Market Update
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.
S&P 500 Extend Losses On Dimming Prospects of Last Minute Debt Deal
Barry Adams
24 May, 2023
New York City
U.S. stocks spent most of the session in the negative territory after debt ceiling talks stalled and Fed minutes showed a slight tilt in favor rate hike pause at the next meeting.
Political leaders of both parties sent mixed signals about the debt ceiling talks and negotiators are showing no real sense or urgency, indicating that a deal may be struck only in the final hours of the deadline.
Republicans are also questioning the possible federal government default date around June 1 and several far right Republican congressmen are asking for deeper cuts in federal government spending.
For the agreement to become a bill, negotiators have to strike a deal by tomorrow, which is looking unlikely after House Speaker McCarthy confirmed that negotiations are struck on spending levels.
President Biden has offered to freeze spending over the next two years and rescind spending COVID funds that have not been spent so far.
Higher debt limit does not mean higher spending, the deal only increases the limit to cover the federal government spending that is already authorized by the Congress.
The debt ceiling talks are turning into budget talks as lawmakers of both parties jockey to preserve their preferred programs
Federal Reserve officials were divided at the last rate setting meeting with "several" members advocating a rate hike pause because the economy is slowing and additional "policy firming" may not be necessary "after this meeting."
The minutes of the meeting also noted "some" members noted that inflation was cooling at "unacceptably slow pace" and a rate hike may be necessary at the next meeting.
U.S. Indexes & Yields
The S&P 500 index decreased 0.7% to 4,115.26 and the Nasdaq Composite fell 0.6% to 12,486.56.
The yield on 2-year Treasury notes increased to 4.30%, 10-year Treasury notes edged up to 3.69% and 30-year Treasury bonds held at 3.94%.
Crude oil rose $1.02 to $73.92 a barrel and natural gas prices rose 5 cents to $2.37 a thermal unit.
U.S. Stock Movers
Lowe's Companies declined 1.6% to 12,461.55 after the home improvement retailer reported better-than-expected sales and earnings but the company lowered its annual outlook.
Abercrombie & Fitch Company soared 24.5% to $28.64 after the specialty apparel retailer reported higher-than-expected profit and lifted its full-year outlook.
Kohl's Corporation soared 10.1% to $21.21 after the department store chain reported better-than-expected quarterly results.
Sales in the first quarter declined 3.3% from a year ago $3.36 billion and net income was unchanged at $14 million and diluted earnings per share fell to 11 cents from 13 cents a year ago.
Zoom Video Communications Inc declined for the second day in a row and fell to $64.26 after the company reported higher sales but a sharp plunge in earnings.
Earnings in the first quarter declined to $15.44 million from $113.66 million and diluted earnings per share plunged to 5 cents from 37 cents a year ago.
BJ's Wholesale Club Holdings Inc decreased 1.5% to $63.80 after the membership warehouse club reported weaker-than-expected sales.
Revenue in the first quarter increased to $4.72 billion from $4.49 billion and net income increased to $116.0 million from $112.4 million and diluted earnings per share rose to 85 cents from 82 cents a year ago.
Children's Place Inc plunged 24.7% to $17.93 after the specialty retailer reported a decline in earnings and a loss in the first quarter.
Revenue declined 11.2% to $321.64 million from $362.35 million and the retailer swung to a net loss of $28.83 million compared to a profit of $19.83 million and diluted earnings per share was ($2.33) compared to $1.43 a year ago.
European Markets Drop 2% On U.S. Debt Default Worries
European stocks turned sharply lower on the lack of progress in the U.S. debt ceiling talks.
Benchmark indexes in Frankfurt and Paris dropped 1.7% as debt ceiling talks appear to stall.
The U.S. federal government is expected to default on its obligation sometimes in the first two weeks in June.
In addition, three leading rating agencies remained silent on the the U.S. debt rating outlook for the third week in a row, indicating their double standards while reviewing sovereign debts.
Financial services and energy explorers were among the leading decliners amid the U.S. debt ceiling talks uncertainties and bond yields continued to advance in Europe and in the U.S.
UK Inflation Slows to 8.7% In April
Consumer prices rose at a slower pace of 8.7% in April from 10.1% in March, the Office for National Statistics reported Wednesday.
Consumer inflation eased to the slowest pace since March 2022 because of a sharp slowdown in electricity and gas prices.
