Market Wraps
Watch For:
Employment Report for April; Canada Labour Force Survey for April; earnings from AMC Entertainment, Enbridge, Warner Bros. Discovery
Today’s Headlines/Must Reads
– Is the Fed Done Raising Rates?
– Pensions Consider Selling Stocks, Adding Credit
– Twitter’s Blue Check Marks Become Polarizing Symbol of Elon Musk’s Tenure
– Coinbase Tries Novel Defense in SEC Fight
Opening Call:
Stock futures edged higher on Friday after four consecutive losses, buoyed by better-than-forecast results from Apple and as the key jobs report loomed.
Stocks in the News
In a market gripped by concerns over regional banks, Apple helped shift attention, with a better-than-expected set of results, a 4% dividend hike, and a $90 billion extension on its stock buyback program.
Its stock rose 2% premarket.
“The Apple share price hit its highest levels since August earlier this week and looks set to open higher when U.S. markets reopen…as it continues to set itself apart from the wider market turmoil being seen elsewhere,” CMC Markets UK said.
Other Stocks to Watch
Booking was down 3% after first-quarter adjusted earnings before interest, taxes, depreciation and amortization of $586 million missed analysts’ forecasts of $627 million.
Carvana reported a first-quarter loss that narrowed from a year earlier as the company said its cost-cutting campaign will contribute to positive earnings, excluding some expenses, for the current second quarter. The stock rose 35%.
Coinbase posted a first-quarter loss much narrower than expectations and the stock was rising 9% in premarket trading.
First-quarter revenue at DraftKings easily topped Wall Street forecasts and its shares were up 11% in premarket trading.
Expedia saw first-quarter revenue jump to $2.67 billion from $2.25 billion a year earlier and a 20% increase in gross bookings. Shares rose 6.3%.
Dropbox reported a better-than-expected rise in revenue in its latest quarter. Its shares rose 7% in after-hours trading.
Fintech Block reported an increase of 26% in first-quarter revenue to nearly $5 billion, beating expectations. The stock gained 5%
Lyft was down 16% after it issued a second-quarter revenue forecast that came up shy of analysts’ expectations.
Economic Calendar
The key nonfarm payrolls report is due at 8:30 am, as the Fed said it’s shifting to a data-dependent mode in determining whether to hike interest rates more.
“Today’s report for April is the first of two labor market updates before the June announcement that will be critical in determining whether the ‘pause’ goes ahead,” Lloyds Bank said.
Forex:
The dollar extended its retreat in Europe as concerns over the health of U.S. regional banks mount.
“U.S. policymakers will be looking at ways to patch things up, but the clear overall trend should be one of tighter credit conditions and weaker U.S. growth,” ING said.
“This should help take the steam out of inflation and send the dollar lower.”
There could be plenty of dollar sellers if the is any surprise 1%-2% rally in the currency in the next couple of weeks, ING added.
Swissquote said a growing divergence between the rate outlooks of the Fed and ECB “builds a stronger case for a significantly higher euro against the dollar.”
“Price pullbacks continue to be interesting opportunities to strength long positions in the single currency,” it added.
Christine Lagarde “left the door wide-open to more rate hikes in the coming months,” whereas U.S. banking stresses are fuelling speculation of Fed rate cuts in the second half of this year, perhaps as early as July, Swissquote said.
TD Securities said sterling is mainly being driven by risk sentiment and the dollar as another interest rate rise by the Bank of England on May 11 is fully priced in, as GBP/USD hits an 11-month high and EUR/GBP falls to a four-week low.
Improving U.K. growth has provided some sterling support, but it’s “started to deviate from some of our short-term models,” TD said.
“While that won’t matter too much if weaker U.S. data pulls the dollar lower, lifting sterling and others, it would reinforce EUR/GBP support ahead of the 200 daily moving average, as the euro looks cleaner.”
Energy:
Oil futures were close to 2% higher but remained on course for a third consecutive weekly decline as fears about demand have battered prices.
Attention is turning to OPEC+ following the sharp falls, with the group due to meet early next month in person to decide on production levels. At their last in-person meeting they opted to slash output by 2 million barrels a day.
“Clearly, if the current downward trend continues in prices, the group would likely be forced to make further supply cuts,” ING said.
