Daily Markets: Inflation Data, Debt Ceiling Remain in Center Stage

Today’s Big Picture

Asia-Pacific equity markets finished the day flat to down: Japan’s Nikkei (0.02%), Australia’s ASX All Ordinaries (-0.03%), India’s SENSEX (-0.06%), and Hong Kong’s Hang Seng (-0.09%) all ended the day relatively unchanged while South Korea’s KOSPI declined 0.22%, and China’s Shanghai Composite fell 0.29%. Taiwan’s TAIEX closed 0.81% lower on a broad decline led by Health Technology names. European markets are mostly higher in midday trading and U.S. futures point to a positive open.

Before we begin trading, investors will mull over the April Producer Price Index (PPI) report, published at 8:30 AM ET. Wholesale prices rose just 0.2% in April, against expectations of 0.3%. Excluding food and energy, core PPI also rose 0.2%, in line with expectations. On an annual basis, headline PPI increased just 2.3%, down from 2.7% in March and the lowest reading since January 2021.

Once that data is released and parsed by market and Fed watchers, the conversation will return to the debt ceiling. Treasury Secretary Janet Yellen said failure to avoid a looming federal government default would undermine Washington’s ability to provide international leadership and defend U.S. national security as well as “spark a global downturn.” Typically, the debt ceiling has been solved at the 11th hour following blustering and posturing by both sides - based on what we’ve seen so far, it looks like history will repeat itself this time around.

Data Download

International Economy

Last night saw updated Consumer Price Index (CPI) and Producer Price Index (PPI) figures from China. Official April YoY CPI in China was reported to be 0.10%, lower than both the previous month’s 0.70% and expectations of 0.30%. YoY PPI for April show a decrease of 3.6%, which also outpaced both the previous month’s 2.5% decrease as well as expectations of a 3.2% contraction.

In the face of a current 10.1% rate of inflation, The Bank of England announced another 25 basis point rate hike, setting that country’s bank rate at 4.50%.

Domestic Economy

8:30 AM ET will see the April YoY update for Producer Price Index growth. Expectations are for a slight decline to 2.4% from the previously announced 2.7% as energy prices ended the month slightly lower. Still, inflation is present as expectations for PPI ex-Food & Energy call for a 3.3% YoY increase, lower than March’s 3.4% but still elevated.

After last week’s blowout jobs numbers, Initial and Continuing Claims figures get their regular Thursday updates. Initial Claims are expected to have climbed to 245,000 as of May 5 as compared to the previously reported 242,000 and Continuing Claims as of April 29 are expected to have risen to 1.825 million, up from the previously reported 1.805 million.

Markets

While the Dow lagged yesterday, down 0.09%, it seems the more exposure to Alphabet (GOOG, GOOGL) and technology, in general, an index had, the better it did. The S&P 500 gained 0.45%, the Russell 2000 added 0.56% and the Nasdaq Composite closed 1.04% higher. Sectors saw a similar pattern, with Technology (1.22%) posting the largest gain and Communications Services (home to GOOG, GOOGL) advancing 0.89%. With Real Estate (0.94%) and Utilities (0.92%) coming in strong, it wasn’t all technology and communications yesterday. Financials (-0.56%) and Energy (-1.13%) provided an offset to gains in those sectors. Shares of Illumina (ILMN) were bid up 7.84% after it was reported that proxy voting advisory firm Glass Lewis has indicated it supports financier Carl Icahn’s proxy battle to oust the company’s current CEO.

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

• Dow Jones Industrial Average: 1.16%
• S&P 500: 7.77%
• Nasdaq Composite: 17.58%
• Russell 2000: -0.10%
• Bitcoin (BTC-USD): 66.43%
• Ether (ETH-USD): 53.74%

Stocks to Watch

Before U.S. equity markets begin trading today, 1-800 Flowers (FLWS), CyberArk (CYBR), Dillard’s (DDS), Fiverr (FVRR), Himax (HIMX), JD.com (JD), Krispy Kreme (DNUT), Lightspeed (LSPD), Tapestry (TPR), UTZ Brands (UTZ), and YETI Holdings (YETI) are expected to report their quarterly results.

While the March quarter revenue for Walt Disney (DIS) matched the $21.8 billion consensus revenue forecast, the company missed the EPS target by $0.01 per share. The closely watched Direct-to-Consumer segment saw revenue for the quarter increase 12% to $5.5 billion and its operating loss decreased by $0.2 billion to $0.7 billion. Disney+ paid subscribers fell down 2% YoY to 157.8 million but average monthly revenue per paid international subscriber climbed 13% for Global Disney+.

EPSN+ subscribers inched up 2% YoY to 25.3 million but total Hulu subscribers were flat YoY at 48.2 million. Disney Parks, Experiences, and Products revenues for the quarter increased 17% to $7.8 billion and segment operating income increased 23% to $2.2 billion. Linear Networks revenues for the quarter decreased 7% to $6.6 billion, and operating income decreased 35% to $1.8 billion. Disney reiterated its 2023 revenue and operating income guidance for high-single-digit growth. Disney also announced plans to launch One App Experience, which will bundle DIS's streaming content. Expects to launch the product by the end of the calendar year. The company warned domestic subscribers for Disney+ may show continued softness in the current quarter due to price.

While Cheesecake Factory (CAKE) served mixed March quarter results with EPS that topped the consensus forecast but revenue for the period came up short vs. Wall Street expectations, the company guided its current quarter below consensus forecasts. Comp sales in the March quarter rose 5.7% YoY. For the current quarter, management guided revenue to $870-$890 million vs. the $898.7 million consensus. The company also shared it expects effective commodity inflation of high single digits for the quarter and is modeling net total labor inflation of about mid-single digits.

Top and bottom line results for the March quarter at The Trade Desk (TTD) came in above consensus expectations as did its adjusted EBITDA for the quarter. For the current quarter, the company sees revenue of at least $452 million vs. the $445.63 million consensus, commenting “The shift from linear to connected TV continues to accelerate and fully decisioned programmatic will feature more prominently than ever at this year's upfronts.”

Robinhood (HOOD) CEO Vlad Tenev said his firm would be the first US retail brokerage to offer 24/5 trading of a list of 40 well-known stocks and ETFs and will look to "expand from there."

IPOs

Saudi Aramco is pushing back a planned Riyadh initial public offering of its energy-trading business, which would have ranked as one of the world’s largest share sales this year.

Near-term the calendar for such activity looks rather thin. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

8x8 (EGHT), Arlo Technologies (ARLO), indie Semiconductor (INDI), and News Corp. (NWSA) are slated to report their quarterly results after equities stop trading. Those looking for more on which companies are reporting when should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Friday, May 12

• UK: GDP – 1Q 2023
• UK: Industrial Production, Manufacturing Production - March
• US: Import/Export Prices – April
• US: The University of Michigan Consumer Sentiment Index – Preliminary May

Thought for the Day

“All the time you're saying to yourself, 'I could do that, but I won't,' — which is just another way of saying that you can't.” ― Richard P. Feynman

Disclosures

• CyberArk (CYBR) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Lightspeed (LSPD) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index

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

Other Topics

Stocks Economy Earnings Politics Central Banks