Daily Markets: Debt Ceiling Negotiations Continue

The big picture today

Asia-Pacific stock markets ended the day mostly flat, except for Hong Kong’s Hang Seng, which fell 1.25% and China’s Shanghai Composite, which lost 1.52%. % on the announcement of a new covid sub-variant, identified as the cause of the latest outbreak. The Japanese Nikkei fell 0.42%, while Australia’s ASX All Ordinaries, India’s SENSEX and Taiwan’s TAIEX all fell between -0.04% and 0.04%. South Korea’s KOSPI posted a 0.41% gain, led by health tech names. European markets are mixed midday and US futures point to a lower open, although we also note that the Cboe Volatility Index (VIX) is also lower, at least at the time of writing.

While President Joe Biden and House Speaker Kevin McCarthy met to negotiate on the US debt ceiling, they came to no firm resolution last night. The two sides will continue to negotiate a debt containment plan to avoid default and we expect all eyes will be on Washington this week, even amid fresh retail earnings and several health and safety officials. Fed doing the trick. A letter from US Treasury Secretary Janet Yellen to McCarthy yesterday noted that it is “very likely” that the Treasury will no longer be able to pay all government bills by early June, and possibly as of June 1, if Congress does not increase or suspend the debt ceiling by then. Clearly, the pressure is high and the timing of a debt ceiling agreement could have implications for the global economy as well as the next cycle of presidential elections. We remind readers that while a deal is necessary, the chances of getting the right deal for both sides under such tight deadlines are unlikely and, despite recent posturing, will result in concessions being made on both sides.

Data download

International economy

The manufacturing PMI at Jibun Bank Japan hit an eight-month high of 50.8 in May, from a low of 49.5 the previous month, according to flash data. It was the first expansion in factory activity since last October and new orders and production returned to expansion territory for the first time since last June, and the fastest pace in 13 months. The services PMI at Jibun Bank Japan hit a record high of 56.3 in May 2023, from a recent 55.4 a month earlier, according to flash data. It is also the ninth consecutive month of growth in the services sector.

The Flash HCOB manufacturing PMI for the euro zone fell to 44.6 in May from 45.8 in April, well below the forecast of 46.2. The reading indicated the steepest contraction in the factory sector in three years, with production, new orders and backlogs shrinking at a faster rate. The HCOB Flash Eurozone Services PMI fell slightly to 55.9 in May from a 12-month high of 56.2 in April, but rose above the expected reading of 55.6.

The Flash S&P Global/CIPS UK manufacturing PMI fell to 46.9 in May from 47.8 the previous month, missing the market expectation of 48. For context, this latest reading points to the biggest deterioration in the sector manufacturer for five months. The S&P Global/CIPS UK services PMI fell to 55.1 in May from 55.9 the previous month and below the market consensus of 55.5. It should be noted that travel, leisure and hospitality companies commented extensively on the resilience of consumer demand.

Domestical economy

At 9:45 a.m. ET this morning, S&P Global will release its Flash PMI data for May. The Flash May manufacturing PMI is expected to decline slightly to 50 from 50.2 the previous month, while the Flash May services PMI is expected to come in at 52.6, down from April’s final reading of 53. ,6.

Shortly after stock trading begins today at 10 a.m. ET, April new home sales data will be released. New home sales for the month are expected to slide to 0.665 million from 0.683 million in March.

Markets

Optimism over a possible compromise on the debt ceiling helped major equity indices shake off Friday’s austere mood, with the exception of the Dow Jones, which fell 0.42%. The S&P 500 managed to post a gain of 0.02% while the Nasdaq Composite rose 0.50% and the Russell 2000 closed up 1.22%. Consumer Staples fell 1.51% as Coca-Cola (KO) (-2.10%) and PepsiCo (PEP) (-2.71%) fell, as did Proctor & Gamble (PG) (-2.62%), with the three names contributing just over 60% of sector returns. Proof that one person can make a difference emerged yesterday as traders pushed Match Group (MTCH) shares up 6.72% after the announcement of the appointment of former Meta executive Stephane Taine , serving as chief product officer for the company’s Hinge product.

Here’s how the major market indicators stack up since the start of the year:

• Dow Jones Industrial Average: 0.42%
• S&P 500: 9.20%
• Nasdaq compound: 21.54%
• Russell 2000: 1.94%
• Bitcoin (USD-BTC): 61.84%
• Ether (ETH-USD): 51.73%

Stocks to Watch

Before US stock markets begin trading today, BJ’s Wholesale (BJ), Dick’s Sporting Goods (DKS), Lowe’s (LOW), And Williams-Sonoma (WSM) are supposed to publish their quarterly results.

April quarter up and down results at Video zoom (ZM) exceeded consensus expectations. At the end of the quarter, the company had approximately 215,900 enterprise customers, up 9% year-on-year, as well as approximately 3,580 customers contributing more than $100,000 in last 12 months revenue, up around 23% year-on-year. For the current quarter, Zoom sees between $1.04 and $1.06 versus consensus of $1.06 with revenue between $1.110 billion and $1.115 billion versus consensus of $1.11 billion.

Shares of Microvast (MVST) sank into aftermarket trading last night following reports that the US Department of Energy canceled a $200 million grant after lawmakers raised concerns about its alleged links to the Chinese government.

Reports from an activist investor interested in Yelp (YELP) boosted the shares in aftermarket trade last night. TCS Capital argues that Yelp could be sold to another technology or media company, or a private equity firm, for at least $70 per share versus yesterday’s closing price of $32.52.

IPOs

In the short term, the timeline for such activity seems rather slim. Readers who want to dig deeper into the schedule of upcoming IPOs should visit Nasdaq’s Latest and Upcoming IPOs page.

After today’s market close

Palo Alto Networks (PANW), Urban Outfitters (URBN)And VF Corp. (VFC) are expected to release their quarterly results after the shares halt trading. Those looking for more information on which companies are reporting when should head to the Nasdaq Earnings Calendar.

on the horizon

Wednesday May 24

• United Kingdom: consumer price index, producer price index – April
• Germany: Business Expectations Index – May
• US: Weekly MBA Mortgage Applications
• United States: EIA Weekly Crude Oil Inventories

Thursday May 25

• Germany: Q1 2022 GDP
• Germany: GfK consumer sentiment – June
• United States: Initial and Continuing Weekly Unemployment Claims
• United States: GDP (second estimate) – 1Q 2023
• United States: pending home sales – April
• United States: EIA Weekly Natural Gas Inventories

Friday May 26

• Japan: Tokyo CPI – May
• United Kingdom: Retail sales – April
• United States: personal income and expenditure, PCE price index – April
• United States: sustainable orders – April
• United States: University of Michigan Consumer Confidence Index (final) – May

Thought of the day

“It’s amazing what you can accomplish if you don’t care who gets the credit.” -Harry S. Truman

Disclosures

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