Housing & utilities inflation eased to 12.3% from 26.1% in March, with the cost for electricity, gas & other fuels rising at a a slower pace of 24.3% compared to 85.6% in the previous month.
However, food and alcoholic beverages inflation hovered at 19.1%, close to record 19.2% in March.
Core inflation, which excludes food and energy, accelerated to 6.8% from 6.2% in March, the highest rate since March 1992.
Europe Indexes & Yields
The DAX index decreased 1.9% to 15,842.13, the CAC-40 index fell 1.7% to 7,253.48, and the FTSE 100 index dropped 1.8% to 7,627.10.
The yield on 10-year German Bunds inched up to 2.43%, French bonds traded higher to 3.01%, the UK gilts inched higher to 4.20% and Italian bonds increased to 4.29%.
The euro edged lower to $1.076, the British pound to $1.236 and the Swiss franc to 90.22 cents.
Brent crude increased $1.05 to $77.87 a barrel and the Dutch TTF natural gas decreased €1.22 to €27.91 per MWh.
Europe Stock Movers
Tullow Oil Plc edged up a fraction to 25.01 pence after the UK-based oil company lifted its full-year crude oil production outlook.
Kingfisher Plc declined 1.9% to 242.10 pence after the UK-based home improvement chain reported comparable same store sales decreased in the first quarter.
Aviva Plc declined 5.3% to 401.38 pence after the financial services company reported a slowdown in asset inflow in its wealth management division.
Ricardo Plc declined 0.4% to 570.01 pence after the UK-based engineering company reiterated its full-year outlook.
Movers: Abercrombie & Fitch, BJ's Wholesale, Children's Place, Kohl's, Lowe's, Zoom Video
Scott Peters
24 May, 2023
New York City
Abercrombie & Fitch Company soared 24.5% to $28.64 after the specialty apparel retailer reported higher-than-expected profit and lifted its full-year outlook.
Net sales in the first quarter increased 3% to $835 million from $812 million and the company swung to a profit of $17.8 million from a loss of $14.8 million and diluted earnings per share was 33 cents compared to a loss of 32 cents a year ago.
The retailer revised its full-year net sales growth estimate to between 2% and 4% from the previous estimate of an increase between 1% and 3% from $3.7 billion sales in 2022.
BJ's Wholesale Club Holdings Inc decreased 1.5% to $63.80 after the membership warehouse club reported weaker-than-expected sales.
Revenue in the first quarter increased to $4.72 billion from $4.49 billion and net income increased to $116.0 million from $112.4 million and diluted earnings per share rose to 85 cents from 82 cents a year ago.
Children's Place Inc plunged 24.7% to $17.93 after the specialty retailer reported a decline in earnings and a loss in the first quarter.
Revenue declined 11.2% to $321.64 million from $362.35 million and the retailer swung to a net loss of $28.83 million compared to a profit of $19.83 million and diluted earnings per share was ($2.33) compared to $1.43 a year ago.
Kohl's Corporation soared 10.1% to $21.21 after the department store chain reported better-than-expected quarterly results.
Sales in the first quarter declined 3.3% from a year ago $3.36 billion and net income was unchanged at $14 million and diluted earnings per share fell to 11 cents from 13 cents a year ago.
Lowe's Companies declined 1.6% to 12,461.55 after the home improvement retailer reported better-than-expected sales and earnings but the company lowered its annual outlook.
Comparable sales fell 4.3%, driven by lumber deflation, unfavorable weather and lower DIY discretionary sales.
Net sales in the first quarter declined to $22.3 billion from $23.7 billion and net income fell to $2.26 billion from $2.33 billion and diluted earnings per share rose to $3.77 from $3.51 a year ago.
Sale of Canada retail operation contributed to 10 cents of earnings per share in the quarter.
Lowe's estimated full-year sales in the range of $87 billion to $89billion, lower than the previously estimated range between $88 billion and $90 billion.
Comparable sales are estimated to decline between 2% and 4%, compared to the previous estimate between flat and 2% decline.
Zoom Video Communications Inc declined for the second day in a row and fell to $64.26 after the company reported higher sales but a sharp plunge in earnings.
Earnings in the first quarter declined to $15.44 million from $113.66 million and diluted earnings per share plunged to 5 cents from 37 cents a year ago.
