US Index Futures fell on Wednesday, extending the previous trading session’s slump, as little sign of progress in talks on raising the US debt ceiling added to the uncertainty. The climate is also justified by the caution before the release of the minutes of the last US monetary policy decision, which may affect expectations about the trajectory of interest rates.
By 7:18 AM, Dow Jones futures were down 110 points, or 0.33%. S&P 500 futures were down 0.35%, while Nasdaq-100 futures were down 0.38%. The 10-year Treasury yield was at 3.68%. West Texas Intermediate crude rose 1.60% to settle at $74.08 a barrel.
On Wednesday’s economic data schedule, the Association of Mortgage Bankers (MBA) showed at 7 am the number of US mortgage applications for the week to May 19.
The average rate on the 30-year fixed mortgage exceeded 7%, reaching the highest level since March. Uncertainty over the Federal Reserve’s actions and the battle over raising the debt ceiling have boosted rates. The total volume of mortgage applications fell 4.6% last week compared to the previous week. Last week, the average weekly contractual interest rate for 30-year fixed-rate mortgages with compliant loan balances ($726,200 or less) increased to 6.69% for loans with a 20% down payment, according to with the MBA. This rate was 5.46% in the same week of the previous year. Mortgage applications to buy a home were down 4% for the week and were 30% lower than the same week a year ago.
The US Department of Energy (DoE) reports weekly US crude oil and oil product inventories for the week to May 19 at 10:30 am. At 1:00 pm, the US 5-year Note Auction, and the minutes of the last FOMC meeting, held between May 2nd and 3rd, will be released at 2:00 pm by the Federal Reserve. The minutes of the FOMC meeting may indicate that part of the committee believes that the Fed Funds rate has already reached a sufficiently restrictive level for the convergence of inflation to the target, indicating a lower propensity of its members for additional interest rate increases. Even so, the minutes are expected to reveal a more divided committee, in line with recent statements by officials.
Elsewhere, UK inflation dropped sharply in April, as lower energy prices and the effect of the conflict in Ukraine over Russia eased year-on-year. The consumer price index (CPI) was up 8.7% year-on-year, according to the Office of National Statistics. Luxury stocks, which have been popular this year, continued to lose value, with LVMH and Kering SA both down around 2%. The property sector and European carmakers also suffered from concerns of a possible rise in interest rates in the UK.
The market assimilates even more a drop in iron ore in China, which melted 4.61% to 682.50 yuan, or the equivalent of US$98.74 a ton, on the Dalian stock exchange. Steel rebar futures touched a six-month low in Shanghai. Benchmark iron ore futures on the Singapore and Dalian exchanges extended losses on Wednesday, falling below $100 a tonne as steel prices tumbled in China on concerns over an economic recovery.
At the close of Tuesday, stock indices closed lower and yields rose along the curve, reflecting a higher risk premium on the part of investors given the stalemate in negotiations for raising the US debt ceiling. The Dow Jones fell 231.01 points, or 0.69%, to 33,055.57. The S&P 500 fell 1.12% to close at 4,145.67, while the Nasdaq Composite fell 1.26% to 12,560.25. Regardless of debt default being an unlikely scenario, the market ends up incorporating this premium into prices. In recent days, we have seen indices there operating very close to stability due to the lack of a macroeconomic north, especially when we look at the S&P 500, which has fluctuated between 4,100 and 4,200.
However, with the FOMC minutes being released today, it is possible that this lack of definition in the movement of assets will come to an end. In recent days, some FOMC members have been giving more hawkish speeches. In particular, Bullard said on Monday that he would like to see two more 0.25 pp increases in FFR. What the market should look for in today’s document, therefore, should be some clue as to the real chances of there not being new interest rate increases. It is believed that the minutes will not contain much additional information.
On the Wednesday earnings front, traders are looking at earnings from Analog Devices, Kohl’s, Xpeng, Petco, Express and Abercrombie & Fitch. After the market closes, reports from Nvidia, Snowflake, Splunk, UiPath, American Eagle, and others will be expected.
Wall Street Corporate Highlights for Today
Comcast Corp (NASDAQ:CMCSA) – Comcast Corp is launching a live TV streaming service called “Now TV” for $20 a month. The service will offer over 40 live TV channels, FAST channels, DVR storage and a free Peacock subscription. Although it offers fewer channels, the price is lower than its competitors. The service will be available in the coming weeks.
Netflix (NASDAQ:NFLX) – Netflix has expanded crackdown on password sharing to more than 100 countries, including the United States, Great Britain, Brazil, France, Germany, Australia, Singapore and Mexico, warning users that their accounts can be shared free of charge outside their homes. The company is looking for new ways to increase revenue in the face of market saturation, including limits on account sharing. Members will be able to add users outside their homes for an additional fee. Sharing within the same household and on different devices while traveling is still allowed.
