Markets Today: Stocks Slightly Higher on Strength in Tesla and Netflix

Morning Markets

June E-Mini S&P 500 futures (ESM23) this morning are up +0.09%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.11%.

U.S. stock index futures this morning are slightly higher.  Tesla and Netflix are up more than +3% in pre-market trading to lift the overall market. Also, the U.S. trade deficit for April was smaller than expected, a slight positive for GDP growth and stocks. However, stocks are being undercut by concern about slowing global demand after China’s May exports fell more than expected. 

The U.S Apr trade deficit widened to -$74.6 billion from -$64.2 billion in Mar, the largest deficit in 6 months but smaller than expectations of -$75.8 billion.

The Organization for Economic Cooperation and Development (OECD) forecast 2023 global GDP of +2.7%, below the +3.3% pace in 2022.

Global bond yields are mixed.  The 10-year T-note yield is up +4.2 bp at 3.703%.  The 10-year German bund yield is up +1.0 bp at 2.382%, and the UK 10-year gilt yield is down -0.8 bp at 4.199%.

On the bullish side for stocks, Tesla climbed more than +3% in pre-market trading after the U.S. Treasury Department said the car maker’s Model 3 sedans became eligible for the full $7,500 tax credit under new criteria for battery sourcing.  Also, Netflix is up more than +3% after Wells Fargo Securities raised its price target on the stock to $500 from $400.  In addition, Amazon.com is up nearly +1% after Edgewater Research upgraded the stock to outperform from neutral.

On the bearish side, Casey’s General Stores dropped more than -4% in pre-market trading after reporting Q4 revenue below consensus. Also, United Natural Foods is down more than -25% after reporting Q3 adjusted EPS below consensus and cutting its full-year adjusted EPS forecast.  In addition, Couchbase is down more than -14% after forecasting a bigger than-expected Q2 operating loss.

Overseas stock markets are mixed.  The Euro Stoxx 50 is down -0.03%.  China’s Shanghai Composite closed up +0.08%, and Japan’s Nikkei Stock Index closed down -1.82%. 

The Euro Stoxx 50 index today is slightly lower as a larger-than-expected fall in Chinese exports stoked concerns about the strength of the global economy.  The weaker-than-expected Chinese exports hammered European luxury goods makers as Hermes International and LVMH Moet Hennessy Louis Vuitton declined.  European stocks were also under pressure from weaker-than-expected German industrial production and Italian retail sales reports. On the positive side, Danske Bank A/S jumped more than +7% after raising its profit forecast, and Inditex SA rose more than +6% after reporting a 43% jump in Q1 operating profit. 

ECB Executive Board member Schnabel said the ECB has "more ground to cover" on raising interest rates as core inflation proves stubborn.

ECB Governing Council member Knot said, "I'm not yet convinced that the ECB's current tightening is sufficient" and that prolonged inflation may prompt further increases in borrowing costs.

German Apr industrial production rose +0.3% m/m, weaker than expectations of +0.6% m/m.

Italy's Apr retail sales rose +0.2% m/m, weaker than expectations of +0.3% m/m.

China’s Shanghai Composite Stock Index today recovered from a 1-week low and closed slightly higher. Chinese stocks today initially opened lower after Chinese trade news showed China’s May exports fell more than expected by the most in 4 months.  Today’s news shows China’s recovery continues to weaken, with manufacturing activity contracting in May and home sales growth slowing after a pickup earlier this year.  However, the Shanghai Composite recovered its losses and posted slight gains as bank stocks rallied after a Bloomberg report said that Chinese authorities asked the country’s biggest banks to lower their deposit rates for the second time in less than a year.  Also, the yuan recovered from a 6-1/4 month low against the dollar today and moved higher after the Securities Times reported that China’s four largest banks cut their dollar deposit rates to 5.7% from 6.0%.

China May exports fell -7.5% y/y, weaker than expectations of -1.8% y/y and the biggest decline in 4 months.  May imports fell -4.5% y/y, a smaller decline than expectations of -8.0%y/y.

Japan’s Nikkei Stock Index today retreated from a 32-year high and closed sharply lower. A wave of profit-taking weighed on Japanese stocks today after their sharp rally over the past 2-1/2 months.  Losses in electronics and machinery stocks led the overall market lower.  Also, Japanese suppliers to Boeing declined today after the company said it would delay deliveries of its 787 Dreamliner due to a defective part.  Japanese stocks today initially rallied as the Nikkei Stock Index rose to a new 32-year high on signs the BOJ will maintain stimulus after BOJ Governor Ueda said it’s “too early” to discuss what to do with the BOJ’s holdings of stock ETFs until the 2% inflation goal is in sight.

The Japan Apr leading index CI rose +0.7 to a 5-month high of 97.6, although weaker than expectations of 98.2.

Pre-Market U.S. Stock Movers

Tesla (TSLA) climbed more than +3% in pre-market trading after the U.S. Treasury Department said the car maker’s Model 3 sedans became eligible for the full $7,500 tax credit under new criteria for battery sourcing.

Netflix (NFLX) rose more than +3% in pre-market trading after Wells Fargo Securities raised its price target on the stock to $500 from $400. 

Dave & Buster’s Entertainment (PLAY) jumped more than +5% in pre-market trading after reporting Q1 EPS of $1.45, stronger than the consensus of $1.25.   

Amazon.com (AMZN) rose nearly +1% in pre-market trading after Edgewater Research upgraded the stock to outperform from neutral with a price target of $145. 

Yext Inc (YEXT) surged more than +15% in pre-market trading after raising its 2024 revenue forecast to $404 million-$407 million from a previous estimate of $402 million-$406 million, above the consensus of $403.3 million. 

Super Micro Computer (SMCI) rose more than +3% in pre-market trading after Rosenblatt Securities initiated coverage of the stock with a buy rating. 

Novocure Ltd (NVCR) climbed more than +5% in pre-market trading after Wedbush upgraded the stick to neutral from underperform. 

Casey’s General Stores (CASY) dropped more than -4% in pre-market trading after reporting Q4 revenue of $3.33 billion, below the consensus of $3.38 billion.

Couchbase (BASE) slumped more than -14% in pre-market trading after forecasting a Q2 operating loss of -$10.1 million to -$10.9 million, wider than the consensus of -$9.79 million. 

United Natural Foods (UNFI) plunged more than -25% in pre-market trading after reporting Q3 adjusted EPS of 54 cents, well below the consensus of 65 cents, and cutting its full-year adjusted EPS forecast to $1.80-$2.30 from a previous forecast of $3.05-$3.90, weaker than the consensus of $3.35.

Cogent Biosciences (COGT) tumbled more than -7% in pre-market trading after launching a $125 million share offering. 

Duolingo (DUOL) slid more than -1% in pre-market trading after JMP Securities downgraded the stock to market perform from market outperform. 

Today’s U.S. Earnings Reports (6/7/2023)

Brown-Forman Corp (BF/B), Campbell Soup Co (CPB), GameStop Corp (GME), Ollie's Bargain Outlet Holding (OLLI), Smartsheet Inc (SMAR).

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