Early Look

Monday, June 5, 2023

U.S. futures are looking flattish after posting another weekly advance on Friday as the S&P rose 1.82%, the Dow added 2.02%, the Nasdaq gained 2.04% and the Russell 2000 gained 3.26% (rising 4.64% the last 2-days). The Dow 700-points surged Friday as traders cheered a strong jobs report (raising hopes of a “soft landing”) and lawmakers passing a debt ceiling bill that averts a U.S. default. The Dow popped 2.12%, the S&P 500 rose 1.45%, and the Nasdaq gained 1.07%. Fed speakers remain in “blackout period” all week heading into the FOMC meeting results next week. The Fed has raised the Fed’s benchmark interest rate ten times in the past 14 months, from approximately zero to 5-5.25% — a 16-year high and although rate expectations have gone from at least three cuts this year to possibly more hikes at either the June or July meeting (or both), stocks have continued to climb higher. Treasury yields are bouncing this morning with the 10-yr near highs at 3.75% and the 2-yr 4.55% (still no market concerns). WTI crude +1.9% at $73.10 per barrel after Saudi Arabia at the OPEC+ meeting this weekend agreed to deliver an additional 1 million–barrel daily production cut next month. In stock news, Apple (AAPL) is hosting its annual WWDC keynote presentation later today, June 5th at 1:00 PM ET (shares testing the all-time high’s ($182.94) here pre-mkt). In Asian markets, The Nikkei Index jumped 693 points or 2.2% to 32,217, the Shanghai Index edged higher 2 points to 3,232, and the Hang Seng Index gained 158 points to 19,108. In Europe, the German DAX is up about 10 points to 16,062, while the FTSE 100 rises 38 points to 7,645.

Market Closing Prices Yesterday

·     The S&P 500 Index jumped 61.35 points, or 1.45%, to 4,282.37.

·     The Dow Jones Industrial Average rose 701.19 points, or 2.12%, to 33,762.76.

·     The Nasdaq Composite surged 139.78 points, or 1.07%, to 13,240.77.

·     The Russell 2000 Index advanced 62.97 points, or 3.56% to 1,830.91.

Economic Calendar for Today

·     9:45 AM ET              S&P Global Composite, May-F

·     9:45 AM ET              S&P Global Services PMI, May-F

·     10:00 AM ET            Employment Trends for May

·     10:00 AM ET            Durable Goods Orders M/M for April

·     10:00 AM ET            Factory Orders M/M for April…est. +0.8%

·     10:00 AM ET            ISM Non-Manufacturing PMI for May…est. 52.3

Earnings Calendar:

·     Earnings Before the Open: SAIC

·     Earnings After the Close: CXM GTLB HQY IDT JOAN

Other Key Events:

·     American Society of Clinical Oncology (ASCO) Annual Meeting, 6/2-6/6, in Chicago, IL

·     Apple (AAPL) Worldwide Developers Conference, 6/5-6/9

·     Raymond James Silicon Valley, California, 6/5-6/6

Sector News Breakdown

Consumer

·     Churchill Downs (CHDN) announced it will suspend racing operations at Churchill Downs Racetrack beginning June 7, through the remainder of the Spring Meet, scheduled to run to July 3. Live racing at Churchill Downs will be conducted as scheduled this weekend on Saturday, June 3 and Sunday, June 4. The remainder of the race meet will be relocated to Ellis Park Racing & Gaming in Henderson, Kentucky, beginning on June 10. “Churchill Downs Racetrack has seen an unusual number of horse injuries over the previous month resulting in 12 equine fatalities.

Energy, Industrials and Materials

·     Oil futures open sharply higher Sunday evening, after Saudi Arabia agreed to deliver an additional 1 million–barrel daily production cut next month as the Organization of the Petroleum Exporting Countries and its allies moved to extend existing production targets.

·     Equitrans Midstream Corp. (ETRN) double Upgrade to Overweight at Morgan Stanley after Incorporating Mountain Valley Pipeline in Forecasts; says with expected completion of MVP, we are raising our DCF-derived PT to $14 and our rating to OW (from UW), provide a brief postmortem on the prior thesis, and offer thoughts on the path ahead.

·     KKR & Co. (KKR) is nearing a deal to buy pump-and-valve maker Circa International (CIR) for $1.6 billion including debt, according to people familiar with the matter, the WSJ reported. KKR is offering $49 a share, 55% above Circor’s closing price on Friday. https://tinyurl.com/2a5ap3kn

·     Watch Class 8 heavy truckers (CMI, PCAR) after Jefferies noted Class 8 Trucks orders for May came in at 15,000, up 10% y/y and up 29% m/m (April: was 12,016, revised higher by ~500units). With 2023 order books largely filled and backlogs stretching close to 7-months, we would not expect a meaningful pick-up in orders until the late 3Q/early 4Q period.

Financials

·     Big banks could face 20% boost to capital requirements, reported the WSJ. Those relying on fees might need larger buffers to absorb losses under planned rules https://tinyurl.com/372587zv

·     Allstate (ALL) has stopped selling new homes, condominiums, or commercial insurance policies in California, citing worsening climate conditions and higher building costs – NY Times.

·     Comerica (CMA) upgraded to Buy from Hold at Odeon Capital.

Healthcare

·     Steris plc (STE) positive mentioned in Barron’s saying the disinfectant and sterilization products maker is a top choice for hospitals. While shares took a dip earlier this year, Barron’s says this may be the best time to buy.

Technology, Media & Telecom

·     Apple (AAPL) is set to launch virtual-reality headset Monday at its annual WWDC keynote presentation later today, June 5th at 1:00 PM ET. The first major product in nearly a decade is likely to overshadow the conference’s announcements of new tools and functions for the iPhone and other devices.

·     EPAM Systems (EPAM) cuts its Q2 EPS view to $2.33-$2.40 from $2.38-$2.46 (est. $2.41) and lowered its Q2 revenue view to $1.16B-$1.17B from $1.2B-$1.21B; also cuts FY23 EPS view to $9.80-$10.20 from $10.60-$10.80 (est. 10.71) and cut FY23 revs to $4.65B-$4.8B from $4.95B-$5B saying they have seen our clients become even more cautious with spending specifically in the ‘build’ segment of the global IT services market.

·     Palo Alto Networks (PANW) to replace Dish (DISH) in S&P 500 at open on 6/20.

·     Dish Networks (DISH) to replace Cutera (CUTR) in S&P 600 at the open on 6/20.

·     IBM (IBM) mentioned positively in Barron’s saying the company has one of the highest dividends yields in the tech sector, at above 5% but the company’s shares are down 8% this year, while big-name players in artificial intelligence software and chips skyrocket.