Daily Markets: Stocks See Potential Debt Ceiling Hopes

Today’s Big Picture

Asia-Pacific equity markets finished the day mixed. South Korea’s KOSPI rose 0.59%, Japan’s Nikkei advanced 0.84%, and Taiwan’s TAIEX gained 1.60% on a broad rally led by Utilities. On the other side of the coin, China’s Shanghai Composite declined 0.21%, Australia’s ASX All Ordinaries gave back 0.47%, and India’s SENSEX closed 0.60% lower. Hong Kong’s Hang Seng fell 2.09% as only one constituent posted a gain yesterday in a broad decline led by Health Technology names, and Consumer Durables. European markets are mixed in midday trading and U.S. futures point to a higher open.

Following debt ceiling comments earlier this week from House Speaker McCarthy that both sides were "still very far apart" on reaching a deal, McCarthy now sees a “better process” in place for further talks, sharing it’s “possible to get a deal by the end of the week.” Adding to the prospects of a deal getting done, Senate Minority Leader McConnell shared, "We are not going to default. They know it and we know it."

As investor fears concerning the debt ceiling ease somewhat this morning, attention will pivot back to retail earnings and what they say about the consumer, a key driver of the economy. Following yesterday’s weaker than expected April Retail Sales report and disappointing results from Home Depot (HD), Tesla’s (TSLA) Elon Musk warned the company isn’t immune from what could be a tough period for the economy and consumer discretionary spending. That setup will have investors digging into quarterly results out this morning from Target (TGT), TJX Companies (TJX), and, later this week, Walmart (WMT) as well as a gaggle of other retail earnings reports next week.

Data Download

International Economy

The Japanese economy advanced 1.6% on an annualized and preliminary basis during 1Q 2023, topping the market consensus of 0.7% and follows the revised 0.1% contraction in 4Q 2022. Industrial Production in Japan decreased 0.60% YoY in March, essentially matching the February figure.

Passenger car registrations in the European Union increased 17.2% YoY to 803,188 units in April, marking the ninth consecutive monthly increase. All the bloc's largest markets grew solidly, led by Italy (29.2%) and France (21.9%). Meanwhile, battery electric car registrations in the EU jumped by 51.9% to 94,561 units in April, accounting for 11.8% of the market.

The Euro Area's consumer price inflation (CPI) was confirmed at 7.0% YoY in April, slightly higher than the previous month's 13-month low of 6.9% and significantly above the European Central Bank's target of 2.0%. Annual core inflation rate in the Euro Area which excludes prices for energy, food, alcohol, and tobacco, edged lower to 5.6% in April from a record high of 5.7% reached in March.

Domestic Economy

We have the “Wednesday Regulars” on tap today, better known to most readers as the weekly data for the MBA Mortgage Applications index and Crude Oil Inventories from the Energy Information Administration (EIA). Ahead of that report from EIA, the American Petroleum Institute reportedly shows a build of 3.69M barrels of oil in U.S. commercial stockpiles for the week ending May 12. Citing demand in China, the International Energy Agency raised its forecast for 2023 global oil demand growth by 200K barrels per day (bbl/day) to 2.2 million bbl/day, and now sees total demand of 102 million bbl/day, ~100K more than it forecast a month ago.

We also have April Housing Starts and Building Permit data being published at 8:30 AM ET. Housing starts are expected to come in at 1.42 million on an annualized basis, down modestly from 1.42 million in March, while Building Permits are forecasted to be little changed near 1.43 million.

Markets

While posting better figures in April than in March, reported Retail Sales numbers fell short of expectations yesterday putting pressure on equities. The Technology sector’s lone positive performance (0.11%) provided some relative outperformance for the Nasdaq Composite but wasn’t enough to lift the index as it fell 0.18%. The S&P 500 declined 0.64%, the Dow gave back 1.01% and the Russell 2000 closed 1.44% lower. Energy and Utilities were down 2.16% and 2.22%, respectively, but it was Real Estate that took the biggest hit yesterday, down 2.67%. The so-called “13-F Season”, when hedge funds and other institutional investors update reported long-only equity holdings in their portfolios, gave investors another name to chase as GE Healthcare Technologies (GEHC) was bid up 3.80% after NYC-based Trian Partners disclosed it as a new position.

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

• Dow Jones Industrial Average: -0.41%
• S&P 500: 7.04%
• Nasdaq Composite: 17.93%
• Russell 2000: -1.42%
• Bitcoin (BTC-USD): 62.91%
• Ether (ETH-USD): 52.21%

Stocks to Watch

Before U.S. equity markets begin trading today, Jack in the Box (JACK), Target (TGT), TJX Companies (TJX), Triumph Group (TGI), and Wix.com (WIX) are expected to report their quarterly results.

March quarter revenue at IT infrastructure company Kyndryl (KD) fell 4% YoY to $4.25 billion, besting the $4.15 billion consensus. The company shared it signed contracts tied to cloud hyperscaler alliances with an aggregate value of $1.2 billion, exceeding its $1 billion target for the year. However, for the coming year, it sees revenue in the range of $16.0-$16.4 billion, noticeably below the $16.92 billion consensus.

Medical digital platform company Doximity (DOCS) reported better than expected March quarter results but issued downside guidance for the current quarter and its full fiscal year. Noting it expects a tough upsell environment this year, the company guided revenue for the current quarter to $106.5-$107.5 million vs. the $111.78 million consensus.

Comments made during Tesla’s shareholder meeting yesterday include the company may try its hand at advertising, that it is working towards developing an EV that is cheaper than a gasoline vehicle, and it expects the engineering and design of its next-gen Roadster EV to be completed this year.

Western Alliance Bancorp (WAL) shared that its deposits stabilized by March 20 and have since resumed a “growth trajectory” with quarter to date deposits growth exceeding $2.0 billion as of May 12.

Shares of Clear Channel Outdoor (CCO) moved higher in aftermarket trading last night amid reports activist Legion Partners is pushing the billboard company to evaluate a sale of the entire company.

After sharing that it is looking at strategic alternatives, shares of National Western Life Group (NWLI) also popped in aftermarket trading last night.

IPOs

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

Boot Barn Holdings (BOOT), Cisco (CSCO), Take-Two (TTWO), Viasat (VSAT), and ZTO Express (ZTO) 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

Thursday, May 18

• US: Weekly Initial & Continuing Jobless Claims
• US: Philadelphia Fed Index – May
• US: Existing Home Sales – April
• US: Leading Indicators – April
• US: Weekly EIA Natural Gas Inventories

Friday, May 19

• Japan: Consumer Price Index – April
• Germany: Producer Price Index – April

Thought for the Day

“You cannot escape the responsibility of tomorrow by evading it today.” ― Abraham Lincoln

Disclosures

• Tesla (TSLA) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Wix.com (WIX), Cisco (CSCO) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index
• Walmart (WMT) is a constituent of the Tematica BITA Big Spenders & Savers Index
• 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.

Other Topics

Stocks Economy Earnings Politics