Daily Markets: Investors Keep Close Eye on Two Key Manufacturing Reports
Today’s Big Picture
Asia-Pacific equity indexes ended today’s session down except for Australia’s ASX All Ordinaries and Japan’s Nikkei which were up 0.10% and 0.65%, respectively. China’s Shanghai Composite was down slightly at 0.13%, India’s Sensex 0.33%, Hong Kong’s Hang Seng 0.56%, and Taiwan’s TAIEX 0.79%. Korea’s markets were closed to mark that country’s Election Day. Following the release of May PMI data, as of mid-day trading, European equity indices were mixed as supply constraints and price pressures resulted in the first major drop in new orders in roughly two years.
U.S. futures point to a mixed market open later this morning. Investors will be digesting the latest Manufacturing Purchasing Managers Index from S&P Global and the analogous report for May from the Institute for Supply Management (ISM). Inside both reports, readers will be looking for signs as to the true speed of the U.S. economy as well as to what extent inflation pressures are poised to remain at elevated levels. Those findings will be juxtaposed against the Fed’s latest anecdotal survey from its regional banks that is the Beige Book which will be released at 2 PM ET this afternoon.
Today beings the Fed’s efforts to shrink its $8.9 trillion balance sheet, injecting fresh questions over how effective it will be and whether combined with the Fed’s plan to boost interest rates, if it will send the U.S. economy into a tailspin. When a Fed governor describes the combined tightening effort as “highly uncertain” despite the “using a variety of models and assumptions,” there are bound to be unanticipated effects.
Following comments, the Biden administration is actively considering adding new Chinese companies to the government’s economic blacklist and reports the U.S. will send Ukraine advanced rocket systems and munitions as part of a new $700 million package of military equipment. While this action has been called for by many, we could see the return of more pronounced geopolitical tensions that could challenge the market’s attempts to reclaim lost territory so far in 2022.
Data Download
International Economy
Last night saw the release of final May Manufacturing PMI figures for Japan at 53.2, coming in just 0.10 above preliminary readings.
Similar to Monday night’s release of manufacturing PMI figures for China from the China Federation of Logistics and Purchasing (CFLP), data and research provider Markit with partner Caixin released Chinese manufacturing PMI for May which showed PMI improving to 48.1 from the previously reported 46.0. This figure, like the previously released result, shows improvement as it works its way back to 50 and above as China continues to relax its Zero Covid policies and re-open the economy.
Data provider Markit released final Manufacturing PMI figures this morning for Germany (54.8), France (54.6), Italy (51.9), Spain (53.8), and the Eurozone (54.6). These results posted closely to preliminary numbers with the exceptions of Italy (1.1 lower) and Spain (1.8 higher). Data provider Reuters released final May Manufacturing PMI for the UK at 54.6 which was in line with preliminary estimates.
10:00 AM ET this morning will see the Bank of Canada release its interest rate policy announcement. Expectations are for another 50 basis point hike which would bring that country’s lending rate to 1.50%.
Domestic Economy
This morning brings the usual weekly report that is the MBA Mortgage Applications Index, which has been under pressure of late as potential homeowners stare down higher borrowing costs. At 9:45 AM ET, the final May reading for S&P Global’s U.S. Manufacturing PMI will be released, and similar to those for Europe, China, and the UK, the likely focus will be the pace of new orders and inflation facing comments. Soon after at 10 AM ET, the Institute for Supply Management will publish its Manufacturing PMI data for May, which is expected to fall to a reading of 54.5 from 55.4 in April.
Also at 10 AM ET, the April Jolts Job Openings report will be published and it is expected to show 11.4 million job openings, down slightly from 11.55 million the prior month. Given Fed Chair Powell’s comments on the tight labor market, we expect this report will be watched more closely than usual. Those looking to gauge the effects of the Biden Infrastructure Law, tune in to the April Construction Spending report that will also be published at 10 AM ET. And as we noted above, at 2 PM ET the latest Fed Beige Book will be released.
Markets
Yesterday’s market session had a lack of corporate news, rising Treasury yields, and some back and forth in oil prices, the S&P 500 shed 0.63% while the Dow Jones Industrial Average slipped 0.67% lower. The Nasdaq Composite traded off 0.41% while the small-cap heavy Russell 2000 lost 1.26%. The 10-year note yield settled the day up 10 basis points at 2.84% while the 2-year note yield jumped eight basis points to 2.54%. The U.S. Dollar Index increased 0.1% to 101.77 and oil prices, flirted with $120 per barrel early in the day before closing up just 0.1% at $114.93 per barrel. Including yesterday’s moves, here’s how the major market indicators stack up on a price return basis year-to-date:
- Dow Jones Industrial Average: -9.21%
- S&P 500: -13.30%
- Nasdaq Composite: -22.78%
- Russell 2000: -16.98%
- Bitcoin (BTC-USD): -33.25%
- Ether (ETH-USD): -49.4%
Stocks to Watch
Before trading kicks off for U.S.-listed equities, Capri Holdings (CPRI) and Conn’s (CONN) are expected to report their quarterly results.
