Market Update
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.
Europe Movers: C&C Group, Concentric AB, Smiths Group, Titon Holdings
Bridgette Randall
19 May, 2023
Frankfurt
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 second-half 2023 results are likely to be below market expectations but reiterated its full-year outlook.
Revenue in the first-half ending in March increased 5.2% to £12.08 million from £11.48 million and pre-tax loss increased to £0.45 million from £0.25 million and basic loss per share increased to 2.86 pence from 1.46 pence a year ago.
The company declared an interim dividend per share of 0.5 pence compared to 1.5 pence a year ago.
European Markets Inched Higher, German Wholesale Inflation Slowed to 2-Year low, Bond Yields Advanced
Bridgette Randall
19 May, 2023
Frankfurt
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 0.6% to 16,259.54, the CAC-40 index rose 0.7% to 7,498.21, and the FTSE 100 index advanced 0.4% to 7,770.91.
For the week, the DAX index advanced 2.1%, the CAC-40 index rose 0.8% and the FTSE 100 index edged up 0.2%.
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.
Wall Street Pins Hopes On U.S. Debt Deal This Weekend, S&P 500 and Nasdaq Extend 2-day Rally
Barry Adams
18 May, 2023
New York City
Stocks on Wall Street traded higher for the second day in a row on the hopes that lawmakers are on track to conclude debt ceiling talks and avert the U.S. government default.
The S&P 500 index and the Nasdaq Composite index gained as much as 1% after the market rally broadened to regional banks, technology and resource sectors.
Energy and commodities gained on the hopes of higher demand from China and Asia as economies in the region continue to expand at a faster clip.
Investors have been increasing exposure to stocks in cautious trading on the hopes that President Biden and House Speaker Kevin McCarthy are likely to strike an agreement as early as this weekend, just in time to avert catastrophic debt default.
Despite the prevailing optimism, any agreement between the two leaders will need approvals from the U.S. House and the Senate in the next two weeks.
A faction of the Republican Party in the U.S. House is not fully on board to lift the debt ceiling, and a last minute disagreement could derail a compromise struck between the two leaders.
The yield on 10-year Treasury notes rose to a 2-month high and jumped above 3.60% after the rate hike at the next Fed's policy meeting was back on table.
Dallas Fed President Lorie Logan said policy makers are looking ahead to the inflation and employment data for the month of May and the economic data released so far do not support the case to pause rate hikes yet.
The Federal Reserve's rate setting committee is scheduled to announce its rate decision after a two-day meeting on June 14.
In overseas trading, European markets soared 1.5% and traded near record highs on the hopes that the U.S. lawmakers will set aside differences and come to an agreement.
Markets in Tokyo extended recent gains to a new 32-year high and indexes in India inched closer to record highs but indexes in Hong Kong and Shanghai traded lower on the worries of uneven economic rebound.
Initial Weekly Jobless Claims Unexpectedly Declined
Initial jobless claims for the week ending on May 13 declined 22,000 to 242,000, the U.S. Labor Department reported Thursday.
The 4-week moving average was 244,250, a decline of 1,000 from the previous week's unrevised average of 245,250.
The jobless claims unexpectedly declined in the previous week, indicating labor market conditions remained tight and upward wage pressures are likely to persist.
The advance number for seasonally adjusted insured unemployment during the week ending May 6 was 1,799,000, a decrease of 8,000 from the previous week's revised level.
The previous week's level was revised down 6,000 from 1,813,000 to 1,807,000.
Existing Home Sales Dropped In April
U.S. existing home sales declined for the second month in a row and extended the previous twelve monthly decline in a row interrupted by the sales increase in January.
Existing home sales in April declined 3.4% from the previous month to an annual rate of 4.3 million, the National Association of Realtors said Thursday.
Seasonally adjusted sales dropped 23.2% from 5.57 million in April 2022 after interest rate rose and home prices remained elevated.
The median existing home prices declined 1.7% from a year ago for all housing types across all four regions to $388,800.
"Home sales are bouncing back and forth but remain above recent cyclical lows. The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand," said NAR Chief Economist Lawrence Yun.
Available homes for sale at the end of April increased 7.2% from March and increased 1.0% from a year ago to 1.04 million units, about 2.9 month supply at the current sales rate.
U.S. Indexes & Yields
The S&P 500 index increased 0.4% to 4,176.76 and the Nasdaq Composite added 1.0% to 12,620.83.
The yield on 2-year Treasury notes increased to 4.18%, 10-year Treasury notes edged up to 3.60% and 30-year Treasury bonds held at 3.89%.
Crude oil fell $0.25 to $72.56 a barrel and natural gas prices rose 3 cents to $2.39 a thermal unit.
