MARKET WRAPS
Watch For:
Housing Starts for April; EIA Weekly Petroleum Status Report; earnings from Cisco Systems, Target
Today's Headlines/Must Reads
- Democrats to Launch Discharge Petition, Aiming to Force Debt-Ceiling Vote
- Cost of Car Repairs Highlights Persistence of Elevated Services Inflation
- Netflix Pitches Advertisers as Ad Tier Trails Smaller Rivals
- UBS Plans for $4 Billion Legal Hit From Credit Suisse Deal
- Cutting Deposit Rates Has Become Mission Critical for Chinese Banks
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Opening Call:
Stock futures tracked higher on Wednesday, as investors continued to focus on debt-ceiling talks, while looking ahead to earnings from Target and housing starts data.
The latest round of discussions over the debt-ceiling ended just ahead of the market close on Tuesday. Perhaps providing some encouragement for investors, the Biden White House referred to those talks as "productive and direct," while House Speaker Kevin McCarthy referred to the meeting as "a little more productive."
The California Republican also said a deal by the end of the week was possible.
"Regional banking fears, tough Fed talk, and rhetoric over the debt ceiling from the politicians have all leaned on stocks over the past week or so," Spartan Capital said.
"The averages have not moved out of their trading ranges, thus suggesting that the market is likely to trade sideways as the earnings season comes to an end and the focus shifts toward the June 13-14 FOMC meeting."
Overseas, the Stoxx Europe 600 fell 0.2%.
In Asia, indexes in China fell, while Japan's Nikkei 225 gained 0.8% to top 30000 for the first time since 2021 after data showed Japan's economy posted a bigger-than-expected upswing in the first quarter, helped by a recovery in tourism that offset sluggishness in some leading economies.
Stocks to Watch to Watch
Doximity said it expects fiscal first-quarter revenue of $106.5 million to $107.5 million, below analysts' forecasts. The stock was down 11% in premarket trading.
EVgo was 10% lower in premarket trading after saying it had begun an underwritten public offering of $125 million of its Class A common stock.
Keysight Technologies was poised to rise after fiscal second-quarter earnings beat Wall Street expectations and the company's adjusted profit forecast for the current quarter of $2 to $2.06 a share also topped estimates.
Kyndryl Holdings said it expects fiscal 2024 revenue to fall 6% to 8%, which implies revenue of $16 billion to $16.4 billion, below analysts' expectations.
Shares in Manchester United rose 8% in premarket trading following reports that Qatari banker Sheikh Jassim Bin Hamad Al Thani has made an improved bid for the soccer club. The offer, which came after final bids were submitted last month, is believed to be $5.5 billion, the Guardian newspaper reported.
Tesla gained 2% in premarket trading after Elon Musk told shareholders at the electric-vehicle maker's annual meeting the company would try running some advertisements.
Western Alliance was up 8% after disclosing that quarter-to-date deposits exceeded $2 billion as of May 12. That's up from $1.8 billion in deposit growth as of May 9.
Forex:
The dollar hit a five-week high against a basket of currencies due to concerns about a slowing Chinese economy, which is weighing heavily on Asian and Latin American currencies, MUFG said.
"The softening outlook for growth outside of the U.S. is helping to provide more support for the U.S. dollar in the near-term," it said.
Meanwhile, improvement in U.S. retail sales, industrial production and NAHB housing market data on Tuesday helped to dampen concerns over a sharper slowdown or recession in the country.
Commerzbank said the dollar could fall if the debt ceiling stalemate persists for some time.
The longer it takes to find a resolution to end the impasse, the more sentiment in the U.S. is likely to be affected by the suspense, Commerzbank said.
"As that would point more towards a further cooling of the economic momentum this is likely to support the expectation of imminent Fed interest rate cuts from the market's point of view, thus principally putting pressure on the dollar."
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Sterling could extend its current decline against the euro on the back of monetary policy divergence between the European Central Bank and Bank of England, ING said.
The BOE is likely to pause its interest rate rise cycle in June but 20 basis points of increases are priced into the Sonia curve so there is "ample room" for sterling to be hit by a scaling back of rate expectations, ING said.
"We still target 0.8900 in EUR/GBP by the summer
Bonds:
Read Euro Falls as ECB Views Diverge But Should Recover
Energy:
Oil futures were around 1% lower in Europe following mixed Chinese economic data and after the latest API figures showed a surprise build in U.S. crude stocks.
