Market Update
Economic Vitality and Potential Debt Deal Power U.S. Markets Advance
Barry Adams
26 May, 2023
New York City
Major averages on Wall Street scaled higher on the hopes that the ongoing debt ceiling standoff may be ending soon.
The deal between President Joe Biden and Republican House Speaker Kevin McCarthy will increase the debt limit for two years and freeze the federal government spending for the next two years.
The deal protects President Bidens from debt default worries before the next presidential election and also offers concessions to Republicans for limiting domestic spending and not expanding the IRS.
Despite the market optimism surrounding the deal, a number of far right conservative republicans are voicing strong disapproval of the expected agreement.
With debt default only a few days away, the agreement still needs to be approved by the House and Senate, not an easy task when 535 lawmakers are expected to vote.
The yield on Treasury notes rose after a measure of inflation widely followed by the Federal Reserve rose more than expected in April, indicating unabated inflationary forces.
The latest report on the PCE index provided another signal for the Fed policymakers to continue its aggressive rate hike.
After the report, Fed policymakers are more likely to lift interest rates by at least 25 basis points at the next meeting in June.
Investors also reacted to a barrage of corporate earnings news ahead of Memorial Day weekend.
Persona Consumption Expenditure Inflation Index Stays Elevated
Personal consumption expenditure increased 0.4% in April from the previous month and rose 4.4% from a year ago, the U.S. Bureau of Economic Analysis reported Friday.
Prices for goods increased 0.3% and prices for services increased 0.4% and food prices decreased less than 0.1%, and energy prices increased 0.7%.
Core personal consumption expenditure, which excludes food and energy, accelerated to 0.4% in April from March.
On a yearly basis, core PCE increased 4.7%.
Personal Spending Jumped 0.8% In April
Personal income increased 0.4% from the previous month in April, according to estimates released today by the Bureau of Economic Analysis.
Disposable personal income or DPI increased 0.4% and personal consumption expenditures or PCE increased 0.8%, rising at the fastest pace in three months.
Durable Goods Orders Advanced 1.1%
Durable goods orders increased 1.1% in April, slower than the upwardly revised 3.3% in March, the U.S. Census Bureau announced Friday.
Excluding transportation, new orders decreased 0.2% and excluding defense, new orders fell 0.6%.
The closely watched proxy for business spending, non-defense capital goods orders, excluding aircrafts, increased 1.4% in April after falling 0.6% in March.
Shipments for manufactured goods declined 0.7% in April, following 0.7% increase in March.
Inventories of manufactured goods increased 1.0% in April following a fall of 1.0% in March.
U.S. Indexes & Yields
The S&P 500 index increased 0.5% to 4,174.13 and the Nasdaq Composite rose 0.6% to 12,808.47.
For the week, the S&P 500 index increased 0.3% and the Nasdaq Composite advanced 2%.
The yield on 2-year Treasury notes increased to 4.59%, 10-year Treasury notes edged up to 3.83% and 30-year Treasury bonds held at 3.99%.
Crude oil rose $0.97 to $72.81 a barrel and natural gas prices rose 2 cents to $2.41 a thermal unit.
U.S. Stock Movers
Costco Wholesale Corporation declined 0.3% to $485.31 after the retailer reported mixed quarterly results.
Ulta Beauty plunged 11.3% to $431.17 despite the company reporting higher revenue and earnings in the first quarter.
The retailer lifted its full year sales outlook slightly and reiterated its earnings per share.
RH declined 5.4% to $240.86 after the home improvement retailer reported better-than-expected sales and earnings in the fiscal first quarter.
However, the retailer estimated higher-than-expected markdowns in the second quarter and estimated weaker-than-expected fiscal second quarter revenue.
Marvell Technology Inc soared 23.7% to $61.45 after the advanced semiconductor company delivered first quarter results ahead of expectations and said second quarter sales are expected to accelerate.
Gap Inc soared 14.2% to $8.48 after the struggling apparel retailer reported improvement in operating margin and a decline in air shipment expenses.
The retailer reported net sales in the first quarter declined 6% to $3.2 billion and 3% decline in comparable sales.
Net loss in the quarter shrank to $18 million from $144 million and diluted loss per share fell to 5 cents from 44 cents a year ago.
European Markets Trim Weekly Losses
European markets traded higher in a tentative rebound after three days of down days and bond yields continued to drift upwards.
The U.S. debt ceiling talks appear to be heading in the right direction and expectations ran high that two sides are close to striking a deal as early as tomorrow, just in time to avoid a federal government default.
The preliminary agreement will hold the federal government spending to fiscal 2023 level for the next two years to raise the U.S. debt ceiling level.
UK Retail Sales Rebounded In April
UK retail sales in April increased 0.5% from March, the Office for National Statistics reported Friday.
Retail sales recovered on the back of higher food and non-food sales from the 1.2% decline in March.