U.S. Stock Movers
Walmart Inc increased 1.9% to $151.45 after the retailer said revenue in the first quarter increased 7.6% to $152.3 billion.
U.S. comparable same store sales increased 7.4%, driven by 2.9% increase in number of transactions and 4.4% rise in average ticket size.
Net income in the quarter decreased 18.5% to $1.7 billion from $2.1 billion and diluted earnings per share declined to 62 cents from 74 cents a year ago.
The company forecasted consolidated store sales to increase 4.0% in the second quarter and 3.5% in the fiscal year 2024.
Take Two Interactive Software, Inc soared 12.8% to $141.0 after the videogame developer reported higher-than-expected revenue in the fiscal fourth quarter.
Revenue in the fourth quarter ending in March increased 56% to $1.45 billion from $930 million and the company swung to a net loss of $610.3 million from a profit of $110.9 million and diluted earnings per share was ($3.62) from 96 cents a year ago.
The company forecasted net revenue in the fiscal year 2024 between $5.37 billion and $5.47 billion net loss range from $518 million to $477 million and net loss per share between $3.05 and $2.80.
Bath & Body Works Inc soared 12.5% to $38.32 after the specialty retailer reported higher-than-expected revenue and earnings in its latest quarter.
Synopsys Inc increased 2.7% to $387.48 after the electronic design automation software developer reported quarterly results that were ahead of expectations.
Revenue in the fiscal second quarter ending in April increased to $1.40 billion from $1.28 billion a year ago.
Net income in the quarter decreased to $269.9 million from $293.8 million and diluted earnings per share fell to $1.76 from $1.89 a year ago.
The company forecasted revenue in the fiscal third quarter ending in July between $1.465 billion and $1.495 billion and earnings per share between $1.88 and $1.99.
Cisco Systems Inc declined 4.2% after the networking gear maker reported better-than-expected revenue and earnings in the fiscal third quarter.
Revenue increased 14% to $14.6 billion and net income increased to $3.2 billion from $2.6 billion and diluted earnings per share rose to 78 cents from 65 cents a year ago.
European Indexes Trade at New Record Highs
European stock markets rebounded in light trading after U.S. debt ceiling talk picked up pace.
Trading was light after financial markets were closed in Nordic countries and Switzerland.
Benchmark indexes in Germany and France traded at new highs and surpassed the previous peaks in January 2022.
Markets advanced after the U.S. President Joe Biden and House Speaker Kevin McCarthy vowed to avoid the government default.
Congressional leaders and Biden are expected to announce an agreement that will permit the lifting of the debt ceiling from $31.4 trillion.
However, any agreement still needs to be approved by the U.S. House and the Senate in the next two to three weeks before the federal government runs out of funds.
Spain's Trade Deficit Narrowed In March
Spain's trade deficit narrowed in March to €0.16 billion after exports increased 17.7% from a year ago to €38.9 billion and imports jumped 3.6% to €39.09 billion.
Exports to the European Union surged 15.4%, the United Kingdom increased 21.3%, the United States advanced 27.9%, and Latin America soared 62.7%. Exports to China increased 42.6% and Japan decreased 5.6%.
In the first three months of 2023, exports soared 14.6% to €102.6 billion and imports decreased 6.8% to €109.2 billion resulting in a trade deficit of €6.6 billion.
Italy's Trade Surplus Expanded In March
Italy's international trade swung to a surplus of €7.5 billion in March from a deficit of €0.76 billion a year ago, the statistical office Istat reported Wednesday.
The trade surplus accelerated from €2.1 billion in February after non-energy products exports expanded in the month.
Trade surplus was the largest since July 2021, when the surplus reached a record high of €8.2 billion.
Exports rose at a slower pace of 4.7% from a 10.4% rise in March and imports declined 9.8% reversing an increase of 3.2% in the previous month.
On a seasonally adjusted basis, exports declined 2.3% and imports fell 6.5%, lifting the surplus in March to €5.54 billion from €3.5 billion in February.
Europe Indexes & Yields
The DAX index increased 1.3% to 16,163.36, the CAC-40 index rose 0.6% to 7,446.89., and the FTSE 100 index advanced 0.3% to 7,742.30.
The yield on 10-year German Bunds inched up to 2.39%, French bonds traded higher to 2.98%, the UK gilts inched higher to 3.89% and Italian bonds increased to 4.25%.
The euro edged lower to $1.081, the British pound to $1.245 and the Swiss franc to 90.36 cents.
Brent crude decreased $1.30 to $75.65 barrel and the Dutch TTF natural gas decreased €2.17 to €29.79 per MWh.