With U.S. Debt Ceiling Talks Entering Critical Phase, Investors Face Rising Risks of U.S. Debt Default
Barry Adams
24 May, 2023
New York City
Stocks struggled on Wall Street as the debt default deadline was only a week away with no measurable progress.
Political leaders of both parties are sending mixed signals about the debt ceiling talks and negotiators are showing no real sense or urgency, indicating that a deal may be struck only in the final hours of the deadline.
Republicans are also questioning the possible federal government default date around June 1 and several far right Republican congressmen are asking for deep cuts in federal government spending.
For the agreement to become a bill, negotiators have to strike a deal by tomorrow, which is increasingly looking unlikely.
President Biden has offered to freeze spending over the next two years and rescind spending COVID funds that have not been spent so far.
Higher debt limit does not mean higher spending, the deal only increases the limit to cover the federal government spending that is already authorized by the Congress.
U.S. Indexes & Yields
The S&P 500 index decreased 0.8% to 4,114.51 and the Nasdaq Composite fell 0.8% to 12,461.55.
The yield on 2-year Treasury notes increased to 4.30%, 10-year Treasury notes edged up to 3.69% and 30-year Treasury bonds held at 3.94%.
Crude oil rose $1.02 to $73.92 a barrel and natural gas prices rose 5 cents to $2.37 a thermal unit.
U.S. Stock Movers
Lowe's Companies declined 1.6% to 12,461.55 after the home improvement retailer reported better-than-expected sales and earnings but the company lowered its annual outlook.
Abercrombie & Fitch Company soared 24.5% to $28.64 after the specialty apparel retailer reported higher-than-expected profit and lifted its full-year outlook.
Kohl's Corporation soared 10.1% to $21.21 after the department store chain reported better-than-expected quarterly results.
Sales in the first quarter declined 3.3% from a year ago $3.36 billion and net income was unchanged at $14 million and diluted earnings per share fell to 11 cents from 13 cents a year ago.
Zoom Video Communications Inc declined for the second day in a row and fell to $64.26 after the company reported higher sales but a sharp plunge in earnings.
Earnings in the first quarter declined to $15.44 million from $113.66 million and diluted earnings per share plunged to 5 cents from 37 cents a year ago.
BJ's Wholesale Club Holdings Inc decreased 1.5% to $63.80 after the membership warehouse club reported weaker-than-expected sales.
Revenue in the first quarter increased to $4.72 billion from $4.49 billion and net income increased to $116.0 million from $112.4 million and diluted earnings per share rose to 85 cents from 82 cents a year ago.
Children's Place Inc plunged 24.7% to $17.93 after the specialty retailer reported a decline in earnings and a loss in the first quarter.
Revenue declined 11.2% to $321.64 million from $362.35 million and the retailer swung to a net loss of $28.83 million compared to a profit of $19.83 million and diluted earnings per share was ($2.33) compared to $1.43 a year ago.
European Markets Plunge 1.7%, Bond Yields Inch Higher
Bridgette Randall
24 May, 2023
Frankfurt
European stocks turned sharply lower on the lack of progress in the U.S. debt ceiling talks.
Benchmark indexes in Frankfurt and Paris dropped 1.7% as debt ceiling talks appear to stall.
The U.S. federal government is expected to default on its obligation sometimes in the first two weeks in June.
In addition, three leading rating agencies remained silent on the the U.S. debt rating outlook for the third week in a row, indicating their double standards while reviewing sovereign debts.
Financial services and energy explorers were among the leading decliners amid the U.S. debt ceiling talks uncertainties and bond yields continued to advance in Europe and in the U.S.
UK Inflation Slows to 8.7% In April
Consumer prices rose at a slower pace of 8.7% in April from 10.1% in March, the Office for National Statistics reported Wednesday.
Consumer inflation eased to the slowest pace since March 2022 because of a sharp slowdown in electricity and gas prices.
Housing & utilities inflation eased to 12.3% from 26.1% in March, with the cost for electricity, gas & other fuels rising at a a slower pace of 24.3% compared to 85.6% in the previous month.
However, food and alcoholic beverages inflation hovered at 19.1%, close to record 19.2% in March.
Core inflation, which excludes food and energy, accelerated to 6.8% from 6.2% in March, the highest rate since March 1992.
