MARKET WRAPS
Watch For:
Employment Report for May
Today's Top Headlines/Must Reads:
- Jobs Report Expected to Show Unemployment Still Historically Low
- Senate Approves Deal Raising Debt Ceiling, Averting U.S. Default
- As China Risks Grow, Manufacturers Seek Plan B-and C and D
- Nvidia Is Still a 'Buy' on Wall Street
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Opening Call:
Stock futures pointed to a higher open on Friday after a debt-ceiling bill cleared a final hurdle, and as investors turned their attention to jobs data that could help cement a pause in Federal Reserve interest-rate hikes.
"The Fed clearly sends a message that they no longer see urgency in hiking the rates, while also letting investors know that their job fighting inflation is not done just yet. That's a way of managing market expectations: pausing rate hikes, without however letting the market conditions loosen due to excess dovish speculation," Swissquote Bank said.
The next set of jitters, though, may come from an expected flood of Treasury bill issuance as the government tries to rebuild its coffers that have been drained by the weeks-long debt-ceiling standoff. Some analysts have warned of a potential liquidity squeeze that could trigger volatility for markets.
Overseas stocks gained. The Stoxx Europe 600 rose 0.7% while Hong Kong's Hang Seng rallied 4%. Japan's Nikkei 225 rose 1.2%.
Stocks to Watch
Broadcom stock pointed around 2% lower despite beating earnings estimates and offering a better-than-expected outlook for the current quarter. CEO Hock Tan said generative AI applications will boost demand for its chips.
Dell's revenue plunged in the first quarter by the largest percentage on record and executives said they expect a similar drop in the current period. Shares fell nearly 3% in off-hours trading.
Lava Therapeutics on Thursday said a lead candidate aimed at an undisclosed tumor-associated antigen was selected for further development toward clinical studies by Janssen Biotech. Shares rose 26% in after-hours trading.
Lululemon Athletica on Thursday raised its outlook for the year amid significant sales growth in China. Shares rose 15% premarket.
MongoDB reported better-than-expected first-quarter results and said it added the most net new customers in over two years. Shares rose 25% ahead of the opening bell.
Oncorus said it plans to cut nearly its entire workforce and anticipates its finances won't meet its needs beyond the third quarter. Shares fell 24% in after-hours trading.
Tilly's guided for wider-than-expected losses in the fiscal second quarter. Shares dropped 13% in after-hours trading.
Forex:
The dollar continues to fall after Fed officials hinted at a pause in raising rates in June, and non-farm payrolls data could help determine whether losses continue, ING said.
"Today's U.S. NFP [non-farm payrolls] data will have a major say in determining whether the Fed hikes in June or not," ING said, adding that only above-consensus data could dampen prospects of a pause.
"Unless the May NFP surprises on the upside we would say today's DXY bias lies towards the 103.20 area."
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The euro should find support as there is limited scope for lower front-end eurozone yields given that the European Central Bank looks set to raise interest rates further, MUFG Bank said.
Although data showed eurozone inflation eased in May, ECB President Christine Lagarde said on Thursday there wasn't clear evidence that underlying inflation had peaked, while ECB meeting minutes reinforced "the prospect of at least two more rate hikes," MUFG added.
Services inflation could "well drift higher over the summer on tourism-related inflationary pressures."
Bonds:
The 10-year U.S. Treasury-German Bund yield spread could narrow, in line with the usual behavior around the time the Federal Reserve delivers its last interest-rate rise, Societe Generale said.
"Euro area core inflation is not yet in free fall, and the European Central Bank's stance is less restrictive than the Fed's," it said. "This argues in favour of a narrower 10y UST-Bund spread."
Energy:
Oil prices jumped for a second day after the Senate passed a bill averting a default.
Focus now turns firmly to this weekend's OPEC+ meeting at which analysts broadly expect the group to keep production quotas unchanged.
Outlook
Oil's outlook in June is likely to hinge on supply trends, especially the upcoming decision from the OPEC+ meeting later this week, Hengtai Futures said.
It added that demand-side fundamentals are showing mixed signals, with U.S. data showing sharply lower inventories buoying sentiment, but a soft China macro recovery is weighing on trading confidence.
Therefore, supply-side factors may be essential in driving prices. "If officials don't offer clear price support actions at the upcoming OPEC+ meetings, investors are unlikely to turn more bullish," Hengtai said.
