The risk aversion environment prevails and puts pressure on US Index Futures, after China’s economy contracted for the second straight month in May, which adds evidence that the Asian country’s post-Covid recovery is losing momentum. The market also follows the vote in the plenary of the House of the bipartisan agreement to increase the debt ceiling of the United States, after the text overcomes its first legislative obstacle yesterday with approval in the committee of the legislative house.
On Wednesday’s US economic data schedule, traders are looking forward to the US Mortgage Market Index at 7:00 am, Fed Bowman Speech, Chicago PMI at 9:45 am, JOLTs Job Offers at 10:00 am, Fed’s Beige Book at 2:00 pm and a Change in API oil inventories at 4:30 pm.
Investors keep their eyes on the debt limit deal negotiated between President Joe Biden and House Speaker Kevin McCarthy. The bill will be voted on in the House on Wednesday after overcoming a critical procedural hurdle, with just a few days left to avoid a US default. Congress is in a race against time to pass the measure before June 5, the date Treasury Secretary Janet Yellen warned of the risk of a US default.
At Tuesday’s close, the Dow fell 50.56 points, or 0.15%, to close at 33,042.78 points. The S&P 500 gained 0.002% to close at 4,205.52 points. The Nasdaq Composite rose 0.32% closing at 13,017.43 points. Stocks were left with little change yesterday after the Memorial Day holiday kept trading closed on Monday. On the agenda, the economic data that came out were less relevant, and made little price. In general, the market remained anxious for the approval of the increase in the US debt ceiling. What generated some fear was that a part of the Republicans said they would vote against the measure, but it does not seem that this will stop the approval. In the commodities market, oil fell more than 4% on Tuesday. In recent days, divergent signs have been seen among some of its main members, with Saudi Arabia signaling a cut in production, while Russia wanting to maintain levels, which has increased the volatility of oil barrel prices.
On the last trading day of May, the Nasdaq Composite posted an increase of nearly 6.5%, while the S&P 500 saw growth of approximately 0.9%. On the other hand, the Dow Jones showed a drop of 3.1% during the same trading period. The Nasdaq, buoyed by tech companies, outperformed the other indexes, largely due to the hype around artificial intelligence that led Nvidia to briefly have a market cap above $1 trillion.
On the Wednesday earnings front, traders are watching earnings from Advanced Auto Parts, Capri Holdings, and others. After the close, among the most anticipated balance sheets are CrowdStrike, Salesforce, C3.ai, Okta, Chewy, Nordstrom and Netapp.
Wall Street Corporate Highlights for Today
Berkshire Hathaway (NYSE:BRK.B), Occidental Petroleum (NYSE:OXY) – Warren Buffett’s Berkshire Hathaway has increased its stake in Occidental Petroleum Corp. to approximately 25%. Berkshire acquired 4.66 million shares of Occidental, bringing its stake to 221.99 million shares, worth about $13 billion. Buffett has denied rumors of taking full control of Occidental.
Microsoft (NASDAQ:MSFT) – Microsoft has criticized the UK antitrust regulator for blocking its acquisition of Activision Blizzard (NASDAQ:ATVI), saying the decision was a global exception. The company argues that the Competition and Markets Authority was wrong to claim that the deal would harm competition in the cloud gaming market. Microsoft is also contesting the US Federal Trade Commission’s lawsuit. The appeal trial in the UK is scheduled for the end of July.
Cargill – Cargill, the North American agribusiness giant, has agreed to sell its poultry business in China to DCP Capital, a private equity firm. The transaction, subject to regulatory approvals, is expected to close this year. China is the second largest poultry producer in the world.
Foxconn (USOTC:FXCOF) – Foxconn expects a strong boost in demand for its server business this year due to the growth of artificial intelligence. Despite global economic uncertainties, the company believes 2023 will be stable, with servers being a bright spot due to growing interest in AI. Foxconn intends to increase its server market share, which currently stands at 40%. In addition, the company is looking to expand its EV battery supply chain in countries other than Taiwan.
Tesla (NASDAQ:TSLA) – Elon Musk, CEO of Tesla, received praise and audiences with Chinese government ministers during his visit to China. His popularity on Chinese social media was evident, with users calling him a “global idol” and expressing a desire to have someone like him in China. His visit, amid rising US-China tensions, has sparked interest in his comments on artificial intelligence and electric vehicles. Elsewhere, the National Highway Traffic Safety Administration (NHTSA) ended its investigation into Tesla vehicles that allowed games on the center front screen. While not seeking a recall, NHTSA has expressed concerns about driver distraction. The investigation covered vehicles sold since 2017 and the NHTSA highlighted the importance of technology locks to prevent misuse of features while driving. NHTSA is also investigating Tesla vehicles with the Autopilot system regarding human factors and parked emergency vehicle accidents.