Metals:
Base metals were higher, with gold flat, in early London trade, as worries over the U.S. debt ceiling and Chinese demand continued to drag on markets.
"The overarching bearish influence on the markets has mainly centered on the speed and depth of China's recovery," Commodity Research Group said.
Recent data has shown property investment slipped in April 16.2% year-on-year, while coal, aluminum and steel production fell, too, it said.
TODAY'S TOP HEADLINES
UBS Prepares for $4 Billion Legal Hit From Credit Suisse Deal
Swiss bank UBS said that it has set aside $4 billion to cover potential legal and regulatory costs from its acquisition of Credit Suisse, and that it is expecting to record other asset write-downs.
UBS on Tuesday released an updated version of a merger prospectus that was first published three weeks ago. The new document showed that UBS expects to book a $34.8 billion gain on negative goodwill, which is when a company acquires assets for less than their worth-typically in a distressed situation.
Netflix Pitches Advertisers as Ad Tier Trails Smaller Rivals
Netflix has a larger base of subscribers than any other streaming service globally. But ahead of its first major presentation to Madison Avenue, it is among the companies with the smallest pool of customers paying for an ad-supported version of its service.
Four months after its launch, Netflix's $6.99-a-month ad tier had 937,616 U.S. subscribers in March, while Disney+'s ad-backed plan-which debuted a few weeks after Netflix-had 863,791, according to subscription-analytics firm Antenna.
Pfizer borrows $31 billion in mega bond deal as debt issuance picks up ahead of debt-ceiling deadline
Pharmaceutical giant Pfizer secured $31 billion in financing on Tuesday, as companies pick up the pace of borrowing ahead of potential market turmoil tied to the U.S. debt-ceiling fight.
Pfizer PFE borrowed the funds via an eight-tranche bond deal that will go toward its roughly $43 billion acquisition of Seagan, a biotech focused on creating therapies to treat cancer, according to public documents tied to the financing.
Lyft Taps New CFO Amid Layoffs, Soft Earnings Forecast
Lyft tapped a new chief financial officer from financial-services firm Charles Schwab in the ride-hailing company's latest C-suite shift as it works through layoffs and a weaker-than-expected earnings forecast.
San Francisco-based Lyft said Tuesday it named Erin Brewer as its CFO, effective July 10. Brewer will succeed Elaine Paul, who stepped into the role in January of last year and will continue working for the company as an adviser until Nov. 30.
Carrier Fire Business Expects to Fight Insurers on Chemical Lawsuit Coverage
Kidde-Fenwal, the fire-protection business bankrupted by possible liability for "forever chemicals," said it believes it has potentially hundreds of millions of dollars in insurance coverage to help pay claims.
However, the Carrier Global subsidiary might have trouble tapping that coverage as its insurers are disputing their obligations and aren't helping to defend the business, a Kidde-Fenwal lawyer said Tuesday during the company's debut in bankruptcy court.
Fashion Giant Shein Raises $2 Billion but Lowers Valuation by a Third
HONG KONG-Shein, the online fashion giant that won over millions of American shoppers during the pandemic, raised $2 billion in its latest fundraising round that values the company at $66 billion, about a third less than a year earlier, according to people close to the company.
The company, which was founded in China and is now based in Singapore, cut its valuation after tech company share prices have come down. The company also faces intensifying pressure from U.S. lawmakers on its labor and environmental practices.
Democrats to Launch Discharge Petition, Aiming to Force Debt-Ceiling Vote
WASHINGTON-House Democrats plan to begin collecting signatures Wednesday for a discharge petition to raise the debt ceiling, a long-shot parliamentary maneuver designed to circumvent House Republican leadership and force a vote.
Rep. Brendan Boyle (D., Pa.), the top-ranking Democrat on the House Budget Committee, said he plans to initiate the petition in the well of the House when the chamber gavels into session at 10 a.m. and be the first to sign.
Fed Officials Debate Whether to Pause Rate Rises
Federal Reserve officials squared off Tuesday over whether the central bank would need to raise interest rates at its meeting next month to combat inflation.
The central bank has lifted its benchmark federal-funds rate at its last 10 policy meetings by a cumulative 5 percentage points, most recently by a quarter percentage point on May 3 to a range between 5% and 5.25%, a 16-year high.
Nasdaq is leading the Dow by the widest margin since 1991 as blue-chip gauge erases 2023 gain. Is that a good sign?
(MORE TO FOLLOW) Dow Jones Newswires
05-17-23 0618ET