On a yearly basis, retail sales declined 3.0%, following a 3.9% in March.
Food store sales rebounded to 0.7% increase in April after falling 0.8% in March and non-food store sales rose 1.0%, recovering from a 1.8% decline in March.
The online retail sales across all channels increased 0.2% but fuel sales at pump stations declined 2.2% despite the recent decline in fuel prices.
In the three months to April, retail trade sales increased 0.8% from the previous three months, the largest increase since August 2021.
Europe Indexes & Yields
The DAX index increased 1.2% to 15,983.97, the CAC-40 index increased 0.8% to 7,319.18, and the FTSE 100 index increased 0.7% to 7,627.20.
For the week, the DAX index declined 1.6%, the CAC-40 index fell 2.2% and the FTSE index dropped 1.7%.
The yield on 10-year German Bunds inched up to 2.49%, French bonds traded higher to 3.08%, the UK gilts inched higher to 4.32% and Italian bonds increased to 4.37%.
The euro edged lower to $1.07, the British pound to $1.23 and the Swiss franc to 90.22 cents.
Brent crude increased 58 cents to $76.84 a barrel and the Dutch TTF natural gas decreased €0.93 to €24.52 per MWh.
Europe Stock Movers
Mining companies advanced around 3% on the optimism surrounding the U.S. debt deal talks.
Anglo American, Antofagasta and Glencore rose between 2.5% and 3%.
Petrol station operator EG Group and supermarket chain Asda are in a final stage of merging their operations in a deal valued at £10 billion.
Volkswagen Group increased 0.4% to €118.54 after the company and its subsidiary Audi reached a preliminary $85 million settlement with the Texas environmental agency for charges linked to the diesel cheating scandal.
AstraZeneca Plc increased 0.3% to 11,678.0 pence after its two cancer drugs Imfinzi and Lynparza indicated positive results in late-stage trials.
Casino Guichard Perrachon SA declined 8.7% to €6.18 after the grocery chain operator said it has initiated court-backed discussions with its creditors.
Movers: Costco Wholesale, Gap Inc Marvell Technology, RH, Ulta Beauty
Scott Peters
26 May, 2023
New York City
Costco Wholesale Corporation declined 0.3% to $485.31 after the retailer reported mixed quarterly results.
Net sales in the fiscal third quarter ending in May increased 1.9% to $52.6 billion from $51.6 billion and comparable sales at the U.S. stores excluding gasoline sales increased 1.8%.
Total comparable sales across all regions, excluding gasoline sales, increased 3.5% and e-commerce sales declined 9.0%.
Net income attributable to shareholders decreased to $1.3 billion from $1.35 billion and diluted earnings per share fell to $2.93 from $3.04 a year ago.
Ulta Beauty plunged 11.3% to $431.17 despite the company reporting higher revenue and earnings in the first quarter.
Net sales in the first quarter increased 12.3% to $2.6 billion from $2.3 billion and comparable sales slowed to 9.1% from 18.0% a year ago.
Net income increased to $347.1 million from $331.4 million and diluted earnings per share rose to $6.88 from $6.30 a year ago.
The retailer lifted its full year sales outlook slightly and reiterated its earnings per share.
Full year 2023 sales range was revised higher to $11.0 billion from $11.1 billion from the previous range between $10.95 and $11.05 billion.
The company reiterated its comparable sales growth range between 4% and 5% and diluted earnings per share between $24.70 and $25.40.
RH declined 5.4% to $240.86 after the home improvement retailer reported better-than-expected sales and earnings in the fiscal first quarter.
Revenue in the first quarter declined to $739 m.1illion from $957.3 million and net income fell to $41.9 million from $200.7 million and diluted earnings per share fell to $1.76 from $7.22 a year ago.
However, the retailer estimated higher-than-expected markdowns "to clear discontinued inventory" in the second quarter and estimated weaker-than-expected fiscal second quarter revenue.
The retailer raised revenue outlook for fiscal 2023 to a range of $3.0 to $3.1 billion and lowered outlook for adjusted operating margin to a range of 14.5% to 15.5%, which includes an approximate 150 basis point drag due to the ramp up of global expansion.
Marvell Technology Inc soared 23.7% to $61.45 after the advanced semiconductor company delivered first quarter results ahead of expectations and said second quarter sales are expected to accelerate.
Revenue in the fiscal first quarter ending in April declined 9% to $1.32 billion and net loss increased to $168.9 million from $165.7 million and diluted loss per share was flat at 20 cents from a year ago.
The company estimated second quarter revenue of $1.33 billion with a band of 5% and gross margin between 44.3% and 46.8%.
Gap Inc soared 14.2% to $8.48 after the struggling apparel retailer reported improvement in operating margin and a decline in air shipment expenses.
The retailer reported net sales in the first quarter declined 6% to $3.2 billion and 3% decline in comparable sales.