Metals:
Base metals prices were pushing higher, while gold was flat in early London trading, with investors looking to the U.S. jobs report as the next big macroeconomic indicator.
Aluminum
Aluminum prices will likely remain in range-bound trading this month, Hengtai Futures said.
It notes that Chinese supply of the base metal is likely on the rise, with several main producing regions expected to ramp up output as hydropower capacity becomes more abundant in the summer rainy season.
More hydropower also means lower production costs of the metal, which could further weigh on prices, Hengtai said, advising investors to stay on the sidelines and monitor the supply trend in the near term.
TODAY'S TOP HEADLINES
Nvidia Is Still a 'Buy' on Wall Street as Analysts Race to Boost Price Targets
An investor craze for artificial intelligence has powered Nvidia's dizzying rise and pushed the stock to lofty valuations. Wall Street analysts are predicting it has more room to run.
Nvidia shares have nearly tripled in 2023, making them the best performers by far in the S&P 500. The graphics chip maker has gained more than $650 billion in market value since hitting a two-year low in October and briefly crossed the $1 trillion mark earlier this week.
Exxon, Chevron Near Deals to Drill in Gas-Rich Algeria
ALGIERS, Algeria-Exxon Mobil and Chevron are in advanced negotiations with Algeria on a deal that would allow the U.S. energy giants to drill for the first time in the gas-rich North African nation, according to the Algerian energy minister and people familiar with the discussions.
The deals, which the energy minister said could be complete by the end of the year, would give the companies a foothold in a country that is an increasingly important supplier of natural gas to Europe following Russia's invasion of Ukraine.
The RV Boom Is Over, But These Stocks Promise a Sweet Ride
Here's a sweet deal: a vehicle big enough for your whole family to live in on "clearance" at 30% off the manufacturer's suggested retail price!
Unfortunately, that 39-foot long Thor Challenger 37FH motor home still will set you back $188,895. Even with a 240 month loan-much longer than those available to car buyers-your monthly payment would come to $1,221. Inflation means parking that recreational vehicle at a campground will cost about 30% more than it would have just a few years ago and, while pump prices are down from their peak, a behemoth that gets about 8 miles a gallon makes dealer Camping World Holdings' "See America for Less" promotion something of a relative statement.
Twitter's Top Content Moderation and Safety Executive Leaves
Twitter's top official for monitoring safety and content moderation said she resigned Thursday, the second time an executive with that role has departed since Elon Musk bought the social-media company in October.
Ella Irwin, Twitter's head of trust and safety, declined to comment on the reason for her departure in an interview with The Wall Street Journal. She said she felt she had always been honest in her work. Irwin, who joined Twitter about a year ago, had publicly defended the company's actions since Musk took over as she navigated a high-profile and often-scrutinized role handling content-moderation decisions.
Judge in Disney-DeSantis Case Recuses Himself
The federal judge handling Walt Disney Co.'s lawsuit against Florida Gov. Ron DeSantis recused himself Thursday, landing the case in the hands of a judge who has in the past sided with the governor in blocking challenges to the sex-education law at the heart of the lawsuit.
U.S. District Judge Mark Walker was originally assigned to Disney's case, prompting DeSantis and other defendants to seek to disqualify him, citing comments he made in other cases that they said raised doubts about his impartiality. Disney challenged the motion, saying it misstated facts and misread the law.
Jobs Report Expected to Show Unemployment Still Historically Low
Friday's jobs report will show whether the labor market remained resilient in May in the midst of rising interest rates and elevated inflation.
Economists surveyed by The Wall Street Journal estimate that U.S. employers added 190,000 jobs in May. That would be a modest slowdown from April's gain of 253,000 and the 29th straight monthly increase. They expect that the unemployment rate ticked up to 3.5% in May from 3.4% in April, which matched the lowest reading since 1969.
Senate Approves Deal Raising Debt Ceiling, Averting U.S. Default
WASHINGTON-The Senate passed wide-ranging legislation Thursday that suspends the $31.4 trillion debt ceiling while cutting federal spending, backing a bipartisan deal struck by President Biden and House Speaker Kevin McCarthy to avert an unprecedented U.S. default.
The 63-36 vote reflected support from both Democrats and Republicans, with backers saying the need to raise the nation's borrowing limit outweighed concern about provisions related to military and domestic spending and energy policy, among other contentious issues.
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06-02-23 0615ET