Europe Indexes & Yields
The DAX index decreased 1.7% to 15,874.71, the CAC-40 index fell 1.9% to 7,242.38, and the FTSE 100 index decreased 1.7% to 7,629.17.
The yield on 10-year German Bunds inched up to 2.43%, French bonds traded higher to 3.01%, the UK gilts inched higher to 4.20% and Italian bonds increased to 4.29%.
The euro edged lower to $1.076, the British pound to $1.236 and the Swiss franc to 90.22 cents.
Brent crude increased 95 cents to $77.79 a barrel and the Dutch TTF natural gas decreased €0.55 to €28.58 per MWh.
Europe Stock Movers
Tullow Oil Plc edged up a fraction to 25.01 pence after the UK-based oil company lifted its full-year crude oil production outlook.
Kingfisher Plc declined 1.9% to 242.10 pence after the UK-based home improvement chain reported comparable same store sales decreased in the first quarter.
Aviva Plc declined 5.3% to 401.38 pence after the financial services company reported a slowdown in asset inflow in its wealth management division.
Ricardo Plc declined 0.4% to 570.01 pence after the UK-based engineering company reiterated its full-year outlook.
Movers: Meta Inc, Micron Technology, PacWest Bancorp
Scott Peters
22 May, 2023
New York City
Micron Technology Inc decreased 4.8% to $64.90 after China's cyberspace agency banned the sale of its products.
Meta Platforms Inc declined 1.2% to $242.60 after European regulators slapped the parent of Facebook with a $1.3 billion fine for violating the data privacy laws.
Meta said it will appeal the decision.
Wise PLC decreased 2.2% to 586.40 pence after the company said CEO Kristo Kaarman will take paternity leave starting in September and CFO Matt Briers is planning to leave the company next year.
CTO Harsh Sinha will assume the role of interim chief executive.
PacWest Bancorp increased 8.0% to $6.19 after the regional bank sold $2.6 billion of construction loans to a Kennedy-Wilson Holding subsidiary.
U.S. Stocks In Holding Pattern With All Eyes On Debt Ceiling Talks
Barry Adams
22 May, 2023
New York City
U.S. stock futures were nearly flat as investors awaited debt ceiling talk update on Monday.
Despite the optimism about the U.S. debt ceiling talks, several key differences remain unresolved.
President Biden and House Speaker Kevin McCarthy are scheduled to meet Monday but the window to avoid debt default is shrinking rapidly.
Treasury Secretary Janet Yellen reiterated that the U.S. federal government could default on its debt obligation as early as June 1.
Despite the U.S. debt talks uncertainties, the three rating agencies have remained silent and not expressed their rating outlook. Had any other country faced similar contentious discussion, rating agencies have been quick to downgrade rating outlook.
S&P Global Inc, Moody's Corp and Fitch Rating's lack of revision on the U.S. debt rating outlook highlights their double standards in evaluating sovereign debt.
The United States is the largest debtor nation in the world and federal government debt has been rising every year since 1965.
In overseas news, China held its interest rate for the 9th month in a row and one-year loan prime rate was held at 3.65% and five-year interest rate at 4.3%, the reference rate used for mortgage lending.
China also banned sale of Micron Technology products, citing the company's products failed its security risk review.
The Cyberspace administration of China in its press release did not specify specific products or specific security issues.
European markets lacked direction as investors looked ahead to the U.S. debt ceiling talks later today.
The DAX index, the CAC-40 index and the FTSE 100 index declined between 0.1% and 0.3%.
The euro traded near $1.08, the British pound hovered near $1.24 and the Swiss franc edged higher to 89.55 cents.
Prime Minister Kyriakos Mitsotakis and his conservative New Democracy party were ahead in Greece's parliamentary elections, when partial results were counted on Sunday.
U.S. Indexes & Yields
The S&P 500 index decreased 0.01% and the Nasdaq Composite fell 0.1% to 12,708.63.
The yield on 2-year Treasury notes decreased to 4.22%, 10-year Treasury notes edged up to 3.66% and 30-year Treasury bonds held at 3.93%.
Crude oil rose $0.22 to $71.91 a barrel and natural gas prices fell 7 cents to $2.51 a thermal unit.
U.S. Stock Movers
Micron Technology Inc decreased 4.8% to $64.90 after China's cyberspace agency banned the sale of its products.