Net loss in the quarter shrank to $18 million from $144 million and diluted loss per share fell to 5 cents from 44 cents a year ago.
Personal Spending Jumped 0.8% In April
Brian Turner
26 May, 2023
New York City
Personal income increased 0.4% from the previous month in April, according to estimates released today by the Bureau of Economic Analysis.
Disposable personal income or DPI increased 0.4% and personal consumption expenditures or PCE increased 0.8%, rising at the fastest pace in three months.
Inflation Measure PCE Index Accelerated In April
Brian Turner
26 May, 2023
New York City
Personal consumption expenditure increased 0.4% in April from the previous month and rose 4.4% from a year ago, the U.S. Bureau of Economic Analysis reported Friday.
Prices for goods increased 0.3% and prices for services increased 0.4% and food prices decreased less than 0.1%, and energy prices increased 0.7%.
Core personal consumption expenditure, which excludes food and energy, accelerated to 0.4% in April from March.
On a yearly basis, core PCE increased 4.7%.
Durable Goods Orders Advanced 1.1% In April
Brian Turner
26 May, 2023
New York City
Durable goods orders increased 1.1% in April, slower than the upwardly revised 3.3% in March, the U.S. Census Bureau announced Friday.
Excluding transportation, new orders decreased 0.2% and excluding defense, new orders fell 0.6%.
The closely watched proxy for business spending, non-defense capital goods orders, excluding aircrafts, increased 1.4% in April after falling 0.6% in March.
Shipments for manufactured goods declined 0.7% in April, following 0.7% increase in March.
Inventories of manufactured goods increased 1.0% in April following a fall of 1.0% in March.
Stocks Extend Gains On Debt Deal Optimism, Inflation Stays Elevated
Barry Adams
26 May, 2023
New York City
Stocks on Wall Street advanced after durable goods orders increased and a measure of inflation rose more than expected in April.
The yield on Treasury notes rose after the personal consumption expenditure price index rose more than expected, indicating that inflation forces are still strong.
The latest report on the PCE index provided another signal for the Fed policymakers to continue its aggressive rate hike.
Fed policymakers are more likely to lift interest rates by at least 25 basis points at the next meeting in June.
Investors also reacted to a barrage of corporate earnings news ahead of Memorial Day weekend.
The White House and Republican leaders are getting closer to a deal after hard negotiations on Thursday.
Debt ceiling negotiations appear to be on track after President Joe Biden and democrats agreed to hold spending level at fiscal year 2023 level for the next two years to increase debt ceiling level.
Investors welcomed the likely debt agreement, but the deal still needs approvals by the Senate and House where both parties have to deal with recalcitrant members.
Persona Consumption Expenditure Inflation Index Stays Elevated
Personal consumption expenditure increased 0.4% in April from the previous month and rose 4.4% from a year ago, the U.S. Bureau of Economic Analysis reported Friday.
Prices for goods increased 0.3% and prices for services increased 0.4% and food prices decreased less than 0.1%, and energy prices increased 0.7%.
Core personal consumption expenditure, which excludes food and energy, accelerated to 0.4% in April from March.
On a yearly basis, core PCE increased 4.7%.
Personal Spending Jumped 0.8% In April
Personal income increased 0.4% from the previous month in April, according to estimates released today by the Bureau of Economic Analysis.
Disposable personal income or DPI increased 0.4% and personal consumption expenditures or PCE increased 0.8%, rising at the fastest pace in three months.
Durable Goods Orders Advanced 1.1%
Durable goods orders increased 1.1% in April, slower than the upwardly revised 3.3% in March, the U.S. Census Bureau announced Friday.
Excluding transportation, new orders decreased 0.2% and excluding defense, new orders fell 0.6%.
The closely watched proxy for business spending, non-defense capital goods orders, excluding aircrafts, increased 1.4% in April after falling 0.6% in March.
Shipments for manufactured goods declined 0.7% in April, following 0.7% increase in March.
Inventories of manufactured goods increased 1.0% in April following a fall of 1.0% in March.
U.S. Indexes & Yields
The S&P 500 index increased 0.5% to 4,174.13 and the Nasdaq Composite rose 0.6% to 12,808.47.
The yield on 2-year Treasury notes increased to 4.59%, 10-year Treasury notes edged up to 3.83% and 30-year Treasury bonds held at 3.99%.
Crude oil rose $0.97 to $72.81 a barrel and natural gas prices rose 2 cents to $2.41 a thermal unit.
U.S. Stock Movers
Costco Wholesale Corporation declined 0.3% to $485.31 after the retailer reported mixed quarterly results.
Ulta Beauty plunged 11.3% to $431.17 despite the company reporting higher revenue and earnings in the first quarter.
The retailer lifted its full year sales outlook slightly and reiterated its earnings per share.
RH declined 5.4% to $240.86 after the home improvement retailer reported better-than-expected sales and earnings in the fiscal first quarter.
