Market Wraps
Watch For:
MBA Weekly Mortgage Applications Survey; CPI for April; Real Earnings for April; EIA Weekly Petroleum Status Report; Monthly Treasury Statement of Receipts and Outlays of the U.S. Government for April; Canada Building Permits for March; earnings from Beyond Meat, Disney, Icahn Enterprises, Robinhood Markets, Roblox, Wendy’s
Today’s Headlines/Must Reads
– Inflation Data to be Watched as Fed Contemplates Pausing Rate Hikes
– White House Debt Meeting Fails to Yield Breakthrough
– What Happens to Social Security Benefits if the U.S. Hits the Debt Limit?
– Crypto Companies Test the Public Markets
– Young Cyber Companies Face Uncertain Economy
– Tucker Carlson to Launch New Show on Twitter
Follow WSJ markets coverage here .
Opening Call:
Stock futures were softer on Wednesday, with traders reluctant to make bold bets ahead of the consumer price index report for April.
“This is a big piece of the puzzle for central bank policymakers and will help them decide on whether to press pause on rate hikes in June,” Hargreaves Lansdown said.
Investors are currently pricing in the Federal Reserve beginning to trim borrowing costs in coming months, a hope that is seen underpinning stocks of late and helping the S&P 500 move towards the top of the 3,800 to 4,200 range its has held all year.
However, some analysts are wary that markets are exposed to disappointment given current expectations.
“A stronger-than-expected CPI print hurts risky assets as it boxes the Fed–caught betwixt and between inflation concerns, slowing growth and the need to address banking sector woes,” SPI Asset Management said.
Fundstrat said it may be sensible for traders to anticipate a hotter CPI number than consensus expectations, but that the market could cope with this.
“The macro remains challenging, so tread carefully. But we see positive risk/reward,” Fundstrat said, noting that after the sharp rally at the end of last week, the S&P 500 had only seen a “slow leak” down despite 2-year bond yields moving higher
Stocks in the News
Swedish Orphan Biovitrum announced it has entered into an agreement to acquire CTI BioPharma, in a deal valued at $1.7 billion.
The Stockholm-based drugmaker said it will offer $9.10 for each share of CTI, which focuses on blood-related cancers and rare diseases. The offer represents a premium of 88.8% over CTI’s Tuesday closing price of $4.82 per share.
Shares in Livent gave up most of their gains to trade up just 1% in premarket action, after it agreed to a $10.6 billion merger with Allkem, an Australian lithium miner.
The transaction is expected to close by the end of calendar year 2023, said Allkem and then Allkem shareholders will own approximately 56% and Livent shareholders will own approximately 44% of the new company.
Stocks to Watch
Backblaze reported a narrower-than-expected loss in the first quarter. Its shares rose 16% in after-hours trading.
Cutera posted a wider loss in its latest quarter and said it is ousting two of the five directors proposed to be removed from the board following an activist move from its former executive chairman and chief executive. Its shares dropped 11% in after-hours trading.
Shares of IAC rose nearly 9% after it posted sales of $1.08 billion, down 18% from a year ago but eclipsing analyst estimates of $1.06 billion.
RingCentral shares gained 9% after it posted a narrower quarterly loss and raised revenue and operating margin outlook for the year.
Upstart shares rose 33% in premarket trading after it delivered an upbeat outlook and signaled funding progress.
Forex:
The dollar was flat against a basket of currencies as traders awaited U.S. inflation data that may influence the market’s interest-rate expectations for the Fed.
“Markets are back in a wait-and-see mode not least ahead of today’s U.S. consumer price index print which could prove instrumental for the very short end of the USD rates curve amid markets second-guessing the outlook for second half Fed rate cuts and the potential for yet another rate hike in June,” Danske Bank said.
ING said the stalemate between lawmakers over raising the debt ceiling is emerging as an increasingly short-term supporting factor for the dollar.
“There is now growing concern that it might actually take a market selloff [in the equity or money markets] to break the impasse,” ING said.
That would provide the dollar a significant near-term boost given its safe-haven status and also considering short-seller bets against the currency have risen steadily in the past few months, ING said.
That’s one of the reasons ING favors a delay in the start of the dollar’s downtrend to the third quarter.
Sterling could rise as the Bank of England is likely to raise interest rates by 25 basis points to 4.5% as expected on Thursday and potentially signal further rate increases, Ebury said.
“Activity and inflation data have both surprised on the upside in the past few weeks,” Ebury said. That opens the door for a “degree of hawkishness” in the BOE’s forecasts and statement that indicates the potential for further rate rises. Hence there is scope for sterling gains later in the week.
Energy:
Oil prices edged lower after the latest API data showed U.S. crude stocks climbed by 3.6 million barrels last week, with the market expecting a 2.5 million drawdown, according to ING.
Metals:
Gold Charts
Spot gold may rise further toward the top of an ascending and broadening wedge, which is now near $2,100/oz, based on the daily chart, UOB Global Economics & Markets Research said. Price movements for past several weeks seem to be forming this wedge pattern, it added.
As long as the bottom of the wedge, which is currently near $2,020/oz, isn’t broken in the next month or two, there’s scope for spot gold to rise to $2,100/oz before the likelihood of a reversal increases, UOB said.
Copper
Copper prices weakened on demand concerns and as traders awaited the CPI data.
TD Securities said the demand outlook for copper is uncertain “as the West barrels towards a recession, pressuring demand for Chinese exports, while a period of destocking in China could see the nation’s appetite for raw materials grow.”
