US Index Futures rebounded on Monday after the Dow Jones and S&P 500 posted second straight weekly losses. Investors are adopting a more optimistic tone as talks progress among US policymakers on a solution to the debt ceiling impasse.
By 7:54 AM, Dow Jones futures were up 121 points, or 0.36%. S&P 500 futures were up 0.34%, while Nasdaq-100 futures were up 0.23%.
US debt ceiling worries investors. Strategists warn of turmoil and economic disaster if the $31.4 trillion borrowing limit is not raised. Biden, McCarthy and congressional leaders will talk Tuesday after postponing Friday’s meeting due to team discussions. Investors are cautious due to several risks, including recession, problems in the banking system and frustrated expectations of looser monetary policy. The S&P 500 posted a 0.3% drop last week, marking six straight weeks without 1% moves, the longest period of flatness since late 2019.
Monday’s main indicator is China’s industrial production numbers. Inflation there fell beyond expectations, which turned on the yellow light for a slowdown in demand. The Chinese economic performance is one of the factors that can influence the performance of the activity across the globe. In the United States, traders watch the Empire State Manufacturing Index, and speeches by Fed members Chicago Fed President Austan Goolsbee and Minneapolis Fed President Neel Kashkari.
The president of the Atlanta Federal Reserve, Raphael Bostic, said that he does not foresee cuts in interest rates until at least 2023, prioritizing the control of inflation. Despite market expectations of cuts due to the economic slowdown, Bostic believes a rate hike is more likely. He remains confident that the policies adopted will be able to reduce inflation to the 2% target.
The Empire State Manufacturing Index saw a sharp drop in May, with a negative reading of 31.8, against estimates of a negative reading of 5. This indicates deteriorating conditions. The new orders index fell 53.1 points to minus 28 points in May, completely reversing a strong 46.7 point gain in April. The shipments index fell 40.3 points to minus 16.4, nearly reversing the previous month’s gain of 37.3. Backorders fell 13.2 points to minus 13.2 The six-month-ahead expectations measure rose 3.2 points to minus 9.8 in May. Recent data volatility heightens concerns about a recession.
In the foreign exchange market, the Lira was devalued after Sunday’s presidential election in the country, which should have a second round. Other currencies linked to emerging countries and commodity exporters operated on the rise.
At Friday’s close, the Dow Jones Industrial Average was down 8.89 points, or 0.03%, to close at 33,300.62. The S&P 500 was down 0.16% to close at 4,124.08. The Nasdaq Composite was down 0.35% to close at 12,284.74. The indices registered losses after the Michigan confidence index data came in lower than expected, but with higher inflation expectations. The data, which is preliminary, turned out to be a negative surprise, since higher inflation indicates that the Fed can keep interest rates high for longer, while lower confidence indicates less activity. What the indicator seems to reflect, therefore, is a scenario of low growth with high inflation – the worst case scenario for the Fed.
On Monday’s earnings schedule are Monday.com (NASDAQ:MNDY), Catalent (NYSE:CTLT), Tower Semiconductor (NASDAQ:TSEM) and Freyr Battery (NYSE:FREY). The most anticipated reports of the week are Walmart (NYSE:WMT), Home Depot (NYSE:HD), Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), Cisco Systems (NASDAQ:CSCO), TJX (NYSE:TJX), Applied Materials (NASDAQ:AMAT), Target (NYSE:TGT) and Deere (NYSE:DE).
Wall Street Corporate Highlights for Today
Tesla (NASDAQ:TSLA) – France is set to receive a record of foreign investment pledges during the Choose France summit in Versailles, attended by President Emmanuel Macron and global business leaders including Tesla’s Elon Musk. The summit is an opportunity for Macron to highlight his pro-business reforms and promote low-carbon industry. So far, executives have committed to investing €13 billion, the highest amount since 2018. During the meeting, Musk joked with Macron before discussing new tax credits for investments in green technology. The Minister of Finance, Bruno Le Maire, stated that the investments resulted from previous negotiations.
Ford (NYSE:F) – Ford is working to reduce costs in China due to declining sales. The company said its costs are not competitive and is looking for ways to reduce them. Local media reports mentioned plans to cut 1,300 jobs, but Ford has not commented on this. In addition, Ford intends to transform one of its joint ventures into an export center for low-cost electric and commercial vehicles, as announced by Chief Executive Jim Farley in April.
General Motors (NYSE:GM) – General Motors will recall nearly 1 million vehicles in the US due to a driver airbag inflator problem. The recall covers Buick Enclave, Chevrolet Traverse and GMC Acadia models from 2014 to 2017. GM is investigating the issue in collaboration with an engineering firm and prioritizing customer safety. The recall was initiated following previous cases of inflator rupture in Chevrolet Traverse vehicles, but the root cause has yet to be identified.