Meta Platforms (NASDAQ:META) – Meta Platforms suffered a setback in the European court, which found the requests for information made by the European Commission in its investigation into Facebook’s data and online marketplace to be legitimate. Meta is considering its options and may appeal the decision. The court also recognized the creation of a virtual data room, excluding private information not relevant to the investigation. On Tuesday, Shutterstock (NYSE:SSTK) announced the purchase of animated image platform Giphy from Meta Platforms for $53 million in cash. The sale was ordered by Britain’s competition regulator over concerns of limited access to competitors. Shutterstock expects to close the deal next month.
Microsoft (NASDAQ:MSFT) – Microsoft rolled out AI updates on Tuesday, including to ChatGPT and the Bing search engine, in an attempt to close the gap with Google. ChatGPT can now provide Bing search results, and the company is also expanding plugins to facilitate transactions on the search engine. Microsoft is seeking a bigger share of the search advertising market, estimated at $286 billion. Bing’s updates aim to offer a different experience and the company hopes to benefit from traffic driven by ChatGPT. In addition, Microsoft will make an AI assistant available to Windows users and will introduce features to help consumers verify the authenticity of AI-generated images and videos.
Alphabet (NASDAQ:GOOGL) – AI startup Anthropic has raised $450 million in a funding round from investors including Google and Alphabet’s Spark Capital. With a total funding of nearly $1 billion, Anthropic is one of the best-funded AI startups, developing foundational models for different AI tasks.
Uber (NYSE:UBER) – Uber and Waymo, owned by Alphabet (GOOGL), have partnered to make self-driving cars available on Uber’s ride-sharing and delivery platform. Customers will be able to use Waymo driverless vehicles in Phoenix, Arizona. This partnership boosts Uber’s ambition in autonomous driving and allows Waymo to expand its reach. Despite longstanding legal disputes, the companies are now working together to push autonomous technology forward. Last year, they also collaborated on the use of autonomous trucks for freight. Elsewhere, Uber has announced it plans to launch 25,000 electric vehicles in India in partnership with local fleet operators. The initiative aims to harness the country’s momentum in clean energy and help India electrify passenger transport. However, the lack of charging stations is still a challenge. Uber will launch the Uber Green EV service in June in three Indian cities, in addition to providing 10,000 electric scooters by 2024 in partnership with startup Zypp Electric.
Target (NYSE:TGT) – Target is removing products from its Pride Collection due to employee safety threats. The collection, comprising more than 2,000 items, has faced clashes between customers and employees. The removal affects products from the LGBTQ brand Abprallen, associated with a controversial designer. Target is also reviewing transgender swimwear and children’s merchandise. Some stores in the US South are repositioning Pride related products.
PPG Industries (NYSE:PPG) – PPG Industries has set ambitious targets for annual growth adjusted per share, free cash flow and organic sales through 2026. The company plans to invest in sustainable growth opportunities and strengthen its technology leadership in the coatings industry . In addition, it is committed to returning value to shareholders and achieving ESG objectives related to sustainability. PPG shares have accumulated 9% gains this year.
Abbott (NYSE:ABT) – The US Federal Trade Commission is investigating whether infant formula manufacturers, including Abbott Laboratories, colluded in bids for state contracts. The investigation also covers possible effects on sales outside of the WIC program. Nestlé (NSRGY) was also contacted by the FTC.
Micron Technology (NASDAQ:MU) – The US Department of Commerce plans to impose restrictions on Chinese memory chip maker Changxin Memory Technologies (CXMT) following China’s ban on sales of Micron Technology chips. The trade dispute between the countries has escalated, and lawmakers and the White House have criticized Chinese actions. The Commerce Department is involved in the discussions, while Rep. Mike Gallagher calls for retaliatory action. CXMT is Micron’s main domestic competitor in the Chinese market. China was already reducing purchases of Micron chips before declaring the company’s products a national security risk. Documents show Chinese officials opted for domestic or South Korean options.
Lenovo (USOTC:LNVGY) – Lenovo Group Ltd reported a 24% drop in Q1 revenue, in line with market expectations. Demand for personal computers continues to fall, but the company expects a recovery in the second half. Lenovo has also diversified its business, expanding into smartphones, servers and IT services. General net income attributable to shareholders in January-March fell 72% to $114 million, versus analysts’ estimate of $212.49 million.
Sony (NYSE:SONY) – The success of the TV series “The Last Of Us” is driving game sales, according to Sony Interactive Entertainment CEO Jim Ryan. Sony is diversifying its business, bringing the franchise to PC and looking to expand its live services and mobile games. Sony expects PC revenue to hit $450 million in the current financial year, up from $80 million two years earlier. The company also plans to accelerate its initiatives in the cloud space in the coming months.