Meta Platforms Inc declined 1.2% to $242.60 after European regulators slapped the parent of Facebook with a $1.3 billion fine for violating the data privacy laws.
Meta said it will appeal the decision.
Wise PLC decreased 2.2% to 586.40 pence after the company said CEO Kristo Kaarman will take paternity leave starting in September and CFO Matt Briers is planning to leave the company next year.
CTO Harsh Sinha will assume the role of interim chief executive.
Stocks Wavered, Treasury Yields Spiked After Debt Ceiling Talks Hit Realities and Approach Deadline
Barry Adams
19 May, 2023
New York City
Market optimism began to fizzle on Wall Street as reality of passing a debt deal began to set in.
Even if President Biden and House Speaker Kevin McCarthy reach a deal as early as this Sunday, passing the bill in the House could take as much as ten days.
The U.S. Senate may need at least six more days before the bill arrives for the president's signature.
In other words, even if a deal is struck this weekend, passing it through chambers may be challenging to avoid the looming default deadline on June 1.
Benchmark indexes turned negative in the afternoon trading amid growing uncertainties about the debt ceiling talks.
Market sentiment turned negative after Republican negotiators walked out of the room raising stakes higher on Capitol Hill. Moreover, not all lawmakers are convinced that the June 1 deadline is the firm deadline and by one estimate lawmakers may have an additional week to review the bill.
Debt drama is likely to continue for another two weeks causing more market volatility as the Senate is in recess and not scheduled to gather until May 29, making the tight deadline even tighter.
In other news, Federal Reserve chair Jerome Powell said at a conference in Washington, D.C. that stress in the regional banks has been mostly halted after the steps taken by the central bank.
Powell added developments in the mid-size banks "are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation.”
“So as a result, our policy rate may not need to rise as much as it would have otherwise to achieve our goals,” he added.
Chairman Powell acknowledged that despite the recent cooling of inflationary forces, overall inflation on balance is still too high.
The Nasdaq index is trading near one-year high and the S&P 500 index is hovering at a 9-month high. European markets also traded at new record highs and the Nikkei index in Tokyo closed at a 33-year high.
Financial markets have been on edge for two weeks on the worries that the U.S. Treasury may default on or after June 1 its debt obligation if the $31.4 trillion debt ceiling is not lifted.
Talks of U.S. default had kept investors anxious and global markets in check amid the debt talk uncertainties.
In addition, rate hike worries resurfaced this week after a chorus of Fed officials stressed that the current economic data do not support a case for rate hike.
The yield on 2-year and 10-year Treasury notes jumped to highs not seen in two months on the expectation that rates may be revised higher at the next meeting on June 13-14.
U.S. Indexes & Yields
The S&P 500 index increased 0.2% to 4,207.69 and the Nasdaq Composite added 0.1% to 12,708.63.
The yield on 2-year Treasury notes increased to 4.32%, 10-year Treasury notes edged up to 3.70% and 30-year Treasury bonds held at 3.95%.
Crude oil rose $0.68 to $72.54 a barrel and natural gas prices rose 6 cents to $2.65 a thermal unit.
U.S. Stock Movers
Foot Locker Inc plunged 24.1% to $24.55 after the specialty retailer reported weaker-than-expected sales and earnings in the first quarter.
The athleticwear maker reported first quarter revenue of $1.93 billion and adjusted earnings per share of 70 cents.
Deere & Company increased 3.3% to $382.83 after the agriculture equipment maker reported better-than-expected quarterly results.
The Children's Place Inc declined 5.8% to $23.20 ahead of the specialty apparel retailer's first quarter results next week.
Farfetch Ltd soared 26.1% to $5.46 after the online fashion platform reported higher-than-expected quarterly results.
Revenue in the first quarter increased 8% to $476.2 million from $435.9 million and the company swung to a profit of $728.8 million from a loss of $174.3 million and diluted loss per share shrank to 37 cents from 43 cents a year ago.
Applied Materials, Inc fell 2.7% to $126.36 after the semiconductor equipment maker reported mixed quarterly results.
Revenue in the fiscal second quarter ending in April increased 6% to $6.6 billion and gross margin of 46.7%.
Net income increased 3% to $1.57 billion from $1.53 billion and diluted earnings per share increased to $1.84 from $1.74 a year ago.
