Daily Markets: Earnings, Fed Comments Weigh on Stocks

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session down across the board. Australia’s ASX All Ordinaries fell 0.35%, India’s Sensex dropped 0.43%, Japan’s Nikkei declined 0.94% and Taiwan’s TAIEX was down 1.19%. Korea’s KOSPI and Hong Kong’s Hang Seng traded off 1.57% and 1.75%, respectively and China’s Shanghai Composite led the way down, closing off 2.41% on the day. By mid-day trading, major European equity indices are down across the board, and U.S. futures point to a rough market open later this morning.

Weighing on stocks is the cut to Snap’s (SNAP) outlook for the current quarter, following its original guidance announced roughly a month ago, as well as the news that Buy Now, Pay Later firm Klarna would be shedding 10% of its workforce. Those developments are reverberating through digital advertising, social media, and related companies like Affirm Holdings (AFRM). 

Later this morning we’ll get the first look at how the U.S. economy fared in April courtesy of the S&P Global Flash May PMI report. In perusing the analogous report for the Eurozone published earlier this morning we learned “Average prices charged for goods and services meanwhile rose sharply, increasing at a rate below April’s all-time high but still registering the second-steepest increase yet recorded by the survey.” Now to see what the one for the U.S. has to say at 9:45 AM ET.

Ahead of those findings, prepared remarks from Kansas City Fed President Esther George hint at what could come from the Federal Reserve’s June and July monetary policy meetings: "I expect that further rate increases could put the federal funds rate in the neighborhood of 2 percent by August, a significant pace of change in policy settings. Balance sheet reduction plans will also be underway as a tightening mechanism… Evidence that inflation is clearly decelerating will inform judgments about further tightening."

And as if we didn’t have enough going on this week between economic data and additional earnings reports, mark your calendars! Secretary of State Antony Blinken is expected to give a speech this Thursday outlining the White House’s strategy on China. There is some speculation that calls for the removal of some Chinese tariffs, but given recent comments regarding Taiwan, we’ll make no judgments until we have data in hand.

Data Download

International Economy

Last night saw the release of preliminary Japanese May Manufacturing PMI which came in at 53.2, 0.20 ahead of expectations and slightly lower than the previously reported 53.5.

This morning we received preliminary updates for both Manufacturing and Services PMI from Germany, France, and the EU itself. The general trend with these figures was that they came in slightly under expectation and previously reported figures. Overall, PMI figures were reported in the mid-to-high 50s, meaning that both Manufacturing and Services activities are in an expansionary phase. Any figures under 50 would indicate a contraction. The UK also reported preliminary May Services and Manufacturing PMI with Manufacturing following the broad trend and Services dipping to 51.8, surprising almost 5 points lower than expectations and a good distance away from the previously reported 58.9. 

Domestic Economy

9:45 AM ET will see the release of Manufacturing and Services PMI with Manufacturing expected to dip slightly to 58.0 from the previously reported 59.2 and Services expected to tick up to 56.0 from 55.6.

10:00 AM ET will see the release of April New Home Sales which, due to continued mortgage rate pressure are expected to drop to 750,000 from the previously reported 763,000 homes. 

Markets

All 11 S&P 500 sectors closed in positive territory yesterday leading the S&P 500 to close the day 1.86% higher. The Dow Jones Industrial Average soared 1.98% while the Nasdaq Composite climbed 1.59% and the Russell 2000 added 1.10%. Including yesterday’s moves, here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -12.27%
• S&P 500: -16.63%
• Nasdaq Composite: -26.27% 
• Russell 2000: -20.16%
• Bitcoin (BTC-USD): -38.54%
• Ether (ETH-USD): -47.67%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Abercrombie & Fitch (ANF), AutoZone (AZO), Best Buy (BBY), Canadian Solar (CSIQ), Frontline (FRO), Petco Health & Wellness (WOOF), and Ralf Lauren (RL) all are expected to report their quarterly results. 

Shares of Zoom Video (ZM) were zooming in after-market trading last night as the company reported better than expected bottom-line results for its April quarter and issued upside guidance for the current quarter and its fiscal 2023. For its June quarter, Zoom sees EPS of $0.90-0.92 vs. the $0.87 consensus while for FY2021 its targets EPS of $3.70-3.77, excluding non-recurring items, vs. $3.57 consensus. 

Snap (SNAP) shares cratered in after-market trading last night as the company warned its revenue and EBITDA for the current quarter will fall below its previous low-end guidance issued on April 21. Snap noted that since that late April guidance that called for revenue growth of 20%-25% YoY, the macroeconomic environment has deteriorated further and faster than anticipated. The company shared it will also slow hiring through the end of the year as it looks to manage expenses. In response, other social media companies and those with advertising revenue business models, such as Pinterest (PINS), Meta Platforms (FB), The Trade Desk (TTD), and Twitter (TWTR) are trading off.

Airbnb (ABNB) announced it will shutter its business in China, which accounted for ~`1% of revenue over the last few years. Instead, the company will focus on providing listings for Chinese travelers going abroad.

Palantir Technologies (PLTR) and global commodities trader Trafigura announced the development of a technology services platform for carbon emissions calculation, reporting, and collaboration across commodity supply chains.

Shares of Insulet (PODD) moved higher in aftermarket trading following reports Dexcom (DXCM) is in discussions to purchase the maker of pumps that deliver insulin for diabetics.

Walmart (WMT) announced it will be expanding its DroneUp delivery network to 34 sites by the end of the year, providing the potential to reach 4 million U.S. households across six states -- Arizona, Arkansas, Florida, Texas, Utah, and Virginia.

Moderna (MRNA) announced it is currently investigating potential monkeypox vaccines at a pre-clinical stage.

IPOs

No initial public offerings (IPOs) are expected to price this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Agilent (A), Intuit (INTU), LiveRamp (RAMP), Nordstrom (JWN), Toll Brothers (TOL), and Urban Outfitters (URBN) are slated to report their latest quarterly results. Investors should remain on watch for companies that pre-announce their March quarter results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Wednesday, May 25

• Japan: Leading Index (Final) – March
• Germany: GDP (Final) – 1Q 2022
• Germany: Gfk Consumer Confidence – June
• France: Consumer Confidence - May
• US: Weekly MBA Mortgage Applications
• US: Durable Orders – April
• US: Weekly EIA Crude Oil Inventories 
• US: FOMC May 2022 Meeting Minutes 

Thursday, May 26

• US: Weekly Initial & Continuing Jobless Claims
• US: GDP (Second Preliminary Reading) – 1Q 2022
• US: Pending Home Sales – April
• US: Weekly EIA Natural Gas Inventories

Friday, May 27

• US: Personal Consumption and Income – April 
• US: Michigan Sentiment Index (Final) – May 

Thought for the Day

“I make no attempt to forecast the market—my efforts are devoted to finding undervalued securities.” ~ Warren Buffett

Disclosures

• Walmart (WMT) is a constituent of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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