Ericsson (NASDAQ:ERIC) – Nasdaq Stockholm has acquitted Ericsson AB of any violations related to its disclosure of a corruption investigation in Iraq. The exchange determined that the internal report leaked last year did not constitute privileged information. Ericsson is still under investigation in the US, but the exchange’s decision was positively received by the market.
Mastercard (NYSE:MA) – Mastercard Inc is launching a US credit card for visually impaired consumers in partnership with Citizens Financial Group (NYSE:CFG). The card will have notches on the side to indicate that it is a credit card, to help customers who are blind or partially sighted. The initiative seeks to promote inclusion and facilitate the identification of cards.
Goldman Sachs (NYSE:GS) – Goldman Sachs has turned Go Inc, Japan’s leading taxi service provider, into a unicorn with an initial investment of ¥10 billion. Go plans to use the proceeds for aggressive acquisitions, an initial public offering and expanding its taxi app, which is already the most used in the country. The company hopes to lead the digitalization of the taxi market in Japan.
Deutsche Bank (NYSE:DB), Citigroup (NYSE:C) – Deutsche Bank and Citigroup admitted to anti-competitive practices by exchanging confidential information about UK government securities between 2009 and 2013, according to the UK antitrust authority. HSBC (NYSE:HSBC), Morgan Stanley (NYSE:MS) and the Royal Bank of Canada (NYSE:RY) have denied any wrongdoing in the alleged sharing of information in individual conversations. The UK’s Markets and Competition Authority (CMA) will review further evidence before making a final decision on potential penalties. The investigation involves the buying and selling of UK government bonds and includes details on pricing and trading strategies.
Citigroup (NYSE:C) – The Mexican government is considering purchasing the majority of shares in Citigroup’s local unit, Banamex. President López Obrador said it would be a “good deal” and mentioned the possibility of a public-private partnership with Citigroup. Grupo México is one of the bidders, but there are rumors of withdrawal.
UBS (NYSE:UBS) – UBS is in discussions with the Swiss authorities on protections against losses related to the acquisition of Credit Suisse (NYSE:CS). While a definitive deal is still under negotiation, UBS expects key terms to be agreed before the completion of the acquisition, expected in early June.
Credit Suisse (NYSE:CS) – No Va Land, the Vietnamese real estate giant, is in talks with creditors to restructure some of its $1 billion foreign debt, including Credit Suisse. The company faces challenges in the real estate sector, with a credit crunch and difficulties finding buyers for its assets. Its total debt is around $2.7 billion.
PacWest Bancorp (NASDAQ:PACW) – PacWest Bancorp sold its home loan division, Civic Financial Services, to Roc360 in an attempt to boost investor confidence. The transaction does not include prior loans and loan service operations. The sale is part of PacWest’s efforts to strengthen its financials and focus on its core business segments.
Citizens Bank (NYSE:CFG) – Citizens Bank has agreed to pay a $9 million civil fine to settle allegations of mismanagement of credit card disputes and fraud. The bank agreed to improve its practices, but neither admitted nor denied wrongdoing. “While Citizens continues to disagree with the CFPB’s position, we are pleased to put this matter behind us,” said General Counsel Polly Klane.
Barclays (NYSE:BCS) – Barclays announced the appointment of Scott McDavid, formerly of Morgan Stanley (NYSE:MS), as Global Head of Equity, and Ronnie Wexler as Global Head of Equity Distribution. These hires are part of Barclays’ efforts to challenge major Wall Street banks and improve its performance in the equity markets.
BlackRock (NYSE:BLK) – BlackRock has appointed Giovanni Sandri as head of Southern Europe, including Italy, Spain, Portugal, Greece and Israel. This new regional structure aims to promote coordination between countries and boost business development in the region.
Tesla (NASDAQ:TSLA) – Elon Musk, CEO of Tesla, has stated that the company will likely choose a location for a new factory by the end of the year, and has expressed interest in India. Tesla also plans to open a gigafactory in Mexico. Musk mentioned the idea of creating an educational institution to control his votes, and revealed that he had identified a successor to the board. Elon Musk plans to stage Ron DeSantis’ presidential campaign announcement on Wednesday via a livestream on TwitterSpaces, in an event that will promote the campaign to Musk’s more than 140 million followers on the platform.
Lordstown Motors (NASDAQ:RIDE) – Lordstown Motors Corp announced a reverse stock split to comply with Nasdaq listing rules and appease investor Foxconn (USOTC:FXCOF). The company is struggling with financial and production challenges, and has warned of the possibility of declaring bankruptcy without Foxconn’s investment.
Boeing (NYSE:BA) – Boeing Chief Executive Dave Calhoun estimates it will take until the end of 2024 to resolve the supply chain issues that have plagued global plane production, saying it is a long-term job. Full recovery in the supply chain is expected by the end of 2024 or even 2025, according to Calhoun and Airbus Chief Executive Guillaume Faury.