Metals:
Base metals and gold were largely unchanged ahead of the nonfarm payroll data, with investors looking to key economic indicators to see how the U.S. economy is faring amid rising interest rates.
Deutsche Bank said the employment report will be an important one for the Fed as it considers whether to pause on interest rate hikes.
“Our U.S. economists at Deutsche Bank are looking for nonfarm payrolls to have grown by 150,000, which if realized would actually be the slowest monthly growth since December 2020.”
Today’s Top Headlines
Twitter’s Blue Check Marks Become Polarizing Symbol of Elon Musk’s Tenure
Elon Musk’s move to upend Twitter’s longstanding verification system is turning the platform’s iconic blue check marks into a polarizing symbol of his leadership for some of Twitter’s most prominent users.
In the two weeks since Twitter began removing the check marks from legacy verified users, reactions have ranged from some users saying they are happy to say goodbye to the check marks and mocking those who purchased them to others saying the subscription features are worth buying.
Coinbase Tries Novel Defense in SEC Fight
With the Securities and Exchange Commission preparing an enforcement action that threatens much of its business, crypto exchange Coinbase is trying a novel defense. It says regulators bear some responsibility for letting the company go public in the first place.
Coinbase went public in April 2021 after clearing a six-month review. SEC staff bored into its financial reporting and disclosures as well as the company’s belief that its menu of cryptocurrencies shouldn’t be treated as securities, which the SEC regulates. Coinbase’s lawyers argue that by clearing the review, regulators signaled that they “did not think Coinbase’s core business was unlawful.”
Crypto Exchange Coinbase Posts Loss, but Beats Expectations
Coinbase Global reported a fifth consecutive quarter of losses as individual investor enthusiasm for crypto trading on the platform remained stagnant.
The biggest cryptocurrency exchange in the U.S. posted a loss of $79 million in the first quarter, narrowing its loss of $430 million a year ago. The improvement was largely driven by operational cost cutting, including a 20% reduction in workforce announced in January.
Apple Finds Strength in India as Overall Sales Fall for Second Straight Quarter
Apple reported its second straight quarter of declining revenue but said iPhone sales surged due to strong demand in emerging markets, a sign of resilience as the tech giant continues to face economic uncertainty.
This is the third time in a decade that the iPhone maker has posted back-to-back quarters of falling revenue. The tech giant’s revenue for the three months ended April 1 was $94.8 billion, down 3% from the year-earlier period. Net income dropped 3% year-over-year to $24.2 billion. Apple exceeded analyst expectations, according to FactSet, of $92.9 billion in sales and $22.6 billion in net income for its fiscal second quarter.
Booking and Expedia Post Sales Surge. Why the Stocks Are Diverging.
Booking Holdings and Expedia both reported strong revenue in the first quarter as bookings soared amid robust travel demand. However, the stocks were moving in opposite directions early Friday, with Expedia up around 6% and Booking down 3%.
That may seem even stranger given that Booking (ticker: BKNG) beat earnings expectations while Expedia (EXPE) missed estimates.
IAG Expects Continued Strong Demand Across Airlines After Swing to 1Q Profit
International Consolidated Airlines Group said Friday that strong demand continued across all its airlines as it reported a swing to a first quarter operating profit that beat consensus, and raised its guidance.
Adidas Shares Climb After 1Q Sales Proved to Be More Robust Than Feared
Shares in Adidas furthered their rally Friday after the group said first-quarter sales remained stable on the year, and that high inventory levels have eased to some extent.
At 0723 GMT, shares were up 6.2% at EUR166. Year-to-date, the share has risen some 30%, reversing some of the steep declines it suffered last year.
Is the Fed Done Raising Rates?
Federal Reserve officials this past week raised interest rates to a 16-year high and signaled they might be done hiking them for now. But they didn’t say exactly how they will know when they have reached that point.
Fed Chair Jerome Powell said at a Wednesday press conference that policy makers will base the decision “on the totality of incoming data and their implications for the outlook for economic activity and inflation.”
Pension Funds Consider Unloading Stocks, Adding Credit
Some of the nation’s largest pension funds are looking at pulling back on stocks and adding private credit, while grappling with the possibility of a prolonged economic slowdown.