Salesforce (CRM) reported a mixed bag with its April earnings report. While revenue and EPS for the April quarter topped consensus expectations, with revenue increasing more than 24% YoY, the company issued downside guidance for the current quarter but lifted its outlook for its full fiscal year. For the current quarter, Salesforce sees EPS of $1.01-$1.02 vs. the $1.14 consensus with revenue in a tight range of $7.69-$7.70 billion vs. the $7.77 billion consensus. For its fiscal year, the company is now calling for EPS of $4.74-$4.76 vs. its prior guidance of $4.62-$4.64 and the $4.66 consensus. However, given expected dollar strength Salesforce trimmed its full-year revenue forecast to $31.7- $31.8 billion vs. its early forecast of $32-$32.1 billion.
While April quarter revenue at ChargePoint (CHPT) rose 102% YoY to $81.6 million, topping the $76.1 million consensus forecast, the company reported a wider than expected bottom line loss of -$0.27 vs. the -$0.18 consensus. Networked charging systems revenue for the first quarter was $59.6 million, an increase of 122% from $26.8 million in the year ago quarter and subscription revenue was $17.6 million, up 63% from $10.8 million. The company sees revenue for the current quarter of $96-$106 million vs. the $104.7 million consensus, and reiterated its full year revenue forecast of $450-$500 million vs. the $462.9 million consensus.
HP (HPQ) posted a top and bottom line beat for its April quarter led by the 9% YoY revenue increase at its Personal Systems segment that was offset by the 7% YoY decline at its Printing segment. For the current quarter, HP sees EPS of $1.03-1.08vs. $1.03 the consensus, and for its FY22 the company calls for EPS of $4.24-4.38, up from its prior guidance of $4.18-4.38, and the $4.26 consensus.
April quarter results from Victoria’s Secret (VSCO) topped top and bottom line expectations. The company issued in-line guidance for the current quarter with a rather wide EPS forecast of $0.95-$1.25 vs. its $1.11 in the recently completed April quarter and the $1.17 consensus. Similar to its EPS outlook, the company sees revenue for the current quarter in a band between up low-single digits to down low-single digits on YoY basis.
Citing deteriorating macroeconomic conditions that have negatively impacted its expectations for GDP growth and debt issuance volumes compared to May 3 when it last issued guidance, S&P Global (SPGI) has suspended its 2022 guidance.
NIO (NIO) delivered 7,024 vehicles in May 2022, up 4.7% YoY, and Li Auto (LI) delivered 11,496 Li ONEs in May 2022, up 165.9% year over year. XPeng (XPEV) delivered 10,125 Smart EVs in May 2022, representing a 78% increase year-over-year. Exiting May, Li’s year-to-date total deliveries reached 53,688, up 122% YoY.
Investors in gaming companies like Wynn Resorts (WYNN), Las Vegas Sands (LVS), and MGM Resorts (MGM) will want to acknowledge the Macau Gaming Inspection and Coordination Bureau reported May 2022 gross revs fell 68.0% YoY to HKD 3.341 billion and compared to the 68.1% drop in April.
Meta Platforms (FB) announced that its Class A common stock will begin trading under the ticker symbol “META” beginning with the market open on June 9.
Pfizer (PFE) announced its intent to exit its 32% stake in Haleon, GSK’s (GSK) consumer healthcare business that is slated to be spun off in July.
IPOs
Shares of Zhong Yang Financial Group (TOP) are expected to start trading on June 1. Quiet periods on the shares of Bausch + Lomb (BLCO), PepGen (PEPG), and Austin Gold (AUST) end, allowing analysts at the firms that underwrote those transactions to publish their respective investment ratings. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Chewy (CHWY), GameStop (GME), NetApp (NTAP), Pure Storage (PSTG), PVH (PVH), Semtech (SMTC), and Veeco Instruments (VECO) are expected to report their latest quarterly results. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Thursday, June 2
- Eurozone: PPI – April
- US: ADP Employment Survey – May
- US: Unit Labor Costs & Productivity – 1Q 2022
- US: Durable Orders – April
- US: Factory Orders – April
Friday, June 3
- Japan: Services PMI – May
- Eurozone: Markit Services PMI – May
- Eurozone: Retail Sales – April
- US: Employment Report – May
- US: Markit PMI Services – May
- US: ISM Non-Manufacturing Index – May
Thought for the Day
“The individual investor should act consistently as an investor and not a speculator.” ~Benjamin Graham
Disclosures
- Li Auto (LI), Nio Inc. (NIO), Xpeng (XPEV) are constituents of the Tematica BITA Cleaner Living Index
- Li Auto (LI), Nio Inc. (NIO), Xpeng (XPEV) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.