MARKET WRAPS
Watch For:
Canada Retail Trade for March; Deere, Foot Locker earnings
Today's Headlines/Must Reads
- Rebound in Treasury Yields Fueled by Resilient Growth, Inflation
- Default Fallout: Mortgages Jump and Home Prices Sink
- Apple Restricts Employee Use of ChatGPT, Joining Other Companies Wary of Leaks
- A Crypto Hedge Fund Imploded. The Comeback Isn't Going So Well.
- BOJ Governor Warns of Risk of Premature Tightening
Follow WSJ markets coverage here .
Opening Call:
Stock futures edged higher on Friday as investors focused on debt-ceiling talks and an address from Jerome Powell.
Investors who had been betting against stocks appear to be scrambling to buy them as the U.S. economy shows signs of continuing to grow, while mostly hopeful signs have emerged from negotiations to lift the debt ceiling.
Jerome Powell is due to step up to the mic at 11am--in a conversation with Ben Bernanke--following recent commentary from central bank officials including Dallas Fed President Lorie Logan who seem ready to at least consider raising interest rates next month.
Friday also will see the expiration of key options contracts.
Overseas stocks mostly rose. The pan-continental Stoxx Europe 600 gained 0.6%, while Japan's Nikkei 225 rose 0.8% to its highest close since August 1990. One outlier was Hong Kong's Hang Seng, which fell 1.3% as Asian investors caught up with Thursday's selloff in Alibaba shares in U.S. trading.
Stocks to Watch
ADRs of Alibaba fell 1.5% in premarket trading, extending losses from the previous session when they declined more than 5% after revenue in the cloud division disappointed in the fiscal fourth quarter.
Applied Materials reported fiscal second-quarter earnings that beat Wall Street's expectations, but the outlook failed to excite investors and the stock was down 1.4% in premarket trading.
Disney shares were down 0.3% after it said it was dropping plans to build a sprawling business campus near Orlando.
Farfetch rose 22% in premarket trading after it reported a narrower-than-expected first-quarter loss and sales rose 8% to $556.4 million, higher than analysts' forecasts.
First-quarter sales at Ross Stores rose from a year earlier but the retailer said same-store sales for the second quarter and fiscal year would be flat from the year-earlier periods. Ross shares declined 0.7%.
Nvidia was up 0.3% in premarket trading. Its shares closed up nearly 5% on Thursday. Boosting the stock was the unveiling of new graphics cards featuring the company's Ada Lovelace architecture.
Occidental Petroleum rose 1% in premarket trading. Berkshire Hathaway bought about 3.5 million shares of Occidental at a price of $58 on Tuesday, Wednesday and Thursday, raising its interest to 217.3 million shares, or 24.4% of the company.
Forex:
The dollar edged lower in Europe on profit-taking after the DXY index hit a two-month high on Thursday, but UniCredit Research said the currency remained well-positioned to gain as markets are pricing some chance of a Fed rate rise in June.
"The dollar index jumping above 103.50 is a clear sign of the renewed strength of the greenback, as the index was on the edge of 101 just at the start of this month."
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The euro recovered slightly after hitting a seven-and-a-half week low against the dollar, driven by the pick-up in Fed interest rate expectations.
The market is re-entering bets the Federal Reserve will raise rates in June, having previously speculated that rates had peaked, ING said.
EUR/USD has probably suffered a substantial "long squeeze," where speculators close earlier bets on it rising, it said. There's "considerable room" for a rise in Fed rate expectations so it's risky to pick a bottom in EUR/USD.
"The next real support level will probably be at 1.0700."
Read Sterling Faces Hit From Potential UK Rates Repricing
Read Ringgit Outlook Seems Bearish Vs. U.S. Dollar
Bonds:
TD Securities is entering long in five-year Treasurys at a yield of 3.69%, targeting 3.20% and a stop-loss level at 4.01%, seeing the recent selloff in this maturity as overdone.
"While we agree with the market pricing in more [Fed] hikes and are forecasting a June hike to a 5.5% terminal rate, the selloff in the 5-10y sector appears overdone," TD Securities said.
Markets have recently reacted sharply to a combination of better news on debt ceiling negotiations, better-than-expected economic data, hawkish speak by the Fed and significant corporate supply, it added.
The 10-year Treasury yield's early April low of 3.253% is likely a bottom at least for the next 1-2 months, based on the daily chart, UOB Global Economics & Markets Research said.