Toyota Motor (NYSE:TM) – Daimler Truck and Toyota have reached a preliminary agreement to combine their truck units in Japan. The companies plan to create a holding company that will encompass Daimler’s Mitsubishi Fuso Truck and Bus Corp and Toyota’s Hino Motors Ltd. The new company will seek technological advances and joint development, with equal investment by both companies. The definitive agreement is scheduled for the first quarter of 2024. At the same time, Toyota revealed that customer information in some countries in Oceania and Asia may have been exposed to the public from October 2016 to May 2023. The data includes names, addresses, phone numbers, emails and vehicle registrations. This incident follows the disclosure of vehicle data from 2.15 million users in Japan.
Volkswagen (USOTC:VWAGY) – Ralf Brandstaetter, director of operations for Volkswagen, said in an interview that the company will not participate in a discount battle in China “at any price”. Volkswagen is focused on a sustainable business model and prioritizes profitability, not sales volume.
Faraday Future Intelligent Electric (NASDAQ:FFIE) – Electric vehicle startup Faraday Future Intelligent Electric has released its limited edition FF 91 2.0 Futurist Alliance for $309,000, with just 300 units available globally. In addition, the company launched the regular model FF 91 2.0 Futurist and a subscription-based mobile ecosystem product called “FF aiHypercar+”. The launch comes after delays in the production of the FF 91 Futurist.
Shyft Group (NASDAQ:SHYF) – Special vehicle manufacturer Shyft Group is preparing to launch a new line of electric trucks and vans under the Blue Arc brand. The company plans to compete with other companies in the midsize electric vehicle segment and expects partnerships with renowned automotive suppliers. Executive President Daryl Adams foresees significant growth and highlights the company’s operational experience as its differentiator.
Stellantis (NYSE:STLA) – Stellantis, the Franco-Italian company that encompasses brands including Fiat and Peugeot, has said it will need one or even two additional large battery plants in the US to meet its EV production targets. Chief executive Carlos Tavares highlighted the favorable investment environment created by US legislation. The company has already announced plans for two factories in North America, in addition to other plants in Europe and Canada.
Boeing (NYSE:BA) – Boeing has increased monthly production of its widebody 787 Dreamliner from three to four units, with plans to reach five per month by the end of the year. In addition, the company will add a second production line at its South Carolina facility. Modification of the 787s is being undertaken to meet FAA standards. The company plans to deliver between 70 and 80 Dreamliners in 2023.
JPMorgan Chase (NYSE:JPM) – Jamie Dimon, CEO of JPMorgan Chase & Co, said that the United States and China need to engage in an effective dialogue to resolve their complex security and trade issues. Dimon expressed his preference for a “de-risking” approach rather than decoupling the two countries. JPMorgan has increased its presence in China, but faces challenges in building scale and reputation. In other news, JPMorgan has quietly established global unit 23 Wall to cater to the ultra-rich and its investment business, aiming to expand its services to the super-rich. The unit focuses on families with wealth above $4.5 trillion and seeks to serve their institutional and family office needs. The bank is responding to the growing sophistication of the wealthy in managing their wealth by offering personalized services.
Goldman Sachs (NYSE:GS) – Goldman Sachs Group Inc plans to cut less than 250 jobs due to the sluggish market for businesses, according to Reuters. The layoffs will occur at various levels of seniority and were driven by the headcount reduction of approximately 3,200 in the first quarter. The company has set a goal of efficiency and expense reduction. Other investment banks are also facing job cuts due to the slump in trading and the uncertain economic outlook. In other news, Dina Powell McCormick, head of sovereign affairs at Goldman Sachs, is leaving the bank to join BDT & MSD Partners.
Wells Fargo (NYSE:WFC) – Carrie L. Tolstedt, a former Wells Fargo executive, has agreed to pay $3 million to settle charges related to investors allegedly misled about Community Bank’s success. In addition to the fine, Tolstedt also agreed to pay about $1.5 million plus interest. The agreement is subject to court approval. At the same time, Wells Fargo hired Jill Ford, a former Credit Suisse banker, as head of its capital markets business. The hire is part of an exodus of bankers from Credit Suisse in the US following its acquisition by UBS. Ford will take office in a few months. The current co-heads of Wells Fargo will assume the role on an interim basis.
Credit Suisse (NYSE:CS) – Credit Suisse scrapped its plans to establish a locally incorporated bank in China, due to concerns over a possible regulatory conflict resulting from its merger with UBS (NYSE:UBS). UBS already has an incorporated bank in China, and only such a license can be obtained by a financial entity in the country. This decision could be a precursor to similar moves in other areas of business in China.
UniCredit (BIT:UCG) – UniCredit is reducing the share of Amundi funds in its total assets under management, as the agreement between the companies nears its end. CEO Andrea Orcel considers not renewing the contract with Amundi, seeking to rebuild UniCredit’s fund management business internally. Relations between the companies deteriorated when Orcel tried to change the terms of the agreement. The reduction of Amundi’s funds accelerates the process of releasing money for investment in other areas.