However, the retailer estimated higher-than-expected markdowns in the second quarter and estimated weaker-than-expected fiscal second quarter revenue.
Marvell Technology Inc soared 23.7% to $61.45 after the advanced semiconductor company delivered first quarter results ahead of expectations and said second quarter sales are expected to accelerate.
Gap Inc soared 14.2% to $8.48 after the struggling apparel retailer reported improvement in operating margin and a decline in air shipment expenses.
The retailer reported net sales in the first quarter declined 6% to $3.2 billion and 3% decline in comparable sales.
Net loss in the quarter shrank to $18 million from $144 million and diluted loss per share fell to 5 cents from 44 cents a year ago.
Europe Movers: Asda, EG Group, AstraZeneca, Casino Guicahrd, Volkswagen
Bridgette Randall
26 May, 2023
Frankfurt
The DAX index increased 0.2% to 15,823.78, the CAC-40 index increased 0.3% to 7,250.31, and the FTSE 100 index increased 0.2% to 7,584.15.
For the week, the DAX index declined 2.7%, the CAC-40 index fell 3.1% and the CAC-40 index dropped 2.2%.
Mining companies advanced around 3% on the optimism surrounding the U.S. debt deal talks.
Anglo American, Antofagasta and Glencore rose between 2.5% and 3%.
Petrol station operator EG Group and supermarket chain Asda are in a final stage of merging their operations in a deal valued at £10 billion.
Volkswagen Group increased 0.4% to €118.54 after the company and its subsidiary Audi reached a preliminary $85 million settlement with the Texas environmental agency for charges linked to the diesel cheating scandal.
AstraZeneca Plc increased 0.3% to 11,678.0 pence after its two cancer drugs Imfinzi and Lynparza indicated positive results in late-stage trials.
Casino Guichard Perrachon SA declined 8.7% to €6.18 after the grocery chain operator said it has initiated court-backed discussions with its creditors.
"The conciliation procedure only concerns the financial debt of Casino Guichard-Perrachon SA and certain of its subsidiaries and will have no impact on the group's relations with its operational partners (in particular its suppliers) and its employees," said the retailer in a statement Friday.
On May 4, the French retailer said it is on track to sell its assets and cut its total outstanding debt.
The Group continued its disposal plan with several assets sold in France, including Sudeco, its stake in GreenYellow, and real estate assets, increasing total asset sale in France to €4.2 billion against the target of €4.5 billion.
In Latin America, the company sold its 18.8% stake in Assaí for €723 million.
The debt load was lowered by €0.8 billion from a year ago.
The retailer and its holding company controlled by Jean Charles Naouri has about €4.9 billion of debt due by 2025.
The sixth largest French supermarket company is in debt restructuring from 2019.
European Markets Trim Weekly Losses, UK Retail Sales Rebounded
Bridgette Randall
26 May, 2023
Frankfurt
European markets traded higher in a tentative rebound after three days of down days and bond yields continued to drift upwards.
The U.S. debt ceiling talks appear to be heading in the right direction and expectations ran high that two sides are close to striking a deal as early as tomorrow, just in time to avoid a federal government default.
The preliminary agreement will hold the federal government spending to fiscal 2023 level for the next two years to raise the U.S. debt ceiling level.
UK Retail Sales Rebounded In April
UK retail sales in April increased 0.5% from March, the Office for National Statistics reported Friday.
Retail sales recovered on the back of higher food and non-food sales from the 1.2% decline in March.
On a yearly basis, retail sales declined 3.0%, following a 3.9% in March.
Food store sales rebounded to 0.7% increase in April after falling 0.8% in March and non-food store sales rose 1.0%, recovering from a 1.8% decline in March.
The online retail sales across all channels increased 0.2% but fuel sales at pump stations declined 2.2% despite the recent decline in fuel prices.
In the three months to April, retail trade sales increased 0.8% from the previous three months, the largest increase since August 2021.
Europe Indexes & Yields
The DAX index increased 0.2% to 15,823.78, the CAC-40 index increased 0.3% to 7,250.31, and the FTSE 100 index increased 0.2% to 7,584.15.
For the week, the DAX index declined 2.7%, the CAC-40 index fell 3.1% and the FTSE 100 index dropped 2.2%.
The yield on 10-year German Bunds inched up to 2.49%, French bonds traded higher to 3.08%, the UK gilts inched higher to 4.32% and Italian bonds increased to 4.37%.
The euro edged lower to $1.07, the British pound to $1.23 and the Swiss franc to 90.22 cents.
Brent crude increased 46 cents to $76.75 a barrel and the Dutch TTF natural gas decreased €0.55 to €24.91 per MWh.
Europe Stock Movers
Mining companies advanced around 3% on the optimism surrounding the U.S. debt deal talks.
Anglo American, Antofagasta and Glencore rose between 2.5% and 3%.
