Tuesday’s pre-market was marked by a climate of uncertainty in financial markets, with US Index Futures falling. All eyes on Wall Street were focused on an important meeting between Congressional leaders and President Joe Biden, at which the central issue was the US debt ceiling.
By 08:30 AM, Dow Jones futures were down 94 points, or -0.28%. S&P 500 futures were down -0.19%, while Nasdaq-100 futures were down 0.10%. Yields on 10-year bonds rose to 3.521%.
Meanwhile, on the international scene, a new round of negotiations regarding the US public debt ceiling continued to affect investor sentiment. Furthermore, even with mixed data from China, commodities resisted and remained high.
Chinese stock markets faced declines in Shanghai and Shenzhen, following official data releases that showed underperformance in April for industrial production, retail sales and fixed investment. Given this scenario, analysts predict the possibility of further political support measures throughout the year. Meanwhile, in Japan, the Topix stock benchmark reached its highest level since 1990. This renewed push by Japanese companies to increase buybacks and focus on returns has helped to bolster positive sentiment, with the Nikkei 225 Stock Average leading the way gains among Asia’s major benchmarks in 2023.
By Monday’s close, the Dow was up 47.98 points, or 0.14%, to 33,348.60 points. The S&P 500 added 0.30% to 4,136.28 points. The Nasdaq Composite rose 0.66% to 12,365.21 points. During the session, some Fed members released comments advocating the pause in interest rate hikes. However, as Raphael Bostic mentioned, the leaders’ minds seem to be cut only in mid-2024. Thus, as the market is still priced in cuts this year, there is a great chance of some correction.
US Treasury Secretary Janet Yellen again warned yesterday, in a letter to Congress, that the country is on track for a debt default on June 1 without raising the debt limit. While that’s an estimate, Yellen said the Treasury could exhaust extraordinary measures to avoid a potential “default” days or weeks after those estimates. Yesterday, President Joe Biden said he was optimistic about a deal. House Speaker Kevin McCarthy said the two sides were still far apart. A new round of talks takes place today. So far, Biden has maintained that raising the debt ceiling is non-negotiable. McCarthy, however, pushed for talks to broker a deal to raise the debt ceiling pegged to spending cuts.
On the economic data front, data published by the US Census Bureau revealed on Tuesday that US retail sales increased by 0.4% in April after two months of declines, showing that the US consumer is still driving the economy. This reading followed the 0.7% drop registered in March and was below the market’s expectation of an increase of 0.8%. US Industrial Production comes out at 09:15 AM. Federal Reserve members speak throughout the day.
On the Tuesday earnings front, investors are watching reports from Baidu, Home Depot and Tencent Music Entertainment. Other names expected later in the week are Walmart (NYSE:WMT), Alibaba (NYSE:BABA), Cisco Systems (NASDFAQ:CSCO), TJX (NYSE:TJX), Applied Materials (NASDAQ:AMAT), Target (NYSE:TGT) and Deere (NYSE:DE).
Wall Street Corporate Highlights for Today
3M (NYSE:MMM) – 3M Co. announced the resignation of Michael Vale, group president and director of business and country, for cause, due to inappropriate personal conduct and violation of company policy. The company is looking for a successor. The company’s shares were flat but are down 16% year-to-date.
Vodafone (NASDAQ:VOD) – Shares of Vodafone fell more than 5% in premarket trading after announcing record job cuts and forecast falling cash flow. The company seeks to streamline the organization and reallocate resources to drive growth while addressing challenges in key markets. As for ongoing merger talks with Three UK, Vodafone said “there can be no certainty that any transaction will finally be agreed”.
Tesla (NASDAQ:TSLA) – CEO Elon Musk expressed concern about Tesla’s hiring practices in an email to employees. Some interpreted it as a soft hiring freeze or a sign of renewed focus after Musk became CEO of Twitter. Last month, the company saw a drop in net profit and Musk suggested prioritizing higher volumes over higher margins. He asked vice presidents to submit hiring requests weekly. Musk is often involved in Tesla’s hiring and budget approvals. The company will hold its annual shareholder meeting in Austin, Texas, on Tuesday.
Stellantis (NYSE:STLA) – Automaker Stellantis has halted construction of a battery factory in Windsor, Canada, due to a disagreement with the federal government over subsidies. The company and LG Energy Solution had planned to invest more than C$5 billion in the factory. The Canadian government has offered subsidies to attract automotive investment, including a deal with Volkswagen for a battery gigafactory.
Activision Blizzard (NASDAQ:ATVI) – The European Union on Monday approved Microsoft’s proposed $69 billion acquisition of Activision Blizzard, subject to solutions offered by the company. The European Commission has accepted Microsoft’s proposed remedies related to cloud gaming, allaying antitrust concerns. The approval is a victory for Microsoft, after the British regulator blocked the deal last month. The EU examined the impact of the acquisition on the console and cloud gaming markets, with a focus on gaming exclusives. The FTC decision in the US is still pending.