After the 10-year yield's two-month high of 3.65% on Thursday, the yield's weekly moving average convergence divergence indicator, while in negative territory, is decelerating, UOB added.
If the 10-year yield can break above resistance levels at the top of the daily and weekly Ichimoku clouds, at 3.672% and 3.689%, respectively, the yield could rise further toward 3.932%.
Energy:
Crude oil prices were around 1% higher in Europe.
"Oil remains range-bound in the face of mixed signals," ANZ Research said.
It pointed to weak demand in the U.S., with gasoline demand yet to show a summer travel pick-up contrasting with air travel in China moving back to pre-pandemic levels.
"China's apparent oil demand hit a record high of 14.5 million barrels a day, bringing its share of global oil demand growth to 50%. U.S. oil inventories are being drawn down, and distillate inventories are falling despite industrial weakness."
Metals:
Gold futures edged higher in early London trading but concerns over the debt ceiling and possible default will create a floor for elevated prices until a resolution is found, Fitch unit BMI said.
Base metals also gained. However, BMI said copper prices remained under pressure "in response to the global economic slowdown and China's service-led recovery."
"We expect prices to see muted gains in the near term, pressured by weak global demand and a slow recovery of mainland China's manufacturing sector," it added.
TODAY'S TOP HEADLINES
TikTok Creators Sue Montana Over State's Ban of Short-Video Platform
A group of TikTok creators is suing Montana's state attorney general over the state's new ban of the social-media platform, echoing steps some of the app's fans took to battle Trump-era efforts to restrict the app.
The creators filed the lawsuit Wednesday in the U.S. District Court of Montana. Samantha Alario, Heather DiRocco, Alice Held, Carly Ann Goddard and Dale Scout are suing the state attorney general, Austin Knudsen, who they say is in charge of enforcing the legislation. They allege the ban is unconstitutional and violates the First Amendment among other laws.
Apple Restricts Employee Use of ChatGPT, Joining Other Companies Wary of Leaks
Apple has restricted the use of ChatGPT and other external artificial intelligence tools for some employees as it develops its own similar technology, according to a document reviewed by The Wall Street Journal and people familiar with the matter.
Apple is concerned workers who use these types of programs could release confidential data, according to the document. Apple also told its employees not to use Microsoft-owned GitHub's Copilot, which automates the writing of software code, the document said.
Twitter Says Microsoft May Have Violated API Policies
Twitter sent a letter to Microsoft saying the company "appears to have used the Twitter API for unauthorized uses and purposes," in a move that comes after public criticism of the software giant by Elon Musk in recent months.
The letter, addressed to Microsoft CEO Satya Nadella and dated Thursday, focuses on Microsoft's use of Twitter's application programming interface, or API, in several products including some related to Xbox; the search engine Bing; and advertising and other tools. The API lets developers analyze some Twitter data and build tools with it.
Newmont Names Karyn Ovelmen as Next Finance Chief
Newmont said Karyn Ovelmen would join the gold mining company as chief financial officer in the current quarter.
Dozens of Car Models Tied to Potentially Explosive Air-Bag Part, WSJ Finds
Air-bag inflators that regulators have warned could explode during a crash and spray the car's interior with metal shrapnel are in at least 50 different vehicle models spanning 15 automotive brands, according to records filed as part of a federal safety-defect investigation.
The Wall Street Journal identified at least 6.8 million vehicles that carmakers have said were built with the potentially dangerous air-bag part. To tally the figure, the Journal reviewed documents that automakers submitted to regulators during the government's eight-year probe of the matter.
Disney Scraps Plan for $900 Million Florida Campus, Closes 'Star Wars' Adventure Hotel
Walt Disney Co. has canceled two major investments in Florida, including reversing course on a potential $900 million office park, amid a high-profile dispute with state lawmakers and Gov. Ron DeSantis.
The company is halting plans for a new corporate campus in Florida that would have relocated more than 2,000 employees, mostly from its theme parks division, to the community of Lake Nona in Orlando.
Lazard CEO Ken Jacobs Prepares to Step Down, Yield Reins to Lieutenant
Longtime Lazard Chief Executive Ken Jacobs is preparing to step down, people familiar with the matter said, as the storied investment bank seeks to revive its fortunes.
Peter Orszag, a former Obama administration official who has run Lazard's financial-advisory unit since 2019, is expected to take the top job, the people said. Jacobs, 64 years old, plans to remain at the firm and continue working with clients.
How Close Could the U.S. Get to a Default in June?
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05-19-23 0623ET
