US Index Futures operated in positive territory on Wednesday, with investors awaiting news on talks between congressmen and President Joe Biden over the US debt ceiling, while awaiting data on housing and building permits. American markets are still echoing the surge in Western Alliance shares in the after hour, after the bank recorded growth in deposits, interrupting a new wave of concern about a crisis in the banking sector in the region.
By 7:38 AM, Dow Jones futures were up 132 points, or 0.39%. S&P 500 futures were up 0.34%, while Nasdaq-100 futures were up 0.21%. The 10-year Treasury yield was at 3.521%. West Texas Intermediate crude rose 0.34% at $71.11 a barrel.
On the economic data front, mortgage applications declined 5.7% in the week ended May 12 as refinancing activity and new residential applications slowed, according to data released by the Mortgage Bankers Association. This follows a 6.3% increase for the week ended May 5. Refinance loan applications decreased 8% from the previous week, while new purchase orders decreased a seasonally adjusted 4.8%, MBA said. The average contractual interest rate for 30-year fixed mortgages with loan balances of $726,200 or less increased to 6.57% from 6.48% the week before.
Investors are also looking forward to the Building Permits report at 8:30 AM and the US Crude Inventories report for the week at 10:30 AM.
On Tuesday’s close, the Dow Jones closed below its 50-day average for the first time since March 30. Dow fell 336.46 points, or 1.01%, to 33,012.14 points. The S&P 500 fell 0.64% to 4,109.90 points. The Nasdaq Composite fell 0.18% to 12,343.05 points. The US market faced concerns regarding the potential for default, which affected investor sentiment. In addition, the disclosure of a disappointing quarterly revenue and a pessimistic forecast for the annual performance of Home Depot, one of the companies in the Dow Jones index, contributed to the negative climate. Additionally, April retail sales were below the expectations of economists surveyed by Dow Jones.
Just before yesterday’s market close, the White House announced that President Biden has instructed his staff to meet daily to resolve outstanding issues and has canceled part of his international travel due to negotiations. House Speaker Kevin McCarthy expressed optimism, saying a deal could be reached by the end of the week. Investors are waiting for a breakthrough in talks, which could boost markets and ease concerns over the debt ceiling. President Biden will return to the United States on Sunday to focus on the crisis.
On the earnings front, traders are digesting the earnings from Target and TJX Cos. The most highly anticipated after-Wall Street close reports are from Cisco Systems (NASDAQ:CSCO), Take-Two Interactive (NASDAQ:TTWO) and Boot Barn (NYSE:BOOT).
Wall Street Corporate Highlights for Today
Tesla (NASDAQ:TSLA) – Tesla CEO Elon Musk has announced that the company will begin dabbling in advertising, marking a significant shift for the electric car maker. Musk explained that the decision is aimed at expanding beyond the existing user base. On Wednesday and Thursday, Tesla executives will meet with Indian officials to discuss local sourcing of parts and other issues, aiming for local sourcing in line with the “Make in India” campaign. Elsewhere, Tesla has applied for regulatory authorization to expand its Shanghai factory, increasing capacity to produce powertrain units. In addition, it plans to produce pouch-type battery cells in an experimental line. Confirmation of the project is still uncertain.
Mercedes-Benz Group (USOTC:MBGYY) – The van unit of Mercedes-Benz has announced plans to develop a new scalable platform for electric vans, aiming to reduce fixed costs by 20% by mid-decade. The company aims for electric vehicles to account for 50% of van sales by 2030, with a forecast of 20% by 2026. Mercedes also aims to achieve double-digit margins on sales of zero-emission models by the end of the decade.
BYD Co Ltd (USOTC:BYDDY) – BYD is stepping up its efforts in autonomous driving by creating a new smart driving research division and hiring thousands of software engineers to overcome its technological shortcomings. Between 4,000 and 5,000 software engineers were hired recently, BYD Senior Vice President Stella Li said at an investor forum this month.
Stellantis NV (NYSE:STLA) – Stellantis is recalling 219,000 Jeep Cherokee SUVs globally due to fire hazards. Model year 2014 through 2016 vehicles with an electric tailgate may experience a short circuit in the electrical module. The recall covers approximately 132,000 vehicles in the United States, 23,000 in Canada, 3,000 in Mexico and 60,500 outside North America. NHTSA said owners should take Stellanti’s advice and park outside until the recall is developed and owners make repairs.
Virgin Orbit (NASDAQ:VORB) – Virgin Orbit has entered into a stalking horse deal with Stratolaunch to sell its core aircraft assets for $17 million. Other bidders may still bid on the assets. Virgin Orbit filed for bankruptcy in April.
Western Alliance Bancorp (NYSE:WAL) – Western Alliance Bancorp reported premarket gains on Wednesday, boosting regional US banks by announcing more than $2 billion in deposit growth since the previous quarter. The latest figures show an additional $200 million increase in deposits between May 9th and May 12th, bringing the total to $49.4 billion. Western Alliance shares were up 7.44% premarket, while PacWest Bancorp (NASDAQ:PACW) posted a 9.0% gain.