Microsoft (NASDAQ:MSFT) – Microsoft announced that the latest version of Phone Link for Windows 11 allows you to receive notifications, send texts and answer calls from paired iPhones. This integration is aimed at winning over Mac users, since most Americans use iPhones. However, Phone Link has limited features compared to Apple’s Messages for Mac. The app works via Bluetooth and requires Microsoft’s “Link to Windows” app to be installed on the iPhone.
Apple (NASDAQ:AAPL) – The market capitalization of Apple Inc. outpaced the Russell 2000 by two weeks, the longest period on record. With a capitalization of approximately $2.7 trillion, Apple is now worth about $100 billion more than all 2,000 shares of the Russell 2000 combined.
Hon Hai Precision Industry (USOTC:HNHPF) – Foxconn, a key supplier to Apple (AAPL), also known as Hon Hai Precision Industry, began construction on a new $500 million factory in Telangana, India, shortly after the Apple CEO meeting with Indian Prime Minister. The new factory will employ 25,000 workers and is part of global supplier diversification efforts as US-China tensions rise. Foxconn is also looking to build another factory in Karnataka, India.
Berkshire Hathaway (NYSE:BRK.B) – Berkshire Hathaway, Warren Buffett’s company, announced that it has begun investing in Capital One Financial Corp, while divesting investments in four other stocks, reducing its exposure to the stock market. Berkshire also revealed a new stake in Diageo Plc and ended its positions in Bank of New York Mellon Corp, US Bancorp, TSMC and RH. The company invested more in Apple and Bank of America. Buffett cited geopolitical concerns in abandoning his investment in TSMC.
Capital One (NYSE:COF) – The company gained 6.3% after a regulatory filing showed Warren Buffet’s Berkshire took a new stake in the company worth more than $950 million.
Taiwan Semiconductor Manufacturing (NYSE:TSM) – In the first quarter, major investment firms such as Macquarie, Fidelity, Tiger Global and Coatue were the main buyers of shares in chipmaker TSMC, while Warren Buffett’s Berkshire Hathaway sold its stake remaining. Macquarie and Fidelity added positions, while Coatue and Tiger Global built new positions. TSMC shares have performed positively, rising nearly 14.5% this year.
Wells Fargo (NYSE:WFC) – Wells Fargo has agreed to pay $1 billion to settle a shareholder lawsuit accusing the company of misrepresentation following the false accounts scandal. The settlement, one of the largest in class action, is aimed at investors who acquired Wells Fargo stock between February 2018 and March 2020. This settlement follows other previous settlements related to the bank’s scandal.
Morgan Stanley (NYSE:MS) – Morgan Stanley is considering cutting 7% of its investment banking team in Asia Pacific, with China being hardest hit due to tensions with the US and weaker economic growth. Around 40 jobs are at risk, and other divisions could also be slightly affected. The cuts are part of the bank’s overall plan to cut about 3,000 jobs by the end of the quarter. The Asia region has contributed about 13% of Morgan Stanley’s net income over the past five years.
Goldman Sachs (NYSE:GS) – Goldman Sachs was fined €6.63 million by the European Central Bank due to errors in calculating its capital ratio. Over the eight-quarter period, the bank’s European unit misclassified corporate exposures, applying a lower risk weight than required by banking rules. The bank recognized the importance of its regulatory obligations and took steps to correct the problem. The ECB also highlighted problems in internal controls that prevented the error from being detected in a timely manner.
Barclays (NYSE:BCS), UBS Group (NYSE:UBS) – In recent days, at least seven of Barclays’ top technology, media and telecommunications investment bankers have resigned to join UBS Group in the United States, according to Reuters. These changes add to the signings announced by UBS last month, illustrating its efforts to strengthen its U.S. team. UBS has hired a number of Barclays executives, including Laurence Braham, Richard Hardegree and Richard Casavechia, among others.
Credit Suisse (NYSE:CS) – Credit Suisse managers, UBS and government officials will face questioning in a rare parliamentary investigation into the Credit Suisse takeover and the government’s use of the emergency law. The parliamentary committee of inquiry will have judicial powers to obtain information about confidential meetings leading up to the deal.
Alphabet (NASDAQ:GOOGL) – Billionaire investor William Ackman built a new stake in Alphabet worth $1.1 billion in the first quarter, according to a regulatory filing. Ackman’s hedge fund, Pershing Square Capital Management, owned 8.1 million Class C shares and 2.2 million Class A shares of Alphabet at the end of the first quarter. The positive performance of Alphabet shares contributed to gains in the Pershing Square Holdings portfolio, which is up 3.6% this year through May 9. This is the first major investment Ackman has made since his bet on Netflix in 2022. Elsewhere, Google co-founder Sergey Brin has gifted Alphabet stock worth around $600 million, in a week which saw his wealth boosted to an all-time high in more than two years. The donation does not specify the recipients of the 5.2 million shares, which can be directed towards charity or other financial purposes. Brin saw his net worth reach $100.7 billion, mostly from Alphabet stock. He previously transferred stock and created a non-profit organization called Catalyst4.
