Stocks Higher on Several Positive Earnings Reports

Morning Markets

June S&P 500 futures (ESM22) this morning are up +0.63%.  Strength in technology stocks is giving the overall market a boost, with Dell Technologies up +12% in pre-market trading and Marvell Technology up +3% after both companies reported stronger-than-expected quarterly earnings.  U.S. stock indexes added to their gains this morning after U.S. Apr personal spending rose more than expected and after the Apr core PCE core deflator slowed its growth rate. 

Positive carry-over from a rally in China’s Shanghai Composite today was supportive for U.S. stock indexes after two of China’s biggest internet companies, Alibaba Group Holding and Baidu, reported better-than-expected quarterly sales growth.  

Citigroup today cut its recommendation on U.S. stocks to neutral, saying the market is showing “elements of a deflating bubble” with high uncertainty and the lack of reassurance from the Federal Reserve.

U.S. Apr personal spending rose +0.9% m/m, stronger than expectations of +0.8% m/m.  March personal spending was revised upward to +1.4% m/m from +1.1% m/m.  However, U.S. Apr personal income rose +0.4% m/m, weaker than expectations of +0.5% m/m.

U.S. Apr PCE core deflator rose +0.3% m/m and +4.9% y/y, right on expectations, with the +4.9% y/y gain the slowest growth rate in 4 months.

The Euro Stoxx 50 index today is up 0.85% at a 3-week high.  European stocks are climbing for a third day as market sentiment improves.  Gains in consumer products, technology, and financial services today lead the overall market higher.  Also, a decline in European government bond yields is supportive for stocks after the 10-year German bund yield fell -4.0 bp to 0.959% when ECB Governing Council member de Cos said "the process of increasing interest rates should be gradual." 

Eurozone Apr M3 money supply rose +6.0% y/y, weaker than expectations of +6.3% y/y and the slowest pace of increase in 2 years.

Asian markets today closed higher.  China’s Shanghai Composite Index closed up +0.23%, and Japan’s Nikkei Stock Index closed up +0.66%.  Strength in Chinese technology stocks led the overall market higher today after Alibaba Group Holding and Baidu both reported better-than-expected quarterly sales growth. Also, signs of M&A activity lifted Chinese stocks after Bloomberg News reported that state-owned automaker China FAW Group is considering acquiring a significant stake in Didi Global.  However, strength in Chinese stocks was limited after today’s data showed that China Apr industrial profits fell -8.5% y/y, the first decline in 2 years.

Japanese stocks today moved moderately higher and were led by gains in airline and tourism-related stocks after the Japanese government said it would reopen its borders to foreign tourists from June 10.  Also, positive carry-over from strength in Chinese technology stocks boosted Japanese technology stocks.   

Pre-Market U.S. Stock Movers

Dell Technologies (DELL) jumped more than +12% in pre-market trading after reporting Q1 adjusted revenue of $26.12 billion, above the consensus of $25 billion.

Marvell Technology (MRVL) climbed more than +3% in pre-market trading after reporting Q1 net revenue of $1.45 billion, better than the consensus of $1.43 billion, and forecasting Q2 net revenue of $1.47 billion-$1.56 billion, the midpoint above the consensus of $1.49 billion.

Zscaler (ZS) rose +2% in pre-market trading after reporting Q3 revenue of $286.8 million, above the consensus of $271.7 million, and forecast Q4 revenue of $304 million-$306 million, stronger than the consensus of $292 million.

Red Robin (RRGB) rallied +13% in pre-market trading after reporting an adjusted Q1 loss per share of -12 cents, well below the consensus of -73 cents. 

Solo Brands (DTC) rose +4% in pre-market trading on signs of insider buying after an SEC filing showed that CFO Webb bought $293,116 of his company’s stock. 

Didi Global (DIDI) jumped +7% in pre-market trading after Bloomberg News reported that state-owned automaker China FAW Group is considering acquiring a significant stake in the company. 

Costco Wholesale (COST) fell -2% in pre-market trading on concern about future earnings after it reported Q3 inventories grew +26% y/y versus a +19% y/y increase in Q2. 

Big Lots (BIG) plunged -17% in pre-market trading after reporting Q1 net sales of $1.37 billion, weaker than the consensus of $1.46 billion.

The GAP (GPS) tumbled more than -15% in pre-market trading after cutting its full-year adjusted EPS forecast to 30 cents-60 cents from a previous estimate of $1.85-$2.05, well below the consensus of $1.32. 

American Eagle Outfitters (AEO) sank -12% in pre-market trading after reporting Q1 net revenue of $1.06 billion, below the consensus of $1.14 billion.

Workday (WDAY) dropped -9% in pre-market trading after reporting Q1 adjusted EPS of 83 cents, weaker than the consensus of 85 cents. 

Today’s U.S. Earnings Reports (5/27/2022)

Big Lots Inc (BIG), Hibbett Inc (HIBB), Legacy Housing Corp (LEGH), National Energy Services Reuni (NESR), NewAge Inc (NBEV), Plantronics Inc (POLY), Sanderson Farms Inc (SAFM).