Record High European Markets, Bond Yields Approach to 2-month Highs
Optimism ruled in European trading after positive corporate earnings and weakening wholesale inflation in Germany supported market sentiment.
Corporate earnings have met or exceeded investor expectations, supporting the advance of benchmark indexes to record highs.
The DAX index and the CAC-40 index traded at new record highs after banks, insurance companies and industrial equipment makers reported higher-than-expected earnings in the first quarter.
The progress in the U.S. debt ceiling talks also contributed to the market momentum.
Market expectations rose after the U.S. President Biden and congressional leader Kevin McCarthy vowed to avoid the government default.
Germany's Wholesale Inflation Slowed to 25-month Low
Germany's producer price inflation slowed for the seventh month in a row after energy prices declined, the Federal Statistics Office reported Friday.
The measure of wholesale inflation rose at a slower pace of 4.1% from 6.7% increase in March. On a monthly basis, prices advanced 0.3%.
Producer price inflation in April was driven by a jump of 6.8% in prices for capital goods, 11.4% in non-durable goods, 2.8% in energy and 0.2% in intermediate goods.
Wholesale prices, excluding energy, rose 4.8% in April, slower than 7.9% in March.
Europe Indexes & Yields
The DAX index increased 0.7% to 16,275.38, the CAC-40 index rose 0.6% to 7,491.96, and the FTSE 100 index advanced 0.2% to 7,756.87.
For the week, the DAX index advanced 2.1%, the CAC-40 index rose 0.7% and the FTSE 100 index edged up 0.02%.
The bond yields in the region advanced to 2-month highs and the UK bond yields jumped to 7-month high as worries of the aggressive rate path resurfaced.
The yield on 10-year German Bunds inched up to 2.47%, French bonds traded higher to 3.06%, the UK gilts inched higher to 4.01% and Italian bonds increased to 4.33%.
The euro edged lower to $1.079, the British pound to $1.241 and the Swiss franc to 90.22 cents.
Brent crude increased 78 cents to $76.64 a barrel and the Dutch TTF natural gas increased €0.46 to €30.25 per MWh.
Europe Stock Movers
Concentric AB increased 3.3% to SEK215.0 after the Swedish pump maker won a SEK201 million order for a high voltage cooling solution from a North American zero-emission truck maker.
The hydrogen fuel cell are useful in achieving zero emission targets, reflecting heat and water as the sole emissions after combustion.
C&C Group Plc decreased 14.5% to 130.96 pence after the beverage maker announced a one-time charge of €25 million.
The maker of beer, cider and wines said it faced severe business disruptions while implementing enterprise resource planning system in the Matthew Clark and Bibendum business and the charge reflects the cost associated with restoring service level and lost revenue.
The company reiterated its annual operating profit outlook of €84 million and said it plans to reinstate its dividend for the fiscal year 2023.
Smiths Group Plc increased 0.9% to 1,720.0 pence after the company lifted its annual organic revenue growth outlook.
Titon Holdings plc dropped 8.1% to 80.0 pence after the UK-based windows and ventilations systems supplier said fiscal year 2023 results are likely to be below market expectations.
Movers: Applied Materials, Children's Place, Deere & Company, Farfetch, Foot Locker
Scott Peters
19 May, 2023
New York City
Foot Locker Inc plunged 24.1% to $24.55 after the specialty retailer reported weaker-than-expected sales and earnings in the first quarter.
The athleticwear maker reported first quarter sales declined 11.4% to $11.9 billion after comparable store sales declined 9.1% on macroeconomic headwinds.
Gross margin declined 400 basis points from a year ago, driven by a combination of higher markdowns, and store closings, as well as an increase in theft related shrink.
Net income declined to $36 million from $133 million and diluted earnings per share fell to 38 cents from $1.33 a year ago.
In the quarter, the retailer paid 40 cents a share dividend or $38 million and the company's board approved 40 cents a share dividend payable on July 28 to shareholders on record July 14.
The company lowered its annual revenue decline forecast between 6.5% and 8.0% from the previous estimate between 3.5% and 5.5% and revised lower comparable sales decrease outlook between 7.5% and 9.0% from 3.5% to 5.5%.