Hertz Global Holdings (NASDAQ:HTZ) – Hertz is becoming an electric car rental company, planning to have 25% of its fleet made up of electric vehicles by the end of 2024, according to CNBC. The company has accelerated its purchases under agreements with Tesla, Star Polar and General Motors, and anticipates nearly 2 million electric vehicle rentals in 2023. Electric vehicles have advantages for rental companies due to lower depreciation expense, lower operating costs and the growing demand from the ride-sharing market, including deals with Uber. Hertz is also hosting driver education events about electric vehicles.
Disney (NYSE:DIS) – The Hong Kong Disneyland Resort reported a 31% increase in its 2022 revenue, driven by rising domestic visitor numbers and the easing of pandemic-related restrictions. Revenue reached HK$2.2 billion (US$280.29 million), with a reduction in net loss. Total attendance was 3.4 million, mostly local tourists. The theme park plans to operate six or seven days a week starting in June to keep up with demand. Also planned are the reopening of Disney’s Hollywood Hotel, the unveiling of the Walt Disney and Mickey Mouse statue in October and the opening of “World of Frozen” in November.
Novartis (NYSE:NVS) – Novartis has announced the future board members of Sandoz, its generics division that will be distributed to shareholders this year. New members include executives from companies such as Nestlé, Emmi and Danaher, among others. The board will take effect following the planned spin-off of Sandoz in the second half of 2023.
Alibaba (NYSE:BABA) – Alibaba Group plans significant investment in its Taobao app following the company’s restructuring. The subsidiary will seek to create content and use artificial intelligence to attract more users. Alibaba faces pressure from short video and live streaming platforms. The company will also make adjustments to its platform fees and offer traders free tools. Alibaba’s makeover will allow its units to launch in public markets. The company is focused on AI development and plans to incorporate its language model into its products and services.
Amazon (NASDAQ:AMZN) – Amazon optimized its delivery network to increase delivery speeds, reduce costs and lower carbon emissions. This includes reducing lead times, revamping inventory management, and showing customers the items closest to them. The company is also encouraging pick-up instead of home delivery as part of its efforts to reduce costs.
Netflix (NASDAQ:NFLX) – According to the WSJ, Netflix plans to reduce its spending by $300 million this year. The company urged employees to be careful with spending, but said there would be no hiring freeze or additional layoffs. Netflix is looking to address growth challenges and explore new ways to make money, such as password crackdowns and an ad-supported service. In June, the company also laid off about 4% of its workforce to reduce costs.
Alphabet (NASDAQ:GOOGL) – The co-founders of Google saw their combined wealth increase by more than $18 billion by launching a new search engine and expanding their AI-powered chatbot. Larry Page and Sergey Brin are among the biggest earners of 2023, occupying the eighth and ninth positions in the ranking of the richest people in the world. Former CEO Eric Schmidt has also benefited from the rise of AI, with his net worth increasing by $1.8 billion this week.
Goldman Sachs (NYSE:GS) – Goldman Sachs is preparing to open an office in Abu Dhabi, marking a significant step for the US bank that has faced problems due to its involvement in the 1MDB scandal. The new Abu Dhabi office will be added to Goldman Sachs’ existing hubs in Dubai, Doha and Riyadh, allowing for greater proximity and relationships with clients in the region.
CME Group (NASDAQ:CME) – CME Group CEO Terry Duffy has threatened to leave Chicago if measures deemed “ill-conceived” are taken by the city and state. He highlighted in an episode of the Odd Lots podcast that fighting crime should be a priority and that raising taxes is not the solution. Duffy stressed the importance of rebuilding the city with the help of the state and federal government. He also discussed market risks, including the possibility of a debt default, which could have catastrophic consequences.
CVS (NYSE:CVS) – CVS Health Corporation is closing its clinical trials unit, launched two years ago, to focus on its core business, according to Endpoints News on Sunday. The company confirmed the decision, gradually winding down the deal and forecasting a full exit by December 31, 2024.
Luminar Technologies (NASDAQ:LAZR) – Austin Russell, CEO of Luminar Technologies, will buy a majority stake in Forbes Global Media Holdings, valuing the publishing business at around $800 million. Russell will acquire 82% of Forbes, with Integrated Whale Media Investments retaining a minority stake. Russell will not be involved in day-to-day operations, and financing details have yet to be released. Forbes will add a new board comprised of media, technology and AI experts, and Steve Forbes will remain involved in the company.
