m/m, stronger than expectations of +0.1% m/m.

ECB Governing Council member Vasle said "further ECB interest rate hikes are needed" to tame inflation and reach our 2% goal as "core inflation remains high and persistent."

ECB Governing Council member Makhlouf said the ECB will likely raise interest rates in June and July as "we need to see and be confident that we're seeing inflation actually on a trajectory that is going to achieve our 2% target."

China’s Shanghai Composite Stock Index today rallied to a 1-week high and closed moderately higher. Chinese property and real estate stocks soared today after Bloomberg reported the government is working on a new basket of measures to support the property market after existing policies failed to sustain a rebound in the sector.  Regulators are considering reducing the down payment in some non-core neighborhoods of major cities, lowering agent commissions on transactions, and further relaxing restrictions for residential purchases under the guidance of the State Council.  Energy stocks, miners, and commodity producers all moved higher today on speculation the new measures to revive the property market will boost demand for commodities. 

Japan’s Nikkei Stock Index today posted moderate gains and is just below Monday’s 32-year high.  Japanese technology stocks gained as sentiment improved after U.S. lawmakers finally passed legislation to raise the debt ceiling late Thursday.  Also, Japanese stocks related to education rallied after Prime Minister Kishida said Japan would spend around $25 billion on policies to bolster the country’s birthrate.  In addition, SoftBank Group climbed more than +4% after Jeffries upgraded the stock to buy from hold on its appeal as an artificial intelligence stock.  Dovish comments from BOJ Governor Ueda knocked the 10-year JGB bond yield down to a 1-week low and gave stocks a boost when he signaled the BOJ would maintain stimulus measures when he said “it will take some time” to reach the BOJ’s 2% price goal.

Pre-Market U.S. Stock Movers

Lululemon Athletica (LULU) surged more than +14% in pre-market trading after reporting Q1 net revenue of $2.00 billion, stronger than the consensus of $1.93 billion, and raising its 2024 net revenue forecast to $9.44 billion-$9.51 billion from a previous forecast of $9.30 billion-$9.41 billion, above the consensus of $9.36 billion. 

MongoDB (MDB) soared more than +25% in pre-market trading after reporting Q1 adjusted EPS of 56 cents, well above the consensus of 18 cents, and boosted guidance on 2024 adjusted EPS to $1.42-$1.56 from a prior view of 96 cents to $1.10, stronger than the consensus of $1.03.

Zscaler (ZS) rose more than +2% in pre-market trading after reporting Q3 revenue of $418.8 million, better than the consensus of $417.1 million and forecast full-year revenue of $1.59 billion, above the consensus of $1.58 billion.

Trade Desk (TTD) climbed more than +3% in pre-market trading after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $90.

U.S.-listed Chinese stocks moved higher in pre-market trading after Bloomberg News reported that regulators are considering a new basket of measures to boost the property market.  PDD Holdings (PDD) is up more than +3%, and Baidu (BIDU), JD.com (JD), Baba Group Holding (BABA), and Trip.com (TCOM) are up more than +2%.

Sansara (IOT) jumped more than +15% in pre-market trading after reporting Q1 revenue of $204.3 million, stronger above the consensus of $191.3 million, and raising its 2024 revenue forecast to $866 million-$874 million from a prior view of $838 million-$848 million, well above the consensus of $844.3 million. 

Asana (ASAN) climbed more than +5% in pre-market trading after reporting Q1 revenue of $152.4 million, above the consensus of $150.9 million. 

SentinelOne (S) plunged more than -35% in pre-market trading after reporting Q1 revenue of $133.4 million, weaker than expectations of $134.7 million, and cutting its 2024 revenue forecast to $590 million-$600 million from a previous forecast of $631 million-$640 million, well below the consensus of $636.4 million. 

Elastic NV (ESTC) dropped more than -7% in pre-market trading after forecasting 2024 revenue of $1.24 billion-$1.25 billion, the midpoint below the consensus of $1.25 billion. 

Dell Technologies (DELL) fell more than -3% in pre-market trading after reporting Q1 net revenue of $20.9 billion versus $26.1 billion y/y and said it sees full-year sales declining about 15% as the recovery in PC sales may take a bit longer than it expected. 

Costco Wholesale (COST) slid more than -1% in pre-market trading after reporting an unexpected -0.3% decline in May total comparable sales, weaker than the consensus of a +0.5% increase. 

Xcel Energy (XEL) fell more than -1% in pre-market trading after JPMorgan Chase downgraded the stock to neutral from overweight.

Today’s U.S. Earnings Reports (6/2/2023)

Catalent Inc (CTLT), Edgio Inc (EGIO), Tupperware Brands Corp (TUP).

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