During the first quarter, the company opened 13 new stores, remodeled, or relocated 18 stores, and closed 35 stores and operated 2,692 stores in 29 countries in North America, Europe, Asia, Australia, and New Zealand.
In addition, 163 franchised stores were operating in the Middle East and Asia.
Deere & Company increased 3.3% to $382.83 after the agriculture equipment maker reported better-than-expected quarterly results.
Revenue in the fiscal second quarter ending in April increased 30% to $17.4 billion from $13.4 billion and net income advanced to $2.1 billion from $2.1 billion and diluted earnings per share rose to $9.65 from $6.81 a year ago.
The company revised higher full-year net income between $9.25 billion and $9.50 billion with cash flow from equipment operations expected to be between $10.0 billion and $10.50 billion.
The Children's Place Inc declined 5.8% to $23.20 ahead of the specialty apparel retailer's first quarter results next week.
Farfetch Ltd soared 26.1% to $5.46 after the online fashion platform reported higher-than-expected quarterly results.
Revenue in the first quarter increased 8% to $476.2 million from $435.9 million and the company swung to a profit of $728.8 million from a loss of $174.3 million and diluted loss per share shrank to 37 cents from 43 cents a year ago.
Applied Materials, Inc fell 2.7% to $126.36 after the semiconductor equipment maker reported mixed quarterly results.
Revenue in the fiscal second quarter ending in April increased 6% to $6.6 billion and gross margin of 46.7%.
Net income increased 3% to $1.57 billion from $1.53 billion and diluted earnings per share increased to $1.84 from $1.74 a year ago.
S&P 500, Nasdaq Indexes Near One Year Highs, Treasury Yields Advanced After Rate Hike Worries Resurfaced
Barry Adams
19 May, 2023
New York City
Stocks traded higher for the third day in a row and market indexes are set to extend weekly gains.
Benchmark indexes extended weekly gains between 2% and 3% on the optimism that debt limit talks could be concluded as early as this weekend, paving the way for the lawmakers to approve the agreement next week.
The Nasdaq index is trading near one-year high and the S&P 500 index is hovering at a 9-month high. European markets also traded at new record highs and the Nikkei index in Tokyo closed at a 33-year high.
Financial markets have been on edge for two weeks on the worries that the U.S. Treasury may default on or after June 1 its debt obligation if the $31.4 trillion debt ceiling is not lifted.
Talks of U.S. default had kept investors on edge and global markets in check amid the uncertainties.
In addition, rate hike worries resurfaced after a chorus of Fed officials stressed that the current economic data do not support a case for rate hike.
The yield on 2-year and 10-year Treasury notes jumped to highs not seen in two months on the expectation that rates may be revised higher at the next meeting on June 13-14.
U.S. Indexes & Yields
The S&P 500 index increased 0.2% to 4,207.69 and the Nasdaq Composite added 0.1% to 12,708.63.
The yield on 2-year Treasury notes increased to 4.32%, 10-year Treasury notes edged up to 3.70% and 30-year Treasury bonds held at 3.95%.
Crude oil rose $0.68 to $72.54 a barrel and natural gas prices rose 6 cents to $2.65 a thermal unit.
U.S. Stock Movers
Foot Locker Inc plunged 24.1% to $24.55 after the specialty retailer reported weaker-than-expected sales and earnings in the first quarter.
The athleticwear maker reported first quarter revenue of $1.93 billion and adjusted earnings per share of 70 cents.
Deere & Company increased 3.3% to $382.83 after the agriculture equipment maker reported better-than-expected quarterly results.
The Children's Place Inc declined 5.8% to $23.20 ahead of the specialty apparel retailer's first quarter results next week.
Farfetch Ltd soared 26.1% to $5.46 after the online fashion platform reported higher-than-expected quarterly results.
Revenue in the first quarter increased 8% to $476.2 million from $435.9 million and the company swung to a profit of $728.8 million from a loss of $174.3 million and diluted loss per share shrank to 37 cents from 43 cents a year ago.
Applied Materials, Inc fell 2.7% to $126.36 after the semiconductor equipment maker reported mixed quarterly results.
Revenue in the fiscal second quarter ending in April increased 6% to $6.6 billion and gross margin of 46.7%.
Net income increased 3% to $1.57 billion from $1.53 billion and diluted earnings per share increased to $1.84 from $1.74 a year ago.