H&R Block (NYSE:HRB), Intuit (NASDAQ:INTU) – Tax preparers are down 9.3% and 4.3%, respectively, following a Wall Street Journal report on the Biden administration’s possible creation of a government-administered online tax filing. The IRS is expected to release the report this week, the paper said. The agency is looking into this as part of the Inflation Reduction Act.
Acquisitions
Broadcom (NASDAQ:AVGO) – European Union antitrust regulators have extended the deadline for reviewing VMware’s (NYSE:VMW) proposed $61 billion acquisition of Broadcom by three days to June 26. The decision was taken in agreement with the companies, and Broadcom is expected to present corrective measures in the coming days, after a closed hearing with the European Commission.
Newmont (NYSE:NEM) – Newmont (NEM) was down 0.15% in premarket trade after agreeing to acquire Australian gold and copper miner Newcrest Mining (USOTC:NCMGY) for $17.5 billion. The acquisition would consolidate Newmont as the world’s largest gold producer. Newcrest shares were up 1.5% in Australian trading.
Oneok (NYSE:OKE) – Oneok has reached an agreement to purchase Magellan Midstream Partners (NYSE:MMP) in a cash-and-stock deal valued at approximately $18.8 billion, including debt. The merger would create one of the largest companies in the United States for transporting oil and natural gas. The deal price represents a 22% premium to Magellan’s Friday closing price of $55.41. In premarket trade, Magellan was up 8.28% to $60.00. Oneok fell 5.82%.
Shake Shack (NYSE:SHAK) – Shake Shack rose 3.79% premarket after The Wall Street Journal reported that Engaged Capital, which has a roughly 6.6% stake in the burger chain, was planning a proxy race for three seats on the company’s board.
NeoGames (NASDAQ:NGMS) – NeoGames, which provides iLottery solutions for national and state lotteries, rose 120.02% to $28.25 after Australian mobile and casino games developer Aristocrat Leisure (USOTC:ARLUF) agreed to buy the company for $29.50 a share in cash.
Western Digital Corp (NASDAQ:WDC) – Kioxia Holdings Corp and Western Digital Corp are accelerating merger talks, seeking a deal as the slump in the flash memory market puts pressure on the companies. The merger, which would result in an entity owned 43% by Kioxia and 37% by Western Digital, aims to increase competitiveness against Samsung Electronics.
Bankruptcies
Vice Media – Vice Media, a digital news startup that caused buzz by being valued at $5.7 billion at its best, has received a bailout offer and filed for creditor protection. The company said today that a group of creditors, including Fortress and the Soros Management Fund, have agreed to buy Vice for $225 million, assuming all of its liabilities. To complete the sale, the company filed for creditor protection in a New York court.
KKR & Co Inc (NYSE:KKR) – Envision Healthcare Corp, backed by KKR & Co Inc, has filed for Chapter 11 bankruptcy protection. The company estimates assets and liabilities between $1 billion and $10 billion. It signed a restructuring support agreement for its debt, resulting in the separation of AMSURG and Envision Physician Services.
Venator Materials Plc (NYSE:VNTR) – British chemical producer Venator Materials has filed for Chapter 11 bankruptcy in the United States, pursuant to a court filing. The company estimated its assets and liabilities at between $1 billion and $10 billion. The decision was taken following a strategic review carried out to strengthen liquidity, prompted by poor financial performance and criticism from a major investor, J&T MS 1 SICAV.
Athenex (NASDAQ:ATNX) – Athenex Inc., a biotechnology company focused on cancer treatments, has filed for Chapter 11 bankruptcy, seeking an accelerated sale of its assets. The company plans to complete the sale by July 1 and end its business in an orderly manner. The regulatory setback and market challenges put financial pressure on the company. Now, they are looking for a buyer to continue the development of their drugs. Athenex is down more than 57% premarket.
Market vision
Charles Schwab (NYSE:SCHW) was upgraded to Outperform from Market Perform by Raymond James. The stock was up 2.55% in premarket trading on Monday. On Friday, the brokerage said client assets increased in April.
SoFi Technologies (NASDAQ:SOFI) – The stock was down more than 6% premarket after a downgrade from Wedbush to Underperform from Neutral . The Wall Street firm said SoFi’s fee income may be reaching a tipping point and it may need to raise capital this year to sustain growth.
Albermale (NYSE:ALB) – Shares rose 2.41% after being upgraded to Outperform by Baird. The company said that the lithium company can be a leader in both the short and long term.
Dupont De Nemours (NYSE:DD) – Shares rose 2.59% in premarket trade after Deutsche Bank upgraded the chemical company to Buy de Hold. The Wall Street firm said the stock was trading at a 50% discount to its peers.