Today’s Big Picture

Asia-Pacific equity markets finished the day mixed: Australia’s ASX All Ordinaries advanced 0.79%, India’s SENSEX rose 0.25%, and Japan’s Nikkei closed close to flat, eking out a 0.06% gain. South Korea’s KOSPI declined 0.18%, China’s Shanghai Composite fell 0.47%, and Taiwan’s TAIEX gave back 0.52%. Hong Kong’s Hang Seng closed 1.54% lower on a broad decline led by Health Technology names as Utilities showed the only sector gains in that market. European markets are down pretty much across the board in midday trading and U.S. futures point to a lower open.

Fresh off the Fed’s policy meeting that signaled the central bank may deliver two more rate hikes this year, Federal Reserve Chair Jerome Powell will deliver his semi-annual monetary policy testimony to the U.S. House Financial Affairs Committee on Wednesday and the Senate Banking Committee on Thursday. Ahead of that, we have a few Fed officials making the rounds today, likely setting the tone Powell will aim to strike when discussing the potential for additional policy action to tame inflation vs. outlook for the U.S. economy.

And while we have a quiet earnings week, investors will be dialing into company comments made during the last few investor conferences before the quarter’s end. As they parse those comments and digest any guidance revisions, they will be assessing prospects for the upcoming June quarter earnings season and potential guidance for the second half of the year.

Data Download

International Economy

Industrial Production in Japan decreased 0.7% YoY in April, modestly better than the 0.8% decline posted the previous month.

While China has cut its key one-year and five-year loan prime rates by 10 basis points each, the first cut since August, the concern is those moves alone may not be enough to prop up China’s weakening economy. The one-year loan prime rate (LPR) on which most new and outstanding loans are based was cut from 3.65% to 3.55% according to the People’s Bank of China. The five-year LPR, which is a reference rate for mortgages, was also cut from 4.3% to 4.2%.

Domestic Economy

At 8:30 AM ET, May Housing Starts and Building Permits data will be released, and both are expected to be little changed compared to the respective April figures.

In its annual spending report, the Office of the Actuary at the Centers for Medicare and Medicaid Services sees annual healthcare expenditures in the U.S. reaching $7.2 trillion in 2031, making up about 20% of the total economy. That compares to $4.4 trillion in 2022 when the U.S. health expenditures accounted for ~17% of the economy vs. ~18% in 2021.

Secretary of State Antony Blinken met with Xi Jinping, China’s leader, on Monday in Beijing, sending a signal, at least for now, that the U.S. and China do not want their relationship to be defined by open hostility. However, even as both sides looked for ways to rebuild ties, they also sought to show they are not compromising on core issues.

Markets

Friday saw markets trade off slightly on some profit-taking from Technology (-0.82%) and Communication Services (-0.83%) and defensive repositioning as Consumer Staples (0.12%), Materials (0.25%), and Utilities (0.54%) were the only sectors to posts gains prior to the long weekend. Remaining sectors were lower but only by 0.21% or less. The Dow fell 0.32%, the S&P 500 declined 0.37%, the Nasdaq Composite gave back 0.68% and the Russell 2000 closed 0.73% lower. Ball Corp (BALL) saw its shares bid up 7.23% after the company announced it is exploring separating its aerospace business from its aluminum can manufacturing operations in a spinoff.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 3.48%
• S&P 500: 14.75%
• Nasdaq Composite: 30.79%
• Russell 2000: 6.49%
• Bitcoin (BTC-USD): 58.62%
• Ether (ETH-USD): 43.20%

Stocks to Watch

At the Paris Air Show, Airbus (EADSY) announced one of the biggest deals in civil-aviation history with an order for 500 narrowbody jets from Indian budget carrier IndiGo. The deal has an estimated value of $50 billion. Also at the Paris Air Show, Boeing (BA) released its 2023 Commercial Market Outlook that projects global demand for 42,595 new commercial jets by 2042, valued at $8 trillion.

Intel (INTC) and the German federal government have signed a revised letter of intent for Intel's planned leading-edge wafer fabrication site in Magdeburg, the capital of Saxony-Anhalt state in Germany. The agreement encompasses Intel's expanded investment in the site, now expected to be more than 30 billion euros for two first-of-a-kind semiconductor facilities in Europe.

US Steel (X) issued upside June quarter guidance with EPS of $1.81-1.86 vs. the $1.76 consensus.

Ahead of its Investor Day, Raytheon Technologies (RTX) reaffirmed its 2023 guidance that calls for EPS of $4.90-$5.05 vs. the $5.02 consensus with revenue in the range of $72-$73 billion vs. the $72.74 billion consensus.

Borrowing from Apple’s (AAPL) playbook, Google (GOOGL) is scouting for suppliers in India to assemble its Pixel smartphones.

Electrek reports Tesla (TSLA) added a discount to the new inventory of Model S and Model X vehicles and three years of free Supercharging for deliveries by the end of the quarter to foster the delivery of vehicles by the end of the quarter. After dropping the price of the new Model S and Model X earlier this year, Tesla is now giving an extra discount of up to $8,000 on some vehicles.

IBM (IBM) and Adobe (ADBE) are expanding their partnership to help brands accelerate their content supply chains through the implementation of next-generation AI including Adobe Sensei GenAI services and Adobe Firefly.

Stellantis (STLA) and Hon Hai Technology (HNHPF) announced the creation of SiliconAuto, a 50/50 joint venture dedicated to designing and selling a family of state-of-the-art semiconductors to supply the automotive industry.

AstraZeneca (AZN) is weighing the spinoff of its China unit and listing the business in Hong Kong amid growing geopolitical risks.

SVB Financial (SIVBQ) agreed to sell its investment banking division, SVB Securities, to a group led by Jeff Leerink and backed by funds managed by The Baupost Group.

Brown-Forman (BF.A, BF.B) announced it reached an agreement to sell its Finlandia vodka brand to Coca-Cola HBC AG for $220 million.

After Today’s Market Close

FedEx (FDX) and La-Z-Boy (LZB) are slated to report their quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Wednesday, June 21

• Korea: Producer Price Index – May
• UK: Car Registrations, Consumer Price Index, Producer Price Index – May
• Italy, Germany, France – Car Registrations - May

Thursday, June 22

• UK: Bank of England Inflation Letter
• Eurozone: Consumer Confidence – June
• UK: GfK Consumer Confidence - June
• US: Existing Home Sales – May
• Leading Indicators – May
• Accenture (CAN), Darden Restaurants (DRI)
• Smith & Wesson Brands (SWBI)

Friday, June 23

• Japan: Consumer Price Index – May
• Japan: Flash PMIs - June
• UK: Retail Sales – May
• Eurozone: S&P Global Flash PMIs - June
• US: S&P Global Flash PMIs – June

Thought for the Day

"You're not learning anything if you're not making mistakes." ~ Charlie Munger

Disclosures

• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Intel (INTC) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
• Apple (AAPL), Brown-Forman (BF.A, BF.B) are constituents 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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