FedEx (NYSE:FDX) – FedEx Corp has reached an interim agreement with the pilots of its air delivery unit, averting a potential strike. The Air Line Pilots Association (ALPA) voted for a strike if higher wages could not be agreed. The details of the agreement were not disclosed.
Illumina (NASDAQ:ILMN) – Illumina CEO Francis deSouza survived a challenge from activist investor Carl Icahn over his board seat. DeSouza received more than twice as many votes as his challenger, giving him legitimacy to continue. Icahn tried to replace DeSouza and chairman John Thompson and wanted to bring back former CEO Jay Flatley. Illumina faced criticism due to the acquisition of Grail, which resulted in a loss of market value. The company plans to expand its board and elect a new chairman.
Nvidia (NASDAQ:NVDA) – Nvidia stock failed to close at a $1 trillion valuation on Tuesday, despite moving closer during the session. Shares ended at $401.11, below the required amount. Nvidia recently announced new products, showing its commitment to extending its leadership in the chip industry. The company’s shares are up 174% so far this year.
C3.ai (NYSE:AI) – C3.ai shares looked set to continue higher on Wednesday after rising 33% on Tuesday amid a broader AI rally. The shares were up nearly 6% in premarket trade.
Intel (NASDAQ:INTC) – Intel has decided not to have an official presence at this year’s Computex expo, as rivals such as Nvidia, Qualcomm and MediaTek shine. The company is going through a transition period and focusing on running its business behind the scenes, supporting partners and holding separate events. Nvidia CEO Jensen Huang mentioned on Tuesday that the company is looking into the possibility of using Intel’s chip manufacturing processes.
Twilio Inc (NYSE:TWLO) – Activist investor Legion Partners has been meeting with Twilio representatives, pushing the cloud computing company to make changes to its board and consider divestitures. Legion has held several meetings over the last few months, discussing cost structure improvements and strategic alternatives. Legion owns a significant stake in Twilio and expects significant action to be taken. The company has faced a slowdown in demand for cloud services and recently announced measures to improve profitability.
CrowdStrike (NASDAQ:CRWD) – CrowdStrike Holdings announced the launch of Charlotte AI, an initiative based on generative artificial intelligence to improve cybersecurity. The company seeks to democratize access to cybersecurity and fill the skills shortage in the industry. CRWD shares are up 50% year-to-date.
Baidu (NASDAQ:BIDU) – Chinese search giant Baidu has announced the creation of a 1 billion yuan venture capital fund to support startups focused on content generated by artificial intelligence applications. In addition, it will launch a competition for developers to use its ERNIE great language model in existing applications or products. With the success of OpenAI’s ChatGPT, Chinese companies have been racing to release their own language models. China has also published draft regulations for the use of generative AI.
Unilever (NYSE:UL) – Graeme Pitkethly, CFO of Unilever Plc, will leave the company by the end of May 2024 after more than two decades of service. The exit comes amidst challenges, such as cost inflation and pressure on margins. Unilever will conduct an internal and external search for a successor. In addition, Conny Braams, Chief Digital and Commercial Officer, also decided to leave the company in August. At the same time, Unilever is working to make its African operations more self-sufficient, with a view to reducing exposure to currency fluctuations and supply chain disruptions. This shift could benefit farmers and processors across Africa.
Glencore Plc (USOTC:GLNCY) – Glencore Plc is moving closer to raising its bid for Teck Resources Ltd (NYSE:TECK) in an attempt to end the battle for the Canadian miner’s future. The Swiss commodities giant is working on a possible improvement to its offer to pressure Teck into trading. The fight between the two companies has been intense, and Glencore is looking to increase pressure on Teck’s board. The situation is still unstable, and the resistance of shareholder Norman Keevil is an obstacle.
Earnings
HP Inc (NYSE:HPQ) – HP Inc missed second-quarter revenue targets as customers impacted by inflation spent less on personal computers. Demand for PCs has declined for companies like HP, Lenovo and Dell after peaking during the pandemic. HP expects second-half revenue to be higher, but the year-on-year comparison is still negative. The company is focusing on AI-driven opportunities and working with partners to create new PC architectures. Second-quarter revenue was $12.91 billion.
Hewlett Packard Enterprise (NYSE:HPE) – Hewlett Packard missed second-quarter revenue estimates due to reduced customer spending on technology, including cloud services. Demand for these services has declined due to high prices and economic uncertainty. HPE faces stiff competition from companies such as Microsoft, Amazon and Oracle. The company expects third-quarter revenue of between $6.7 billion and $7.2 billion.
Box Inc (NYSE:BOX) – Box beat earnings expectations and forecasts, with the exception of a slight cut to the full-year revenue outlook. Shares were up 2.1% in premarket trading on Wednesday. The company raised its full-year earnings target.
Ambarella Inc (NASDAQ:AMBA) – Shares in Ambarella fell more than 17% in premarket trading on Wednesday after the company released a lower-than-expected outlook. The company expects second-quarter revenue of between $60 million and $64 million, while analysts had forecast $66.9 million. Ambarella reported a loss of $35.9 million in the first quarter.