Petrol station operator EG Group and supermarket chain Asda are in a final stage of merging their operations in a deal valued at £10 billion.
Volkswagen Group increased 0.4% to €118.54 after the company and its subsidiary Audi reached a preliminary $85 million settlement with the Texas environmental agency for charges linked to the diesel cheating scandal.
AstraZeneca Plc increased 0.3% to 11,678.0 pence after its two cancer drugs Imfinzi and Lynparza indicated positive results in late-stage trials.
Casino Guichard Perrachon SA declined 8.7% to €6.18 after the grocery chain operator said it has initiated court-backed discussions with its creditors.
Stocks Rally On Wall Street While Mood In Washington Sours
Barry Adams
25 May, 2023
New York City
Stocks powered ahead despite the rising uncertainties about the debt ceiling talks and the rising prospects of federal government default on its obligations.
The rift between the White House and the Republican leaders appears to be widening by the day. Republicans are leveraging their slim majority in the House and accomplish their longstanding demands to cut discretionary spending but keep the inflated defense and military budget intact.
The central sticking point in negotiations is focused on the overall spending, Republicans are demanding to roll back the fiscal year spending at the year 2022 level.
Meeting that baseline spending objective would require cutting about 15% to 20% spending across several government departments including transportation, healthcare and education.
Republicans are also seeking large cuts in Medicaid, lift means test and work requirements for the food stamps or Supplemental Nutrition Assistance Program and simplify permits for new projects in the energy and mining sector.
Fitch Ratings Placed U.S. Debt On Negative Watch List
Fitch Ratings, one of the leading three rating agencies, belatedly placed the U.S. debt on a negative watch list.
Fitch placed the U.S. long term debt rating AAA on a watch list with a potential downward rating if lawmakers fail to agree on lifting the debt ceiling.
The rating agency cited ongoing lack of agreement among lawmakers to raise the U.S. federal government debt in time increases the risk that the government may miss some payments.
The rating agency was quick to note that it anticipates an agreement before the so-called X-date anytime after June 1 when the government is expected to run out of cash.
S&P Global and Moody's have not placed the U.S. debt rating on a watch list so-far, despite the growing uncertainties surrounding the debt ceiling talks and the possibilty of a first ever debt default.
S&P Global lowered its debt rating of the U.S. government debt in 2011 to AA+ from AAA after the previous protracted debt ceiling negotiations in 2011, and left it unrevised since then.
Lower debt rating translates to higher interest rate, meaning higher cost of borrowing.
US First Quarter GDP Revised Higher
U.S. GDP in the first quarter was revised higher to 1.3% in the first quarter, from the first estimate of 1.1%, the Bureau of Economic Analysis reported Thursday.
Despite the upward revision, economic growth in the first quarter is the weakest since the second quarter 2022.
Consumer spending accelerated in the first quarter to 3.8% from the previous estimate of 3.7% and private inventory estimate subtracted 2.1 percentage points, less than 2.3 percentage point estimated in the first estimate.
Net external demand contributed positively to the latest GDP revision after exports rose at a faster pace than imports.
Nonresidential fixed investment was revised upward to 1.4% from 0.7% and public spending to 5.2% from 4.7% in the first estimate respectively.
However, residential fixed investment shrank at the faster pace of 5.4% from 4.2% in the first estimate.
U.S. Indexes & Yields
The S&P 500 index increased 0.8% to 4,147.81 and the Nasdaq Composite rose 1.6% to 12,675.52.
The yield on 2-year Treasury notes increased to 4.47%, 10-year Treasury notes edged up to 3.76% and 30-year Treasury bonds held at 3.98%.
Crude oil rose $1.51 to $72.83 a barrel and natural gas prices rose 2 cents to $2.39 a thermal unit.
U.S. Stock Movers
Nvidia Corporation soared 23.5% to $375.16 after the advanced chip maker reported better-than-expected quarterly sales and earnings.
The company also lifted its annual outlook on the back of demand for its AI chip.
Other semiconductor stocks traded higher after results from Nvidia boosted the prospects for the sector.
Taiwan Semiconductor Manufacturing Company Ltd increased 8.7% to $97.94 and Advanced Micro Devices, Inc gained 7.8% to $116.48.
Best Buy Company Inc jumped 1.9% to $70.49 after the electronics retailer reported slightly better-than-expected adjusted earnings in its latest quarter.
American Eagle Outfitters Inc dropped 16.4% to $10.30 after the specialty apparel retailer estimated second quarter revenue to decline on tough comparison.
U.S. Default Worries Drag Down European Markets Second Day
European markets lacked direction in weak sentiment after German economic growth was revised lower.
Benchmark indexes trended lower and Germany's first quarter economic growth was revised to 0.3% decline, second quarterly contraction in a row, indicating technical recession.
The White House and the Republican leaders reported progress in the latest round of talks but an agreement was still further than expected.