Virgin Orbit (NASDAQ:VORBW) – Virgin Orbit, Richard Branson’s bankrupt satellite launch company, announced final closure following the sale of assets for $36.4 million, including headquarters in Long Beach, Calif., to Rocket Lab (NASDAQ:RKLB). Most of the employees will be laid off, and other assets will also be sold. Tuesday’s filing said Virgin Orbit had decided “not to proceed with the auction” regarding the company’s stock of LauncherOne rocket engines, the core of its launch business. “No successful bidders or the next highest bidder have been selected for such assets at this time,” the document said.
LVMH (USOTC:LVMUY) – Bernard Arnault, the richest person in the world, saw his fortune decline by $11.2 billion in a single day due to concerns about the slowdown of the US economy and the consequent reduction in demand for luxury goods . Despite that, Arnault still has a net worth of $191.6 billion, and the gap between him and Elon Musk has shrunk to $11.4 billion. The fall in shares of LVMH, the company founded by Arnault, was part of a broader slump that has hit the European luxury sector, wiping out about $30 billion in value.
Earnings
Bank of Montreal (NYSE:BMO) – Bank of Montreal reported a surprise drop in second-quarter profit due to a higher provision for loan losses. Excluding some items, earnings were C$2.93 per share, below Bloomberg analysts’ average estimate of C$3.21. The provision included losses on the Bank of the West portfolio, which was recently acquired. The bank also reported earnings in line with analysts’ expectations. The bank increased its quarterly dividend by 2.8% to C$1.47 per share. Stocks are stable in premarket trading.
Bank of Nova Scotia (NYSE:BNS) – Bank of Nova Scotia missed analysts’ expectations, posting a lower net interest margin and a higher provision for nonperforming loans. The international division also negatively impacted results. The bank saw a 21% drop in net income to C$2.16 billion ($1.59 billion), or C$1.69 per share, and set aside C$709 million for credit losses, while analysts projected C$696.3 million.
Xiaomi Corp (USOTC:XIACF) – Xiaomi Corp. fell 19% due to the drop in demand for electronics and internet services in China. Sales fell across all of its businesses, led by a 24% drop in smartphone revenue and a 28% drop overseas. While quarterly earnings beat expectations, slumping smartphone sales and challenges in the global market took a toll on the company. Xiaomi is focused on becoming a player in the electric vehicle market, but it needs to face obstacles and rely on its traditional business to support its investments.
Palo Alto Networks (NASDAQ:PANW) – The company’s fiscal third-quarter earnings and revenue beat estimates. The cybersecurity company posted adjusted earnings of $1.10 per share on revenue of $1.72 billion. Analysts polled by Refinitiv estimated earnings of 93 cents a share and $1.71 billion in revenue. The company’s earnings outlook for the fiscal fourth quarter also beat expectations.
Urban Outfitters (NASDAQ:URBN) – Urban Outfitters reported earnings of 56 cents per share for the first quarter. Analysts had expected earnings of 35 cents a share, according to Refinitiv. Revenue also beat expectations, with the company posting $1.11 billion against consensus estimates of $1.09 billion.
Agilent Technologies (NYSE:A) – Agilent posted earnings and revenue above estimates in the fiscal second quarter, according to Refinitiv. The outlook for earnings and revenues in the fiscal third quarter was lower than anticipated.
Intuit (NASDAQ:INTU) – Shares of the tax software company are down more than 5%. While Intuit’s fiscal third-quarter earnings beat estimates, revenue was below expectations, according to Refinitiv. The company’s earnings outlook for the current quarter was also lower than analysts estimated.
Toll Brothers (NYSE:TOL) – The company’s fiscal second quarter earnings and revenue beat analyst estimates. The company said the surge in demand that began in January continued into the beginning of the third quarter.
VF Corp (NYSE:VFC) – VF, whose brands include Smartwool and The North Face, posted adjusted earnings of 17 cents per share on revenue of $2.74 billion during the fiscal fourth quarter. Analysts had forecast earnings of 14 cents a share on revenue of $2.73 billion, according to Refinitiv.
Xpeng (NYSE:XPEV), Nio (NYSE:NIO), Li Auto (NASDAQ:LI) – US XPeng deposit receipts fell 5.6% in premarket trade after the Chinese electric vehicle maker reported a fiscal first-quarter loss higher than expectations and revenue was down 46% year-over-year. The shares of Nio Inc. shares fell 1.94% and shares of Li Auto Inc fell 0.84%.
Nvidia (NASDAQ:NVDA) – Analysts expect Nvidia to report fiscal first-quarter adjusted earnings of 92 cents a share and revenue of $6.5 billion when the chipmaker releases its report after the stock market close in Wednesday. The stock has gained 110% this year.