Meantime, Galaxy Futures said China’s copper demand outlook appears concerning, as recent data suggests lower copper-consuming industrial activities and import volume, .
Industry data shows that electric-cable and wire companies’ facilities utilization rate has fallen sequentially, while market estimates expect continued weakness in May.
The government’s official data also shows on-year declines in the import volume of some copper products, Galaxy said. This suggests that China’s post-reopening recovery is likely to be uneven, with rebound momentum heavily concentrated in the consumer goods and services sectors.
This would imply limited demand boost for traditional industrial sectors such as cabling and construction, which are the main drivers of copper demand, Galaxy added.
Cobalt
Cobalt prices have fallen sharply over the last year, and are likely to remain pressured in the short term, according to Fastmarkets.
Prices of cobalt hydroxide–one of the key materials used to make electric-vehicle batteries–fell below $15 a pound in recent days, having stood at over $30 a pound a year ago.
“There’s been a perfect storm of mismatch between supply and demand,” Fastmarkets said.
It pointed to pressure from battery producers aggressively destocking with fewer consumers looking to purchase EVs amid macroeconomic worries and China’s recovery from Covid-19 lockdowns being slower than expected.
In addition, increased supply from Indonesia and Congo is also weighing on prices, it noted.
Today’s Top Headlines
Tucker Carlson Announces Twitter Show, Alleges Fox Breached Contract
Tucker Carlson said he is launching a new show on Twitter, putting him on a potential collision course with Fox News, which ousted him last month while keeping him under contract.
“Starting soon, we’ll be bringing a new version of the show we’ve been doing for the last six-and-a-half years to Twitter,” Mr. Carlson said in a video posted to the social-media platform Tuesday afternoon.
Inflation Data to be Watched as Fed Contemplates Pausing Rate Hikes
A closely watched April inflation reading Wednesday could influence the Federal Reserve’s strategy over whether to pause its interest-rate increases.
Inflation has cooled from its recent peak but remains stubbornly elevated. The Fed aggressively raised rates for more than a year to try to tame inflation by slowing economic activity, and indicated last week that it might be done lifting them for now.
White House Debt-Ceiling Meeting Fails to Yield Breakthrough as Deadline Nears
WASHINGTON-President Biden and House Speaker Kevin McCarthy remained at loggerheads after a meeting at the White House on Tuesday, making little progress in averting the first-ever default by the federal government but setting plans for a new round of talks.
House Republicans have demanded deep spending cuts in exchange for raising the debt ceiling. Mr. Biden and Democrats in Congress maintain that the federal borrowing limit should be raised without preconditions and have called the GOP stance irresponsible, as a June deadline looms. Neither side has presented a path forward that could win enough support to pass both chambers of Congress.
When Is the Debt Ceiling Deadline and What Happens if the Limit Isn’t Raised?
The federal government could run out of money to pay its bills soon, putting Congress on the clock to again raise or suspend the federal borrowing limit.
What Happens to Social Security Benefits if the U.S. Hits the Debt Limit?
Millions of Americans will probably get their Social Security checks even if Congress fails to reach a deal to raise the U.S. debt limit, economists and policy advocates say.
Still, there is a chance the checks many retirees rely on to pay the bills could be delayed or temporarily reduced should the government default on its obligations for the first time since the U.S. Treasury was established in 1789. If the checks are held up, the federal debt ceiling crisis could trigger household financial crises.
Crypto Companies Test the Public Markets
The 2023 market rebound is enabling some crypto companies to explore an option that appeared off the table just six months ago: trying to go public.
Bitcoin-mining company Bitdeer Technologies listed on the Nasdaq last month after merging with a special-purpose acquisition company, or SPAC, a blank-check company so called for its use in helping businesses access public markets with fewer strings attached. Blockchain company Chia Network recently took another step toward going public, while cloud-mining company BitFuFu and crypto cash-machine company Bitcoin Depot are working on plans to go public via SPAC mergers.
Young Cyber Companies Face Uncertain Economy
Newer cybersecurity companies are grappling with uncertain economic conditions as they find it harder to raise capital, continue to trim their workforces and refocus on profits after long periods of chasing growth.
Fed by a glut of venture-capital investment, many private cybersecurity providers hired widely and expanded their operations significantly in recent years. Some have had to change direction quickly this year, as global economies soured and interest rates rose sharply. Staff numbers have often been the first casualty.
Trump Loss in Sexual-Abuse Case Casts Another Legal Cloud Over 2024 Bid
A federal jury verdict holding Donald Trump liable for sexual abuse and defamation has injected new uncertainty into the 2024 presidential race, testing whether voters and Republican allies will stick with him through another controversy.
Tuesday’s decision on the allegations by columnist E. Jean Carroll marked the second time this year Mr. Trump has faced a significant legal setback, following an April indictment on charges in New York related to hush-money payments to a porn star. Ms. Carroll’s allegations-and those of other women who have accused Mr. Trump of misconduct over the years-could be on the agenda Wednesday night, when he is scheduled to participate in a CNN town hall in New Hampshire.
George Santos Charged in Justice Department Probe
Federal prosecutors have filed criminal charges against Rep. George Santos, the embattled New York congressman who assumed office this year after lying about his biography during his campaign, according to people familiar with the matter.
Details of the criminal charges, which have been filed under seal, couldn’t immediately be determined, but Mr. Santos has been under federal investigation since at least December. He also faces scrutiny from a number of other entities, including local prosecutors in New York and the House Ethics Committee. Mr. Santos has faced accusations he engaged in unlawful activity during his 2022 campaign and failed to disclose required information.
Source: Dow Jones Newswires