The U.S. federal government is expected to run out of cash in six days but leaders of both parties showed no urgency to strike a deal, suggesting that any deal may be struck only in the last hour.
Fitch Ratings placed the U.S. debt with "AAA" rating on watch with a potential downgrade, the first rating agency to take the proactive step.
Two other leading agencies, S&P Global and Moody's, have yet to announce their rating outlook, despite the heightened level of partisanship that could lead to catastrophic debt default.
Investors rely on credit ratings as one of the metrics in assessing the risk profiles of governments and companies.
German Economy In Technical Recession
Germany's GDP contracted at 0.3% in the first quarter from the previous quarter, the Federal Office of Statistics reported Thursday.
The first quarter GDP adjusted for calendar and seasonal factors was revised to a decline from the preliminary estimate of flat growth on weak household consumption.
The economy contracted 0.2% from a year ago in the first quarter.
Germany's economy declined 0.5% in the fourth quarter and entered into a technical recession with two quarterly declines in a row.
Household consumption declined 1.2% in the quarter after elevated prices forced consumers to trim spending, automobile sales were also down after the government withdrew the subsidy for electric and hybrid vehicles.
Moreover, government spending fell 4.9% but gross fixed capital formation in machinery and equipment increased 3.2% and net exports contributed 0.7% to the GDP in the first quarter.
Europe Indexes & Yields
The DAX index decreased 0.3% to 15,793.80, the CAC-40 index fell 0.3% to 7,229.27, and the FTSE 100 index decreased 0.7% to 7,570.87.
The yield on 10-year German Bunds inched up to 2.47%, French bonds traded higher to 3.04%, the UK gilts inched higher to 4.31% and Italian bonds increased to 4.31%.
The euro edged lower to $1.075, the British pound to $1.234 and the Swiss franc to 90.55 cents.
Brent crude declined $2.61 to $75.71 a barrel and the Dutch TTF natural gas decreased €2.61 to €25.23 per MWh.
Europe Stock Movers
Deutsche Boerse AG declined 1.06% to €163.90 after the German stock market operator made a formal offer to acquire SimCorp at 735.0 Danish kroner per share.
Johnson Matthey Plc declined 1.7% to 1,837.0 pence after the UK-based chemical company reported a decline in annual profit.
Hill & Smith Plc advanced 4% to 1,420.45 pence after the company reported a record operating performance in the four months to the end of April.
Renewi Plc dropped 1.9% to 575.0 pence after the waste-to-product company reported a decline in the fiscal year 2023 on higher costs and volatility in recyclate prices.
Movers: American Eagle Outfitters, BestBuy, Dollar Tree, Nvidia, Taiwan Semi
Scott Peters
25 May, 2023
New York City
Nvidia Corporation soared 23.5% to $375.16 after the advanced chip maker reported better-than-expected quarterly sales and earnings.
The company also lifted its annual outlook on the back of demand for its AI chip.
Revenue in the fiscal first quarter declined 13% from a year ago and increased 19% from the previous quarter to $7.19 billion.
Net income increased 26% to $2.0 billion from $1.6 billion and diluted earnings per share rose to 82 cents from 64 cents a year ago.
The company estimated fiscal second quarter revenue of $11.0 billion with a band of 2% and GAAP gross margin of 68.5%.
In the first quarter of fiscal 2024, NVIDIA returned to shareholders $99 million in cash dividends and the company will pay its next quarterly cash dividend of 4 cents per share on June 30, to all shareholders of record on June 8.
Other semiconductor stocks traded higher after results from Nvidia boosted the prospects for the sector.
Taiwan Semiconductor Manufacturing Company Ltd increased 8.7% to $97.94 and Advanced Micro Devices, Inc gained 7.8% to $116.48.
Best Buy Company Inc jumped 1.9% to $70.49 after the electronics retailer reported slightly better-than-expected adjusted earnings in its latest quarter ending in April.
Revenue in the fiscal 2024 first quarter declined to $9.5 billion from $10.6 billion, driven by 11% fall in domestic revenue to $8.8 billion on 10.4% fall in comparable sales.
Net income declined to $241 million from $341 million and diluted earnings per share fell to $1.11 from $1.49 a year ago.
In the fiscal first quarter, the company returned a total of $281 million to shareholders through dividends of $202 million and share repurchases of $79 million.
The electronics retailer reiterated its fiscal 2024 sales outlook between $43.8 billion and $45.2 billion and comparable sales to decline between 3% and 6%.
American Eagle Outfitters Inc dropped 16.4% to $10.30 after the specialty apparel retailer estimated second quarter revenue to decline on tough comparison.
Revenue in the first quarter increased 2% to $1.1 billion, driven by 5% increase in retail store revenue and 4% decline in online sales.
Net income declined to $18.5 million from $31.7 million and diluted earnings per share fell to 9 cents from 16 cents a year ago.
