MARKET WRAPS
Watch For:
Import Prices for April; World Agricultural Supply & Demand Estimates; Canada New Motor Vehicle Sales for March
Today's Headlines/Must Reads
- Decline in PacWest Stock Indicates Bank Fears Persist
- White House Debt-Ceiling Meeting Postponed
- U.S., China Senior Officials Meet in Tentative Effort to Restart Ties
- Stop Equating Latest Bank Failures to the 2008 Crisis
- Why Amazon Isn't Checking Out of Groceries
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Opening Call:
Stock futures pointed to a stronger start, as investors balanced concerns about the economy, regional bank health and the debt ceiling.
The outlook for Friday, which according to Goldman Sachs has been the best-performing day of the week for the S&P 500 this year, looked stronger without much in the way of new economic data or earnings.
Investors also pondered whether U.S.-China tensions could be easing following talks between senior officials this week.
National security adviser Jake Sullivan met with his Chinese counterpart on Wednesday and Thursday as Washington and Beijing try to stop relations from further deteriorating.
"From the market standpoint, that does help alleviate some pressure," Pictet Asset Management said. "We think this meeting is an effort to diffuse some of those tensions."
Global stock markets were mixed. Hong Kong's Hang Seng Index fell 0.6%, while Japan's Nikkei 225 added 0.9% and the Stoxx Europe 600 rose 0.7%.
Stocks to Watch
Shares of Amazon.com edged higher in premarket trading having risen 2% on Thursday, extending the stock's winning streak to an eighth trading day.
Amylyx Pharmaceuticals rose 8% in premarket trading after reporting first-quarter earnings of 2 cents a share vs. analysts' expectations for a loss of 24 cents
Disney rose 1% in premarket trading. Its shares fell 9% on Thursday after it reported a surprise decline in Disney+ subscribers during the company's fiscal second quarter.
Netflix pointed higher in premarket trading, up 0.2%, after closing higher for a seventh straight session on Thursday.
News Corp rose 3% premarket after the media company reported a fall in revenue and profit but continued growth at Wall Street Journal parent Dow Jones.
Tesla was up 1% in premarket trading after Elon Musk said he has found a new chief executive for Twitter. The announcement came as a relief for investors in the electric-vehicle company who have worried that Musk has been too busy with, or distracted by, running the social media platform.
Read Tesla Raises EV Prices Again. It's Good News for Investors Worried About Margins.
Forex:
The dollar was slightly lower against a basket of currencies after rising in the previous session, with ING saying markets are set to remain "very sensitive" to U.S. debt ceiling news into the weekend.
"We still think investors are worryingly eyeing a scenario where it would ultimately take an adverse market reaction to break the impasse, and lack of any progress towards a deal can definitely continue to offer some support to the dollar."
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Sterling looks vulnerable as the Bank of England's 25 basis points interest-rate rise on Thursday was likely the last of the cycle, ING said.
"While we don't exclude one final June hike, our base case is that we have reached the peak of the BOE tightening cycle as inflation will start to rapidly decelerate this year," ING said.
However, the Sonia curve prices in around 38 basis points of further rate rises, leaving the pound at risk of falling. This may materialize in EUR/GBP, which could rise to 0.9000 in the second half of 2023 as EUR and GBP rates re-converge, ING said.
Bonds:
Portfolio positioning surveys indicate that investors in both Europe and the U.S. have embraced long-duration fixed income in an attempt to protect their investments in the event of an economic downturn, J.P. Morgan Asset Management said.
"History would support this positioning, especially if the Fed pauses its rate-hiking cycle in the near future," JPM said.
Since 1995, in the 60 days prior to the end of the Fed's interest-rate rising cycles, Treasuries have posted sizable excess returns of between 40 and 90 basis points, JPM added.
Energy:
Oil prices are on course for a fourth weekly drop, weighed by economic jitters and signs of increased supplies. prices are on course for a fourth weekly drop, weighed by economic jitters and signs of increased supplies.
Reports that a pipeline linking northern Iraq and Turkey would resume flows on Saturday--after being shuttered for over a month because of a legal dispute--pushed prices lower on Friday. The reopening could see around 450,000 barrels of oil a day return to the market, according to ING.
Meanwhile, economic worries have hung over oil this week. "Most of the commodities complex came under pressure due to lingering banking concerns, worries over the U.S. debt ceiling and questions growing over how strong a Chinese recovery we are seeing," ING added.