UBS Group AG (NYSE:UBS) – UBS has earmarked $4 billion for potential legal costs related to its acquisition of Credit Suisse Group AG (NYSE:CS), yet will record a $34.8 billion negative goodwill on the deal. The Swiss bank did not elaborate on the specific issues that led to this decision. The negative goodwill represents a reduction of US$48.8 billion in Credit Suisse’s equity at the end of 2022, including transaction cost of US$3.5 billion and adjustments of US$10.6 billion.
Blackrock (NYSE:BLK) – BlackRock has requested that its employees return to the office at least four days a week, with flexibility to work from home one day a week. The move follows other Wall Street firms, such as JPMorgan, which are also adopting in-person work policies.
Citigroup (NYSE:C) – Ed Wehle, senior technology banker at Barclays (NYSE:BCS), has left the bank to join Citigroup in New York as global head of technology services. The move follows an exodus of investment bankers from Barclays.
JPMorgan Chase (NYSE:JPM) – Jamie Dimon, CEO of JPMorgan Chase, said the bank is unlikely to acquire other struggling institutions following its recent acquisition of First Republic Bank. Dimon reiterated the financial soundness of the regional banking system and highlighted that regulatory changes would not have prevented bankruptcies. JPMorgan Asset Management also suggested that the Federal Reserve may cut interest rates in the third quarter. JPMorgan’s Seamus Mac Gorain supports that prospect, but the Fed has been cautious about the possibility. Differing opinions are expressed by Goldman Sachs and Barclays.
First Republic Bank (NYSE:FRC) – Michael Roffler, former CEO of First Republic Bank, said the bank’s collapse was influenced by the failures of other regional banks and that regulators were unconcerned about its strategy, liquidity or management performance. “We could not have predicted that Silicon Valley Bank and Signature Bank would fail, or that the failure of these banks would trigger substantial deposit outflows at our bank,” he said.
Blackstone (NYSE:BX), Thomson Reuters (NYSE:TRI) – A consortium of investors including Blackstone and Thomson Reuters has sold 33 million shares of the London Stock Exchange Group (LSE:LSEG) for around £2.7 billion. The allotment of shares, which was raised by 28 million, was priced at 8,050 pence per share, a discount of around 5% to the last LSEG closing price.
Goldman Sachs (NYSE:GS) – More than 140 top business executives, including Goldman Sachs Group Inc Chairman and CEO David Solomon, urged President Joe Biden and key congressional leaders to act quickly to avoid a debt default from the US, which would be potentially disastrous. In an open letter, they warned of economic strains already evidenced by recent bank failures and stressed that failure to meet debt obligations would weaken the US position in the global financial system. The letter was also signed by other key executives such as Albert Bourla, President and CEO of Pfizer Inc, James Gorman, President and CEO of Morgan Stanley (NYSE:MS), Jeff Gennette, President and CEO of Macy’s Inc (NYSE:M), and Kenneth Jacobs, president and CEO of Lazard Freres & Co (NYSE:LAZ).
Alphabet (NASDAQ:GOOGL) – Google’s new large-scale language model called PaLM 2 is trained on 3.6 trillion tokens, nearly five times more than its 2022 predecessor, allowing it to perform advanced coding, math, and creative writing skills. Google does not release full details about its training data, as does OpenAI with its LLM, GPT-4, due to competition in the industry. However, the research community is demanding greater transparency as the AI race intensifies. Google also announced that it will delete personal accounts inactive for two years starting in December, aiming at security and preventing hacks. The change will affect content on Google Workspace, YouTube, Google Photos and will be preceded by notifications to inactive users.
Amazon (NASDAQ:AMZN) – Amazon Prime members now have access to pickleball coverage as part of their membership benefits. Prime Video entered into an agreement with the Professional Pickleball Association to broadcast four live events per year, starting with the Atlanta Open. The deal highlights the growth potential of the sport, which has seen a significant increase in its popularity in recent years.
Meta Platforms (NASDAQ:META) – Meta Platforms Inc. is seeking to revitalize interest in the metaverse by highlighting its potential in professional training and education. Nick Clegg, president of global affairs, lauded the transformative impact of augmented and virtual reality in these fields, pointing to applications in skilled professions, schools and elderly care, at the company’s “Future of Work Summit” event in Washington on Tuesday. Despite the recent challenges, Clegg remains cautiously optimistic, saying it will take about 10 to 15 years for the technology to reach sufficient maturity to become widely prevalent in society.
Pfizer (NYSE:PFE) – Pfizer plans to raise $31 billion through a debt offering to finance the acquisition of Seagen. The company seeks to offset the drop in sales from COVID-19 and the loss of patents through investments in research and acquisitions. The debt offering, which would be in eight tranches, will be completed on May 19th.