The retailer estimated second quarter revenue to decline in "low single-digits" compared to last year and operating income in the range of $25 million to $35 million.
Dollar Tree Inc dropped 12.5% to $135.50 after the deep discount retailer reported mixed quarterly results.
Consolidated net sales increased 6.1% to $7.32 billion, driven by companywide same store sales increase of 4.8%.
Dollar Tree same store sales increased 3.4%, driven by a 5.5% increase in traffic, partially offset by a 2.1% decline in average ticket.
Family Dollar’s 6.6% same store sales increase comprised of a 4.3% increase in traffic along with a 2.2% increase in average ticket.
Companywide net sales increased to $7.3 billion from $6.9 billion and net income declined to $299 million from $536.4 million and diluted earnings per share fell to $1.35 from $2.37 a year ago.
In the quarter, the company repurchased 1.025 million shares for $151.1 million.
The retailer guided full-year sales between $30 billion and $40.5 billion, driven by low- to mid-single-digit comparable same store sales.
The company guided second quarter sales between $7.0 billion and $7.2 billion and same store sales to increase in mid-single-digit sales and earnings per share between 79 cents and 89 cents.
U.S. First Quarter GDP Revised On Upwardly Revised Consumer and Government Spending
Brian Turner
25 May, 2023
New York City
U.S. GDP in the first quarter was revised higher to 1.3% in the first quarter, from the first estimate of 1.1%, the Bureau of Economic Analysis reported Thursday.
Despite the upward revision in the second estimate, economic growth in the first quarter is the weakest since the second quarter 2022.
The statistical agency will provide a third estimate of the economic growth in about three months, which will be the final estimate for the first quarter.
Consumer spending accelerated in the first quarter to 3.8% from the previous estimate of 3.7% and private inventory estimate subtracted 2.1 percentage points, less than 2.3 percentage point estimated in the first estimate.
Net external demand contributed positively to the latest GDP revision after exports rose at a faster pace than imports.
Nonresidential fixed investment was revised upward to 1.4% from 0.7% and public spending to 5.2% from 4.7% in the first estimate respectively.
However, residential fixed investment shrank at the faster pace of 5.4% from 4.2% in the first estimate.
White House and Republicans Struggle to Find Compromise and U.S. Debt Rating On Negative Watch List
Barry Adams
25 May, 2023
New York City
U.S. debt ceiling talks weighed on market averages and stocks turned lower after one of the leading three rating agencies belatedly placed the U.S. debt on a negative watch list.
Major averages declined after Fitch Ratings placed the U.S. long term debt rating AAA on a watch list with downward outlook.
The rating agency cited ongoing lack of agreement among lawmakers to raise the U.S. federal government debt in time increases the risk that the government may miss some payments.
The rating agency was quick to note that it anticipates an agreement before the so-called X-date anytime after June 1 when the government is expected to run out of cash.
S&P Global lowered its debt rating of the U.S. government debt in 2011 to AA+ from AAA after the previous protracted debt ceiling negotiations in 2011, and left it unrevised since then.
Investors rely on the so-called independent rating as one of the metrics in assessing risk profiles of governments and corporations.
Lower debt rating translates to higher interest rate, meaning higher cost of borrowing.
US First Quarter GDP Revised Higher
U.S. GDP in the first quarter was revised higher to 1.3% in the first quarter, from the first estimate of 1.1%, the Bureau of Economic Analysis reported Thursday.
Despite the upward revision, economic growth in the first quarter is the weakest since the second quarter 2022.
Consumer spending accelerated in the first quarter to 3.8% from the previous estimate of 3.7% and private inventory estimate subtracted 2.1 percentage points, less than 2.3 percentage point estimated in the first estimate.
Net external demand contributed positively to the latest GDP revision after exports rose at a faster pace than imports.
Nonresidential fixed investment was revised upward to 1.4% from 0.7% and public spending to 5.2% from 4.7% in the first estimate respectively.
However, residential fixed investment shrank at the faster pace of 5.4% from 4.2% in the first estimate.
U.S. Indexes & Yields
The S&P 500 index increased 0.5% to 4,136.41 and the Nasdaq Composite rose 1.4% to 12,654.75.
The yield on 2-year Treasury notes increased to 4.47%, 10-year Treasury notes edged up to 3.76% and 30-year Treasury bonds held at 3.98%.
Crude oil rose $1.51 to $72.83 a barrel and natural gas prices rose 2 cents to $2.39 a thermal unit.
U.S. Stock Movers
Nvidia Corporation soared 23.5% to $375.16 after the advanced chip maker reported better-than-expected quarterly sales and earnings.
The company also lifted its annual outlook on the back of demand for its AI chip.
Other semiconductor stocks traded higher after results from Nvidia boosted the prospects for the sector.
Taiwan Semiconductor Manufacturing Company Ltd increased 8.7% to $97.94 and Advanced Micro Devices, Inc gained 7.8% to $116.48.