Delta Air Lines (NYSE:DAL) – Delta Air Lines is in talks with Airbus for a large order of wide-body aircraft, including the A350 and A330neo models, according to Bloomberg News. However, a deal is not yet secured. With the relaxation of pandemic restrictions, airlines are increasing their fleets for the summer travel season.
Amgen (NASDAQ:AMGN), Horizon Therapeutics (NASDAQ:HZNP) – The US Federal Trade Commission plans to sue Amgen to block its $27.8 billion acquisition of Horizon Therapeutics, according to a source . Amgen expects to complete the deal in the first half of the year, but is awaiting further information on the agency’s decision. Senator Elizabeth Warren expressed concerns about the deal, citing drug price increases by both companies. The FTC rarely breaks pharmaceutical settlements, usually requiring the divestiture of one of the drugs involved.
Disney (NYSE:DIS) – Nelson Peltz, the activist investor who previously pursued a proxy dispute in Walt Disney Co., recently increased his stake in the company. Trian Fund Management has purchased around 500,000 additional shares since March, bringing the total to 6.4 million. Peltz praised Disney’s strategic and operational improvements and is closely monitoring management execution.
Dish Network (NASDAQ:DISH) – The satellite TV provider rose 5.2% in premarket trading after managing director James DeFranco announced the purchase of 3 million shares.
Seagen (NASDAQ:SGEN) – The biotech company lost 4.5% in premarket Daniel Welch, director of Seagen, reported the sale of 1,864 shares, a stake worth $371,961.
NRG Energy (NYSE:NRG) – Activist investor Elliott Investment Management LP is seeking board and strategy changes at NRG Energy. For the second time in six years, the fund is involved with the US energy company and is seeking the appointment of five new independent board members. Elliott also criticizes the recent acquisition of Vivint Smart Home. The fund’s disclosed economic stake is over 13%, estimated to be around $1 billion. NRG has responded positively to Elliott’s interest, saying it is open to dialogue. The fund is pushing for $500 million in cost cuts and a strategic review to refocus the company on its core business of providing energy.
Earnings
Baidu (NASDAQ:BIDU) – Baidu Inc. posted revenue growth of 10% above expectations, driven by the advertising and cloud businesses due to the post-pandemic reopening in China. This indicates that the country’s leading internet companies are reeling from regulatory crackdowns and Covid restrictions. Baidu also launched its own version of ChatGPT, kicking off a competition between companies like Alibaba and SenseTime. Barclays analysts are optimistic about China’s economic recovery and the advertising industry’s prospects in 2023. Baidu reported revenue of 31.1 billion yuan (US$4.5 billion) in the first quarter, against the estimate average of 30 billion yuan. Net profit was 5.8 billion yuan.
Home Depot (NYSE:HD) – Home Depot shares fell 2.83% premarket after posting its biggest drop in revenue in more than 20 years and lowering its full-year forecasts due to project delays and a slowdown. from sales of big-ticket items like patio sets and grills. Cold weather and falling wood prices also affected sales. The company now expects sales and comparable sales to decline by between 2% and 5% in the fiscal year.
Rumble (NASDAQ:RUM) – The conservative social media and video platform, was down 3.4% after posting a larger-than-expected loss. Rumble reported Q1 EPS of -0.14, $0.11 worse than the analyst’s estimate of -0.03. Revenue for the quarter came in at $17.6 million, versus the consensus estimate of $15.93 million.
Grindr (NYSE:GRND) – Social network and dating app Grindr was flat premarket after rising 1.6% after first-quarter revenue rose 28% to $55.8 million.
Nu Holdings (NYSE:NU) – Nu Holdings jumped 5.9% after the fintech beat analysts’ expectations for Q1 earnings. Nu reported adjusted net income of $182.4 million, higher than the consensus estimate of $113.4 million, according to FactSet. The company posted revenue of $1.6 billion, compared with analysts’ forecasts of $1.40 billion.
Sea Limited (NYSE:SE) – Shares fell nearly 8% after the Singapore-based technology company reported first-quarter results. Its revenue was $3.04 billion, less than the $3.06 billion expected by analysts polled by StreetAccount. Sea Limited also reported GAAP earnings of 15 cents a share. However, it was unclear whether this was comparable to a StreetAccount forecast.
Market view
Gilead Sciences (NASDAQ:GILD) – Gilead Sciences was up 0.79% to $79.00 after the stock was upgraded to Outperform from Market Perform by analysts at BMO Capital, and the price target was raised to $ $100 from $90.