Returning to the stock markets, they closed yesterday within the narrow range they've been in for several sessions. In Europe, indices generally only changed by a few points, but in the US, the S&P 500 closed up 0.1%, while the Nasdaq 100 fell 0.2%. Microsoft led the decline, seemingly due to a minor wave of caution ahead of the company's earnings report, with its stock price already up 17% in 2023. Tesla continued to lose ground as investors questioned the automaker's strategy.

Volatility remained low yesterday, as measured by the 30-year benchmark VIX index. In response to the popularity of 0DTE options (zero day to expiry) and the subsequent controversy over the risks they could pose to trading by amplifying movements, the CBOE, the stock market operator that calculates the VIX, launched its sibling index, the VIX 1 Day (VIX1D), which measures the S&P 500's volatility over a single trading session. The VIX 1 Day debuted on Monday morning, and it's still unclear how it behaves or what to do with it. It's best to wait for options to be issued on the product to try to understand the behavior of 0DTE options or wait for the 1-hour VIX to be released. But I digress.

In reality, equity market participants are awaiting the next US economic data to contextualize the Fed's future rate decisions. The focus is more on the June 14 date than the May 3 date. In eight days, it's widely expected that the central bank will raise rates by a quarter point to the "5 to 5.25%" range, and the market has accepted this. However, many questions remain for June. Everything will depend on the balance between inflationary and recessionary fears. Currently, the market is in a state of limbo. It's intrigued by the prospect of the Fed returning to a policy of rate cuts in the near future, but the risk is still too high for it to be truly comfortable with this possibility. This is evident in the bearish bets hedge funds have been increasing recently, as I mentioned yesterday. These funds are signaling that "on balance, there is a better chance of making money by betting on the downside rather than the upside of the US equity markets right now."

In other news, tensions between Washington and Beijing over access to advanced semiconductor technologies continue to escalate. The White House is reportedly planning to pressure the South Korean president, who is currently on an official visit to the United States, to ensure that Korean chip giants don't become the default suppliers for the Chinese industry.

 

Economic highlights of the day:

On the agenda today, we have the FFHA home price index, New Home Sales, the Conference Board confidence index and the Richmond Fed manufacturing index. All the agenda is here. 

The dollar is up 0.3% against the euro to EUR 0.9079 and up 0.5% against the pound to GBP 0.8047. The ounce of gold is worth USD 1992. North Sea Brent crude is currently at USD 81.72 per barrel and US WTI light crude at USD 77.94. The yield on 10-year US debt is down to 3.47%. Bitcoin is trading at 27,400 dollars.

 

In corporate news:

  • General Motors was up more than 3% in premarket trading as the automaker raised its annual profit and cash flow forecasts, citing stronger-than-expected demand and higher prices.
  • 3M Company will cut about 6,000 jobs worldwide to reduce costs, the U.S. conglomerate said, as it reported lower first-quarter earnings per share but better-than-expected results. The stock was up 1.8% in pre-market trading.
  • McDonald's reported like-for-like sales up 12.6% in the first quarter, beating consensus. The stock gained 1% in premarket trading.
  • PepsiCo raised its annual sales and profit forecasts after beating market expectations on its first-quarter sales thanks to sustained demand despite price hikes. The company was up more than 1% in premarket trading.
  • General Electric raised the low end of its annual profit forecast, thanks to strong demand for aircraft engine parts and services. The stock was up 1.4% in pre-market trading.
  • Verizon - The U.S. telecom operator reported lower-than-expected revenue and mobile subscribers as the pandemic-related demand boom fizzled out. The stock was down 0.6% in premarket trading.
  • United Parcel Service said it expects to report lower-than-expected full-year revenue due to a slowing economy. The global parcel delivery giant was down 5% in premarket trading.
  • Biogen reported better-than-expected quarterly profit on sales of the spinal muscular atrophy drug Spinraza, but said it would pause or stop some studies to cut costs.
  • Centene gained 2% in pre-market trading after raising its 2023 earnings guidance.
  • Halliburton - The oil company reported a better-than-expected quarterly profit, as tightness in the services and equipment market supported demand and therefore prices. However, the stock was down 1.36% in pre-market trading.
  • First Republic Bank fell 21% in after-hours trading after the regional bank reported a 40.8% plunge in customer deposits in the first quarter to $104.5 billion from the previous quarter. Rivals Huntington Bancshares, Truist Financial, PacWest Bancorp and Western Alliance Bancorp were down 2.4% to 2.8%.
  • Raytheon Technologies - The defense group reported a 4% increase in adjusted quarterly profit on the back of demand. The stock was up 1% in pre-market trading.
  • Spotify - Spotify broke the 500 million monthly active user mark for the first time, thanks to its expansion into new markets. The stock was up 5% in premarket trading.
  • JetBlue Airways gained 1.5% in premarket trading after reporting a smaller-than-expected net loss in the first quarter and strong earnings guidance for the second quarter.
  • Netflix announced Tuesday that it plans to spend $2.5 billion over the next few years to produce movies, TV series and reality shows in South Korea, doubling the amount the streaming platform has invested in the market since 2016.
  • Whirlpool was up 3.2% in after-hours trading after reporting first-quarter revenue above expectations and confirming its full-year results.
  • Kimberly-Clark was up 1.7% in premarket trading after the company raised its full-year profit forecast thanks to several price increases that offset lower volumes.

 

Analyst recommendations:

  • Capri Holdings: Jefferies downgrades to hold from buy. PT set to $45.
  • Chesapeake Energy: Stephens Inc initiated coverage with a recommendation of equal-weight. PT set to $91.
  • Coca-Cola: Goldman Sachs maintains its neutral opinion on the stock. The target price is now set at USD 63 compared to USD 62.
  • Columbia Sports: Piper Sandler initiated coverage with a recommendation of neutral. PT set to $92.
  • Coterra Energy: Stephens Inc initiated coverage with a recommendation of overweight. PT set to $32.
  • Earthstone: Stephens Inc initiated coverage with a recommendation of overweight. PT set to $18.
  • EQT Corp: Stephens Inc initiated coverage with a recommendation of equal-weight. PT set to $36.
  • Range Resources: Stephens Inc initiated coverage with a recommendation of overweight. PT set to $34.
  • Reinsurance Group: Wells Fargo Securities reinstated coverage with a recommendation of overweight. PT set to $163 - a 16% increase from last price.
  • Universal Health: Barclays upgrades Universal Health Services Inc. Class B to equal-weight from underweight. PT up 0.9% to $142.
  • VF Corp: Piper Sandler reinstated coverage with a recommendation of overweight. PT set to $29 -  a 27% increase from last price.