Best Buy Company Inc jumped 1.9% to $70.49 after the electronics retailer reported slightly better-than-expected adjusted earnings in its latest quarter.
American Eagle Outfitters Inc dropped 16.4% to $10.30 after the specialty apparel retailer estimated second quarter revenue to decline on tough comparison.
Europe Movers: Deutsche Boerse, Hill &Smith, Johnson Matthey, Renewi
Bridgette Randall
25 May, 2023
Frankfurt
Deutsche Boerse AG declined 1.06% to €163.90 after the German stock market operator made a formal offer to acquire SimCorp at 735.0 Danish kroner per share.
Johnson Matthey Plc declined 1.7% to 1,837.0 pence after the UK-based chemical company reported a decline in annual profit.
Revenue in the fiscal year 2023 declined 7% to £14.9 billion from £16.0 billion and underlying profit from continuing operations dropped 20% to £326 million from £407 million and earnings per share fell to 178.6 pence from 213.2 pence a year ago.
Hill & Smith Plc advanced 4% to 1,420.45 pence after the company reported a record operating performance in the four months to the end of April.
Revenue in the four-month period increased 18% in constant currencies and 10% on an organic basis compared to relatively soft market conditions in the previous year.
The company said full-year operating profit is expected to be "ahead of the top end of the analysts' estimates."
Renewi Plc dropped 1.9% to 575.0 pence after the waste-to-product company reported a decline in the fiscal year 2023 on higher costs and volatility in recyclate prices.
Revenue in the fiscal 2023 increased to €1,892 million from €1,869 million and statutory after-tax profit declined to €66.6 million from €75.4 million a year ago.
Basic earnings per share fell to 79 cents from 93 cents a year ago.
The company guided operating performance in the fiscal year 2024 to match market expectations and recycled metal, paper, and plastics prices are expected to be more stable around current levels in the fiscal year, "except wood prices which remain strong."
European Markets Weak On U.S. Default Worries, German Economy In Technical Recession
Bridgette Randall
25 May, 2023
Frankfurt
European markets lacked direction in weak sentiment after German economic growth was revised lower.
Benchmark indexes trended lower and Germany's first quarter economic growth was revised to 0.3% decline, second quarterly contraction in a row, indicating technical recession.
The White House and the Republican leaders reported progress in the latest round of talks but an agreement was still further than expected.
The U.S. federal government is expected to run out of cash in six days but leaders of both parties showed no urgency to strike a deal, suggesting that any deal may be struck only in the last hour.
Fitch Ratings placed the U.S. debt with "AAA" rating on watch with a potential downgrade, the first rating agency to take the proactive step.
Two other leading agencies, S&P Global and Moody's, have yet to announce their rating outlook decision, despite the heightened level of partisanship that could lead to catastrophic debt default.
Investors rely on credit ratings as one of the metrics in assessing the risk profiles of governments and companies.
German Economy In Technical Recession
Germany's GDP contracted at 0.3% in the first quarter from the previous quarter, the Federal Office of Statistics reported Thursday.
The first quarter GDP adjusted for calendar and seasonal factors was revised to a decline from the preliminary estimate of flat growth on weak household consumption.
The economy contracted 0.2% from a year ago in the first quarter.
Germany's economy declined 0.5% in the fourth quarter and entered into a technical recession with two quarterly declines in a row.
Household consumption declined 1.2% in the quarter after elevated prices forced consumers to trim spending, automobile sales were also down after the government withdrew the subsidy for electric and hybrid vehicles.
Moreover, government spending fell 4.9% but gross fixed capital formation in machinery and equipment increased 3.2% and net exports contributed 0.7% to the GDP in the first quarter.
Europe Indexes & Yields
The DAX index decreased 0.008% to 15,842.47, the CAC-40 index fell 0.1% to 7,244.50, and the FTSE 100 index decreased 0.1% to 7,617.86.
The yield on 10-year German Bunds inched up to 2.47%, French bonds traded higher to 3.04%, the UK gilts inched higher to 4.31% and Italian bonds increased to 4.31%.
The euro edged lower to $1.075, the British pound to $1.234 and the Swiss franc to 90.55 cents.
Brent crude declined $1.02 to $77.33 a barrel and the Dutch TTF natural gas decreased €1.49 to €26.30 per MWh.
Europe Stock Movers
Deutsche Boerse AG declined 1.06% to €163.90 after the German stock market operator made a formal offer to acquire SimCorp at 735.0 Danish kroner per share.
Johnson Matthey Plc declined 1.7% to 1,837.0 pence after the UK-based chemical company reported a decline in annual profit.
Hill & Smith Plc advanced 4% to 1,420.45 pence after the company reported a record operating performance in the four months to the end of April.
Renewi Plc dropped 1.9% to 575.0 pence after the waste-to-product company reported a decline in the fiscal year 2023 on higher costs and volatility in recyclate prices.