June S&P 500 futures (ESM23) are trending up +0.45% this morning as the passage of a U.S. debt ceiling bill in Washington boosted market sentiment, while investors looked ahead to a crucial U.S. nonfarm payrolls report that might clarify the Federal Reserve’s policy path.
The U.S. Senate late on Thursday passed legislation to suspend the government’s $31.4 trillion debt ceiling and enforce restraints on government spending until the 2024 election. With a vote of 63-36, the Senate has given its approval to the bill that was previously passed by the House of Representatives on Wednesday. The measure now goes to the White House to be signed into law by U.S. President Joe Biden.
In Thursday’s trading session, the tech-heavy Nasdaq 100 outperformed major benchmarks as the U.S. Treasury yields fell amid bets the Federal Reserve will pause its interest-rate increases in June. Meta Platforms Inc (META) rose about +3% after the company unveiled the third version of its mixed reality headset. Also, energy stocks gained ground as the price of WTI crude rose more than +2%. In addition, NetApp Inc (NTAP) surged over +8% and was among the top percentage gainers on the benchmark S&P 500 after reporting better-than-expected Q4 results and providing an upbeat FY24 adjusted EPS outlook. On the negative side, Salesforce Inc (CRM) slid more than -4% after the software company provided a weaker-than-expected FY24 sales forecast, limiting gains on the blue-chip Dow.
The Labor Department’s report on Thursday showed claims for state unemployment benefits rose +2K to a seasonally adjusted 232K last week, stronger than expectations of 235K. Also, U.S. ADP Nonfarm Employment Change came in at 278K in May, stronger than expectations of 170K. At the same time, first-quarter U.S. Unit Labor Costs were revised downward to +4.2% q/q from +6.3% q/q. In addition, U.S. May ISM Manufacturing PMI stood at 46.9, weaker than expectations of 47.0.
“Overall, upside risk to May payrolls comes from a higher than expected ADP print, still low initial and continued jobless claims, and an improvement in labor dynamics in the ISM Manufacturing Index,” Morgan Stanley said in a note.
In an essay published on Thursday, St. Louis Fed President James Bullard expressed his opinion that current interest rates are positioned towards the lower end of a range that could effectively bring inflation down.
Meanwhile, U.S. rate futures have priced in a 76.1% probability of no hike and a 23.9% chance of a 25 basis point rate increase at the June meeting.
Today, all eyes are focused on U.S. Nonfarm Payrolls data in a couple of hours. Economists, on average, forecast that May Nonfarm Payrolls will stand at 180K, compared to the previous value of 253K.
Also, investors are likely to focus on U.S. Private Nonfarm Payrolls, which came in at 230K in April. Economists foresee the May figure to be 160K.
U.S. Average Hourly Earnings data will be reported today. Economists expect May’s figures to be +0.4% m/m and +4.3% y/y, compared to the previous numbers of +0.5% m/m and +4.4% y/y.
U.S. Unemployment Rate will come in today as well. Economists foresee this figure to be 3.5% in May, compared to the previous value of 3.4%.
In the bond markets, United States 10-Year rates are at 3.612%, up +0.03%.
The Euro Stoxx 50 futures are up +0.73% this morning after the debt-ceiling deal passed its last Congressional hurdle, with investor focus shifting to U.S. non-farm payroll numbers due later today. Gains in mining and real estate stocks are leading the overall market higher. Meanwhile, ECB Executive Board member Fabio Panetta said in an interview published Friday that the central bank isn’t done raising interest rates, though it doesn’t have a lot further to go. In corporate news, Puma Se (PUM.D.DX) gained over +3%, and Adidas Ag (ADS.D.DX) rose more than +4% after U.S. retailer Lululemon Athletica lifted its annual sales and profit guidance.
France’s Industrial Production and Spain’s Unemployment Change data were released today.
The French April Industrial Production stood at +0.8% m/m, stronger than expectations of +0.3% m/m.
The Spanish May Unemployment Change came in at -49.3K, stronger than expectations of -40.1K.
Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.79%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.21%.
China’s Shanghai Composite today closed higher, rebounding from six-month lows as the passage of a U.S. debt ceiling bill and optimism that the Federal Reserve will pause interest-rate hikes in June boosted risk appetite. Real estate and consumer discretionary stocks rebounded from early lows and closed solidly higher. Also, Hong Kong-listed technology stocks rallied on Friday, with Tencent Holdings Ltd climbing over +5% and Alibaba Group Holding Ltd surging more than +6%. Meanwhile, foreign investors added 8 billion yuan of onshore shares as of mid-Friday via trading links with Hong Kong.
“The Fed’s potential pause in rate hikes at the June meeting helped boost sentiment for tech shares in Hong Kong today and released some pressure from yuan depreciation,” said Steven Leung, an executive director at UOB Kay Hian Hong Kong Ltd.
Japan’s Nikkei 225 Stock Index ended sharply higher today, closing at a three-decade high amid optimism over the approval of a deal to lift the U.S. debt ceiling. Also, Bank of Japan Governor Kazuo Ueda stated on Friday that the central bank did not have a predetermined timeline to accomplish its 2% inflation target. Meanwhile, SoftBank Group Corp climbed more than +4% as the company gets ready to spin off its chip designing division, Arm, which is anticipated to capitalize on the surge in investment in artificial intelligence. In addition, Dai-Ichi Life Holdings Inc rose more than +3%, driving up insurance stocks, as risks regarding a potential financial catastrophe from a U.S. default faded. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 1.85% to 19.63.
Pre-Market U.S. Stock Movers
MongoDB (MDB) surged over +25% in pre-market trading after the cloud software provider reported upbeat Q1 results and issued above-consensus Q2 and FY24 guidance.
Lululemon Athletica Inc (LULU) climbed more than +14% in pre-market trading after the company reported better-than-expected Q1 results and provided upbeat FY23 guidance.
SentinelOne Inc (S) plunged over -35% in pre-market trading after the cybersecurity firm posted mixed Q1 results and slashed its full-year revenue guidance.
ChargePoint Holdings Inc (CHPT) fell about -4% in pre-market trading after the company reported mixed Q1 results and issued weaker-than-expected Q2 revenue guidance.
EPR Properties (EPR) rose about +1% in pre-market trading after KeyBanc upgraded the stock to Overweight from Sector Weight.
Xcel Energy Inc (XEL) dropped more than -1% in pre-market trading after JPMorgan downgraded the stock to Neutral from Overweight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - June 2nd
Daktronics (DAKT), Transphorm Tech (TGAN), Yatra Online (YTRA), Bridgford (BRID), Yunji (YJ).
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