AT&T (NYSE:T) – AT&T Inc. is downsizing its offices and requiring managers to appear in person at least three days a week, which could prompt some to quit, according to Bloomberg. The company will consolidate into nine main offices, but will offer relocation services for affected employees. CEO John Stankey acknowledges that some people may decide to go their separate ways because of this change.
Comcast (NASDAQ:CMCSA) – Comcast will likely sell its 33% stake in Hulu to Walt Disney early next year, according to Comcast CEO Brian Roberts, quoted by CNBC. The 2019 deal, which assigned a minimum equity value of $27.5 billion to Hulu, allows for the purchase or sale of the stake starting in January 2024.
Apple (NASDAQ:AAPL) – On Tuesday, the United States announced charges in five cases of technology theft on behalf of China, Russia and Iran. Weibao Wang, a former Apple engineer, has been accused of turning the company’s technology towards autonomous vehicle systems and fleeing to China, according to Reuters. In 2017, he took a job in the United States at a Chinese company working to develop self-driving cars before resigning from Apple, but waited about four months before informing Apple of his new job, according to the indictment.
EVgo (NASDAQ:EVGO) – EVgo was down 6.3% in premarket trade to $5.37 after announcing it has begun an underwritten public offering of $125 million in Class A common stock.
WeWork (NYSE:WE) – Sandeep Mathrani will step down as CEO of WeWork on May 26, while Sycamore Partners has named him a director to lead its real estate activity. WeWork shares are down about 76% so far this year, resulting in a market capitalization of $745.42 million, according to data from Refinitiv. The company was valued at up to $47 billion in 2019.
Sony (NYSE:SONY) – Sony Group Corp. announced on Wednesday its plans to buy back up to 2.03% of its shares over the next 12 months. The Tokyo-based company joins several Japanese companies that have recently carried out buybacks, saying it will acquire up to 25 million shares, with a maximum spend of ¥200 billion ($1.5 billion). Sony stock hit a 52-week high this week, buoyed by the general recovery in Japanese stocks.
Manchester United (NYSE:MANU) – Shares of Manchester United soared after a new takeover bid made by Sheikh Jassim Bin Hamad Al Thani. The offer includes 100% of the club, debt settlement and a separate club and community fund. Sheikh Jassim is chairman of Qatar Islamic Bank. The rival bidder is Sir Jim Ratcliffe, CEO of Ineos.
Earnings
Target (NYSE:TGT) – Shares of Target were flat premarket after beating Wall Street’s earnings expectations despite modest year-over-year growth in the discount store’s sales. The retailer maintained its full-year outlook, with comparable sales projected to range from a low decline to a low single-digit increase. Target’s EPS was $2.05, beating estimates of $1.76, and total revenue reached $25.32 billion versus an expected $25.29 billion. Comparable sales were flat year-over-year.
TJX Cos (NYSE:TJX) – The shares of TJX Cos fell 2.07% premarket despite reporting a better-than-expected first-quarter fiscal profit. However, sales were below consensus. The company had net income of $891 million, or $0.76 per share, for the quarter ended April 29, versus the consensus of $0.72. Sales rose to $11.783 billion against estimates of $11.824 billion. The company maintained its full-year outlook and expects comparable sales and EPS growth. The stock is down 1.7% for the year, while the S&P 500 is up 7%.
Tencent (USOTC:TCEHY) – Tencent posted rapid growth with revenue of 150 billion yuan ($21.4 billion) in the first quarter, beating estimates of 146.09 billion yuan. Profit attributable to shareholders was 25.8 billion yuan against 31 billion yuan expected, up 10% year-on-year. Investors are bullish on the reopening of the Chinese economy, which boosts tech companies.
Commerzbank (USOTC:CRZBY) – Germany’s Commerzbank reported a net profit almost doubled in the first quarter, boosted by higher interest rates. The bank raised its net interest income forecast to €7bn and is continuing its reform process to improve earnings.
Siemens (USOTC:SIEGY) – Siemens has raised its full-year sales and profit forecasts, driven by strong demand and an expanding order backlog. The company posted a 14% increase in second-quarter revenue and had its highest quarterly profit in the factory automation and smart buildings divisions.
Doximity (NYSE:DOCS) – Online medical platform provider Doximity said it expects fiscal first-quarter revenue of $106.5 million to $107.5 million, below analyst forecasts, and shares fell 10.78% in premarket trading.
Keysight Technologies (NYSE:KEYS) – The electronics company was flat premarket after fiscal second-quarter earnings beat Wall Street expectations and the company’s adjusted earnings forecast for the current quarter of $2 to $2.06 a share also beat estimates.
Kyndryl Holdings (NYSE:KD) – The IBM spin-off that manages IT data centers and provides other related services to large technology buyers said it expects fiscal 2024 revenue to decline by 6% to 8%, implying a revenue from US$16 billion to US$16.4 billion, which is below analysts’ expectations.
Market vision
Wynn Resorts (NASDAQ:WYNN) – Wynn Resorts stock was up 2.3% to $105.44 after the casino company’s stock was raised to Overweight from Equal Weight on Barclays, and the price target was raised to $135 from $120.