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Mid-Morning Look: June 02, 2023

Mid-Morning Look: June 02, 2023

Mid-Morning Look

Friday, June 02, 2023

Index

Up/Down

%

Last

 

DJ Industrials

396.27

1.20%

33,457

S&P 500

32.37

0.77%

4,253

Nasdaq

55.95

0.43%

13,156

Russell 2000

21.16

1.20%

1,789

 

 

U.S. stocks closing out the week strong, rising after the Senate passed the debt ceiling bill, and China mulls new property support package to boost the economy, overshadowing the much strong May nonfarm payroll report which raises prospect the Fed could stay aggressive with rate hikes. Overnight, the U.S. avoided a possible default on its obligations after the U.S. Senate passed bipartisan legislation backed by President Joe Biden that lifts the government’s $31.4 trillion debt ceiling. The Senate voted 63-36 to approve the bill that had been passed on Wednesday by the House of Representatives. That helped boost prices overnight. U.S. listed China stocks bounce on headlines overnight that China was weighing up a property market support package to boost the economy. Lastly the Street has now underestimated NFP a record 14 straight months after reporting Nonfarm payrolls for May surged +339K well above consensus +190K with big upward revisions in prior months. Shares of Asian markets with big gains, led by a 4% advance in the Hang Seng. Oil prices rose on Friday after a U.S. debt ceiling deal averted a default, while attention turned to a meeting of OPEC ministers and their allies at the weekend. The Nasdaq Composite hitting fresh 52-week highs as all news being taken positively today. Materials, energy, financials, industrials among the leading sectors in early trading as selling seen in some of the biggest winners of 2023 so far as Communications turn “red”. Treasury yields and the dollar bounce since the jobs data, but not having broad impact on markets yet, gold slips.

 

Economic Data

·     Nonfarm payrolls for May surge +339,000 well above consensus +190,000 and vs April +294,000 (prev +253,000), March revised to +217,000 (from +165,000).

·     May private sector jobs added +283,000 vs. consensus +165,000

·     Unemployment rate rises to 3.7% vs 3.4% previous and estimate of 3.5%

·     Average hourly earnings all private workers +0.3% from prior month (in-line with ests.), and US average earnings yoy actual +4.3% (forecast 4.4%, previous 4.4%)

 

 

Macro

Up/Down

Last

 

WTI Crude

1.76

71.86

Brent

2.12

76.40

Gold

-17.10

1,978.40

EUR/USD

-0.0034

1.0727

JPY/USD

0.78

139.58

10-Year Note

0.06

3.668%

 

 

Sector Movers Today

·     Materials, energy, financials, industrials among the leading sectors in early trading; U.S. material and industrial stocks rose early after a report overnight that China is mulling property market support. Bloomberg reported China is working on new measures to support the property market after existing policies failed to sustain a rebound in the sector. Shares of steel stocks, copper, machinery, iron ore all led markets early (CAT, X, NUE, FCX, CLF).

·     In chemicals: CC, DD and CTVA announced an agreement in principle to settle all drinking water claims related to perfluoroalkyl and polyfluoroalkyl substances, known as PFAS. As part of the agreement, the companies will establish a settlement fund and contribute a total of $1.185B to the fund, with Chemours contributing about $592M, DD $400M and CTVA about $193M. VVV was downgraded to neutral from Overweight at JP Morgan saying longer-term share multiple risk in Valvoline is likely to stem from long-term growth expectations for electric vehicles.

 

Stock GAINERS

·     AVGO +3%; reported in-line results Q2 sales/EPS $8.7B/$10.32 met Street; provided additional details on the generative AI opportunity where it expects the opportunity to grow from 10% in FY22 to ~25% in FY24 of semi revenues.

·     BABA +2%; US listed Chinese technology companies (BABA, BIDU, JD, PDD, TCEHY) advance after headlines overnight that China was weighing up a property market support package to boost the economy.

·     BNTX +3%; said its cancer immunotherapy candidate gotistobart, in partnership with OncoC4 Inc, was shown to shrink tumors in close to 30% of participants in an early-to-mid-stage study.

·     CC +24%; gains alongside DD and CTVA after reaching agreement to settle PFAS related drinking water claims; the three companies said they would set up a $1.19 billion fund to settle PFAS-related drinking water claims in the United States; CC takes $592M charge related to fund.

·     DISH +18%; Bloomberg reported that AMZN is in talks to offer mobile service as well as DISH, to possibly offer low-cost or even free nationwide mobile phone service to Prime subscribers (T, VZ, TMUS shares slide in reaction). The story looks like a follow up from WSJ 5/26 seen here https://tinyurl.com/bdfbbmba

·     FIVE +5%; reported healthy 1Q results but mixed relative to Street expectations, with EPS above but sales below, comps increased 2.7%, while 2Q guidance was issued below consensus and 2023 guidance was narrowed.

·     LULU +13%; snaps its 9-day losing streak in strong fashion as posted Q1 results ahead of expectations and raised FY23 guidance as 1Q revenue and EPS came in ahead of expectations, with top-line strength across all channels and geographies.

·     MDB +30%; as delivered a strong 1QFY24, beating consensus estimates behind robust Atlas (+40% YoY; 65% of revenue), and large customer growth (>100K ARR customers +28% YoY); beat and raise driven by consumption levels that exceeded their outlook.

 

Stock LAGGARDS

·     CVNA -5%; cancels exchange offer for up to $1 billion of notes.

·     PD -15%; as managed to outperform top-line guidance in the quarter, but by a thin margin, posting $103.2M vs a $103M guidance midpoint; saw increased churn specific to the SMB segment (most of customer base but only 20% of total ARR); guides year revs lower.

·     S -36%; after reported mixed F1Q24 results with lackluster revenue of $133.4M (consensus $136.6M), up 70% y/y, and ARR of $563.6M, below expectations of $594.4M; new guidance calls for FY24 revs of $590-600mn vs. prior guide of $631-640mn.

·     TLYS -8%; Q1 EPS loss (-$0.40) vs. est. loss (-$0.33); Q1 revs $123.6M vs. est. $123.75M; guides Q2 EPS loss (13c-27c) vs. est. 0c; revs $148M-$158M vs. est. $160.5M.

·     TMUS -8%; along with VZ and T after Bloomberg reported that AMZN is in talks to offer mobile service as well as DISH, to possibly offer low-cost or even free nationwide mobile phone service to Prime subscribers.

·     XEL -2%; downgraded to Peer Perform at Wolfe Research given the lower-than-expected 9.25% ROE stipulated in the MN electric (~31% of rate base) rate case and concern about the Co electric (~27% of rate base) rate case outcome (also note utilities underperform today).

_________________________________________________________________

Market commentary provided by Hammerstone Markets, Inc, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

The post Mid-Morning Look: June 02, 2023 first appeared on eOption.

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