Board members of the $307 billion California State Teachers’ Retirement System voted Thursday to reduce the fund’s stockholdings to 38% from 42%, a shift staff and consultants said would lower the fund’s risk level without bringing down returns. The public pension fund, the nation’s second-largest, is closely watched by other retirement managers.
Banking group asks SEC for probe after alleging abusive short-selling practices
The trade group representing U.S. banks has asked the Securities and Exchange Commission to take action against what it calls market manipulation and abusive short-selling practices after the latest nosedive in the stock market.
The American Bankers Association letter to SEC Chair Gensler is dated Thursday, which saw another round of mass selling of regional banks.
German Manufacturing Orders Fell by More Than Expected in March
New orders at German factories tumbled more than expected in March, signaling sliding demand for manufacturers as concerns over the health of the global economy mount.
Manufacturing orders decreased 10.7% in March on month after rising by a downwardly revised 4.5% in February, according to price-adjusted data released Friday by the German statistics office Destatis.
China Caixin Services PMI Slips, But Stays Firmly in Expansion Territory
A private gauge of China’s service sector declined in April but stayed in expansion territory, as consumers shifted to close-contact services after Beijing lifted Covid-19 restrictions.
The Caixin China services purchasing managers index fell to 56.4 in April from 57.8 in March, Caixin Media Co. and S&P Global said Friday.
Reserve Bank of Australia Still Jittery About Stubborn Inflation Risks
SYDNEY-The Reserve Bank of Australia continues to warn that while inflation pressures have peaked, the risks that inflation remains higher for longer are significant and further interest-rate increases may be needed.
In its latest monetary-policy statement released Friday, the Australian central bank said that while inflation expectations are consistent with price pressures returning to target by mid-2025, a continuation of that is not yet assured.
On Biden’s Second-Term Agenda: Unmet Goals From His First Term
WASHINGTON-President Biden wants American voters to give him another four years in office to “finish the job”-a signal that his second-term agenda would be driven largely by efforts to reach policy goals left undone in his first term.
Mr. Biden still has 18 months before the election to unveil some new proposals. And he won’t be the only one on the ballot in November 2024-both the House and Senate majorities will be at stake, and the fate of much of Mr. Biden’s agenda would depend on whether Republicans again end up in control of one or both chambers of Congress. A second Biden administration would also spend significant time continuing to implement the big-ticket bills passed in his first term.
Ron DeSantis Dominates Florida Legislative Session Ahead of Expected Presidential Run
What Ron DeSantis wanted, he got.
The Florida governor dominated the 60-day legislative session in Tallahassee that ends Friday, racking up conservative policy victories that will serve as the backbone of his soon-expected entry into the 2024 presidential race. Those wins could boost him in the GOP primary contest-even as some allies are concerned about how far to the right he pushed, particularly on abortion.
Biden to Tap Air Force General as Next Chairman of Joint Chiefs of Staff
WASHINGTON-President Biden is expected to nominate Air Force Gen. Charles Q. Brown Jr. as the next chairman of the Joint Chiefs of Staff, succeeding Army Gen. Mark Milley and becoming the second Black general in the post, according to U.S. officials.
Gen. Brown is currently the chief of staff of the Air Force. If he is nominated and confirmed by the Senate, two Black men would lead the Pentagon for the first time ever. Lloyd Austin is serving as the first Black defense secretary.
Kim Gardner, Top Elected Prosecutor for St. Louis, Is Resigning
Kim Gardner, the top elected prosecutor in St. Louis, said Thursday she would resign effective June 1.
The decision from Ms. Gardner, the city’s first Black circuit attorney, comes as she has faced months of criticism from lawmakers and other officials over what they termed dysfunctional prosecutions and crime levels in one of Missouri’s most-populous cities.
Former Uber Security Chief Gets Probation in Obstruction Case
Joseph Sullivan, the former chief security officer at Uber Technologies, was sentenced to three years’ probation by a federal court in San Francisco, over criminal obstruction charges relating to a 2016 data breach at the ride-hailing giant.
District Judge William Orrick delivered the sentence Thursday, a long-awaited verdict in a case that has divided opinion within the cybersecurity industry. Judge Orrick said that because of Mr. Sullivan’s character, the unusual nature of the case and that it was the first of its kind, he had shown Mr. Sullivan leniency, but he said chief information security officers shouldn’t expect that in future cases.
Source: Dow Jones Newswires