Europe Stock Movers
Deutsche Bank AG increased 3.5% to €9.72 after Germany's largest bank settled a lawsuit for $75 million brought by women who alleged that the bank facilitated sex trafficking activities of the late Jeffrey Epstein.
Burberry Group Plc decreased 5.7% to 2,377.0 pence after the UK-based luxury apparel and accessories company reported same store sales increased 16% from a year ago.
EasyJet Plc increased 0.8% to 524.60 pence after the deep discount airline operator narrowed its first-half loss on rising international traffic.
BT Group Class A stock plunged 7.3% to 137.25 pence despite the UK-based telecom group reporting 5% increase in adjusted annual core earnings.
The telecom company also announced a plan to eliminate 55,000 jobs.
International Distribution Services Plc declined 0.7% to 220.60 pence after the parent of Royal Mail reported an annual adjusted operating loss of £419 million.
Premier Foods Plc advanced 3.9% to 134.64 pence after the company posted strong annual profit and increased its dividend.
Existing Home Sales In April Dropped to 6-month Low
Brian Turner
18 May, 2023
New York City
Existing home sales declined for the second month in a row and extended the previous twelve monthly decline in a row interrupted by the sales increase in January.
Home sales of all types including single-family, townhomes, condominiums and co-ops have been on the slide since peaking around 6.4 million annual pace in January 2022.
Existing home sales in April declined 3.4% from the previous month to an annual rate of 4.3 million, the National Association of Realtors said Thursday.
Seasonally adjusted sales dropped 23.2% from 5.57 million in April 2022 after interest rate rose and home prices remained elevated.
The median existing home prices declined 1.7% from a year ago for all housing types across all four regions to $388,800.
"Home sales are bouncing back and forth but remain above recent cyclical lows. The combination of job gains, limited inventory and fluctuating mortgage rates over the last several months have created an environment of push-pull housing demand," said NAR Chief Economist Lawrence Yun.
Available homes for sale at the end of April increased 7.2% from March and increased 1.0% from a year ago to 1.04 million units, about 2.9 month supply at the current sales rate.
Movers: Bath & Body Works, Cisco, Synopsys, Take Two Interactive, Walmart
Scott Peters
18 May, 2023
New York City
Bath & Body Works Inc soared 12.5% to $38.32 after the specialty retailer reported higher-than-expected revenue and earnings in its latest quarter.
Revenue in the first quarter declined 4% to $1.39 billion from $1.45 billion and net income declined to $81 million from $155 million and diluted earnings per share fell to 35 cents from 64 cents a year ago.
The company forecasted fiscal 2023 sales between flat and decrease in mid-single digit decline from $7.5 billion in 2022 and diluted earnings per share between $2.70 and $3.10 compared to $3.40 a year ago.
Cisco Systems Inc declined 4.2% after the networking gear maker reported better-than-expected revenue and earnings in the fiscal third quarter.
Revenue increased 14% to $14.6 billion and net income increased to $3.2 billion from $2.6 billion and diluted earnings per share rose to 78 cents from 65 cents a year ago.
Synopsys Inc increased 2.7% to $387.48 after the electronic design automation software developer reported quarterly results that were ahead of expectations.
Revenue in the fiscal second quarter ending in April increased to $1.40 billion from $1.28 billion a year ago.
Net income in the quarter decreased to $269.9 million from $293.8 million and diluted earnings per share fell to $1.76 from $1.89 a year ago.
The company forecasted revenue in the fiscal third quarter ending in July between $1.465 billion and $1.495 billion and earnings per share between $1.88 and $1.99.
Take Two Interactive Software, Inc soared 12.8% to $141.0 after the videogame developer reported higher-than-expected revenue in the fiscal fourth quarter.
Revenue in the fourth quarter ending in March increased 56% to $1.45 billion from $930 million and the company swung to a net loss of $610.3 million from a profit of $110.9 million and diluted earnings per share was ($3.62) from 96 cents a year ago.
The company forecasted net revenue in the fiscal year 2024 between $5.37 billion and $5.47 billion and net loss range from $518 million to $477 million and net loss per share between $3.05 and $2.80.
Walmart Inc increased 1.9% to $151.45 after the retailer said revenue in the first quarter increased 7.6% to $152.3 billion.
U.S. comparable same store sales increased 7.4%, driven by 2.9% increase in number of transactions and 4.4% rise in average ticket size.
Net income in the quarter decreased 18.5% to $1.7 billion from $2.1 billion and diluted earnings per share declined to 62 cents from 74 cents a year ago.
The company forecasted consolidated store sales to increase 4.0% in the second quarter and 3.5% in the fiscal year 2024.