Metals:
Base metals prices were mixed as worries over the global economy and weak growth continue to hit demand.
Prices have been falling steadily this year after a rebound in buying from China post-lockdown failed to materialize, according to Fitch subsidiary BMI.
"The global outlook for metals demand remains downcast in 2023 with weak-to-flat growth expected across major economies, pressuring prices," it said.
BMI expects that global real GDP growth will slow to 2.1% on year in 2023 from 3.1% on year in 2022.
TODAY'S TOP HEADLINES
PacWest Stock Decline Indicates Bank Fears Persist
PacWest Bancorp has kept offering reassurances about its business since Silicon Valley Bank collapsed in March. The bank's stock has continued to fall, though, a sign the siege of U.S. regional banks might not end until policy makers act decisively to break it.
Shares of the Beverly Hills, Calif.-based regional bank fell 23% on Thursday after the company said its deposits dropped 9.5% during the week ended May 5. The lender said most of the decline occurred in the wake of news reports that PacWest was exploring a range of options, including a sale.
Why Amazon Isn't Checking Out of Groceries
Amazon.com hasn't taken over your refrigerator yet. But the size and importance of the grocery market is precisely what compels the Everything Store to keep trying.
Amazon has been dabbling in the grocery business for years. It launched its first grocery storefront on its website in 2006 and bought Whole Foods Market for $13.1 billion 11 years later. Soon after, Amazon began opening its own physical stores featuring innovative technology such as Just Walk Out, which senses what shoppers pick up and charges them automatically, and Dash Carts, which let shoppers scan and pay for items as they put them in their carts. The latest development: Amazon One, which allows shoppers to pay with a scan of their palm.
Tesla Raises EV Prices Again. It's Good News for Investors Worried About Margins.
Tesla has implemented another round of price raises across most of its electric-vehicle portfolio in the U.S. The increases are small but could help quell shareholder concerns about the company's shrinking margins.
Tesla (ticker: TSLA) raised the prices for its Model S and X vehicles by $1,000 late on Thursday and the prices of its Model Y by $250, according to its website. The move follows a similar round of small price increases earlier this month. Prices for the entry-level Model 3 were unchanged.
News Corp Revenue Slips Amid Challenging Ad Market
News Corp reported slightly lower revenue amid a softening advertising market, despite continued growth at Wall Street Journal parent Dow Jones & Co.
The New York-based media company, which owns the Journal, HarperCollins Publishers and news organizations in the U.K. and Australia, said revenue fell 1.8% to $2.45 billion for the quarter ended March 31. Net profit declined 39% to $50 million, or nine cents a share, from $82 million, or 14 cents a share, a year earlier.
White House Debt-Ceiling Meeting Postponed
WASHINGTON-A highly anticipated meeting scheduled for Friday between President Biden and congressional leaders to chart a path forward on lifting the debt ceiling was postponed until next week, officials said.
The delay will give White House and congressional staff more time to make progress in their closed-door spending talks, the officials said, adding that Senate Minority Leader Mitch McConnell (R., Ky.) was unable to attend the Friday meeting because of a scheduling conflict.
U.S., China Senior Officials Meet in Tentative Effort to Restart Ties
WASHINGTON-National security adviser Jake Sullivan held previously unannounced talks with his Chinese counterpart in Vienna, as Washington and Beijing try to reset high-level contacts and keep relations from further spiraling downward.
Brief official accounts of the meeting Wednesday and Thursday between Mr. Sullivan and Wang Yi, the Communist leadership's top foreign-affairs official, hinted at the immense strains between Washington and Beijing and the struggles both sides are having in steadying ties.
PacWest Stock Makes a Slight Recovery. Regional Bank Volatility Persists.
PacWest Bancorp and other regional banks were bouncing back in early Friday trading. But the lenders still can't seem to shake off turmoil that has dogged them since Silicon Valley Bank collapsed in March.
PacWest (ticker: PACW) was rising 3.6% in Friday's premarket session. Western Alliance (WAL) rose 3%, and Zions Bancorp (ZION) advanced 1.8%.
PacWest Stock Decline Indicates Bank Fears Persist
PacWest Bancorp has kept offering reassurances about its business since Silicon Valley Bank collapsed in March. The bank's stock has continued to fall, though, a sign the siege of U.S. regional banks might not end until policy makers act decisively to break it.
(MORE TO FOLLOW) Dow Jones Newswires
05-12-23 0616ET
