Daily Markets: Oil Prices Ease, Lifting Equities Ahead of OPEC Meeting

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session mixed as China’s Shanghai Composite rose 0.42% and India’s Sensex gained 0.79%, while Japan’s Nikkei fell 0.16%, Taiwan’s TAIEX dropped 0.73%, Australia’s ASX All Ordinaries declined 0.83% and both Hong Kong’s Hang Seng and Korea’s KOSPI closed down 1.00% on the day. By mid-day trading, major European equity indices are up across the board. UK markets are closed today and tomorrow for a bank holiday which was moved to extend Queen Elizabeth’s platinum jubilee celebrations tomorrow marking her 70 years on the throne. U.S. futures point to a positive market open later this morning.

The Fed’s long awaited process of Quantitative Tightening started yesterday at $50 billion per month for the next three months and then will ramp up to $95 billion per month until they feel they need to stop. The big question here is how much of a headwind does the Fed bidding up bonds pose to stocks as battle-weary investors look for some relief in the form of dependable, strong offer prices in the bond markets?

Yesterday JPMorgan Chase (JPM) CEO Jamie Dimon sounded alarm bells on the economy, warning investors to prepare for an economic “hurricane” but this morning equities are moving higher in response to this morning’s decline in oil prices. The catalyst for that move was a report from The Financial Times that Saudi Arabia has indicated to western allies it is prepared to raise oil production should Russia’s output fall substantially under the weight of sanctions. The concern is the rebound in oil demand from China as it emerges from recent lockdowns could pressure the global oil supply. This will put a greater focus on today’s OPEC+ meeting, the outcome of which is expected to set oil production policy for July. There has always been some play with OPEC targets and given India’s role as an importer of Russian crude and subsequent exporter of refined products, OPEC will pay attention to both the lit and “gray” oil markets to best gauge the global supply demand picture.

Data Download

International Economy

This morning saw the April update for the Eurozone Produce Price Index (PPI) showing YoY growth of 37.20%, just 1.30% lower than estimates but slightly higher than the previously reported 36.90%. Producer Prices had been contracting up until the beginning of the pandemic in 2020 and a number of factors, including early economic shutdowns, labor shortages, supply chain backlogs and most recently unprecedented high fuel prices have sent PPI on an almost vertical trajectory. The good news here is looking at the chart, this is the first time since 2020 that PPI looks like it’s starting to roll over, or at least take a break from going straight up.

Domestic Economy

We have another busy day of domestic economy data that kicks off at 8:30 AM ET with the May ADP Employment Survey that is expected to show 300K jobs added during the month, up from 247K in April. Also at 8:30 AM ET, the final reading on Unit Labor Costs & Productivity for the March 2022 quarter will be published. Soon after the market open, the report on April Factory Orders will be released and it’s expected to show a 0.7% gain MoM. And with consumer wallets feeling the pain of record gas prices, the 11 AM ET report on gasoline stocks from the U.S. Energy Information Administration will indicate if more pain at the pump is ahead.

Markets

The S&P 500 declined 0.75% yesterday while the Nasdaq Composite and the Dow Jones Industrial Average fell 0.72% and 0.54%, respectively; the Russell 2000 dropped 0.49%. From a sector perspective, everything was down except for Energy. Utilities and Tech ended the day relatively unscathed while Healthcare and Financials took the brunt of the damage. Including yesterday’s moves, here’s how the major market indicators stack up year-to-date :

• Dow Jones Industrial Average: -9.70%
• S&P 500: -13.95%
• Nasdaq Composite: -23.33%
• Russell 2000: -16.98%
• Bitcoin (BTC-USD): -37.53%
• Ether (ETH-USD): -51.55%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, Ciena (CIEN), Hormel Foods (HRL), SecureWorks (SCWX), and Toro (TTC) are expected to report their quarterly results.

Chewy (CHWY) reported April quarter revenue and EPS that topped expectations and issued revenue guidance of $2.43-$2.46 billion for the current quarter, bookending the consensus forecast of $2.44 billion. In addition to delivering a positive bottom line surprise, the company's shareholder letter reported that 4.2 million new active users were added in the quarter, bringing its total active users to 20.6 million.

Shares of Meta Platforms (FB) traded off last night on the news that after 14 years, Sheryl Sandberg is set to exit her post as chief operating officer. Sandberg is expected to remain on Meta’s board.

April quarter earnings at branded apparel company PVH (PVH) topped expectations and revenue for the quarter rose 2.1% YoY to $2.12 billion, edging past the $2.1 billion consensus. Of note, Tommy Hilfiger revenue increased 2% YoY while Calvin Klein revenue increased 13% YoY, and those gains were mitigated by the 31% drop in revenue for Heritage Brands, which PVH exited. For the current quarter, the company sees EPS of $2.00 vs. the $2.28 consensus with revenue falling 3-4% YoY implying $2.22-2.24 billion vs. the $2.25 billion consensus.

Quarterly results at GameStop (GME) were mixed with the retailer missing bottom line expectations but modestly beating revenue forecasts for the quarter. Revenue rose 7.8% to $1.38 billion with hardware and accessories sales of $674M, ~49% of total sales vs. 55% in the year ago quarter. Software sales rose 35% YoY to $484 million and collectibles revenue climbed 26% YoY to $221 million. Inventory was $917.6 million vs. $570.9 million at the close of the year ago quarter and the management team shared the high level of inventory is part of its plan to improve in-stock levels in merchandise to meet increased customer demand. During the quarter, the company launched GameStop Wallet, a digital asset wallet that allows gamers and others to store, send, receive and use cryptocurrencies and NFTs across decentralized apps. GameStop reiterated its NFT Marketplace is planned to launch in the current quarter.

Cedar Fair Entertainment (FUN) reported preliminary May to date net revenue that rose 21% YoY to a record $343 million. Excluding groups, YTD attendance was up 4% through May 30, 2022.

General Motors (GM) chopped the price of its 2023 Chevrolet Bolt EV by $5,900 and its larger Bolt EUV by $6,300. Investors will want to how other EV companies ranging from Ford Motor (F) and Tesla (TSLA) to Rivian (RIVN) and Lucid (LCID) respond.

Amazon (AMZN) announced it will stop supplying retailers in China with its Kindle e-readers later this week and will shut its Kindle e-bookstore business in China and will stop selling eBooks as of June 30, 2023.

IPOs

Quiet periods end this week 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

Calavo Growers (CVGW), CrowdStrike (CRWD), lululemon athletica (LULU), Okta (OKTA), PagerDuty (PD),and RH (RH) 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

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 biggest risk of all is not taking one.” ~Mellody Hobson

Disclosures

• CrowdStrike (CRWD), Okta (OKTA) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Calavo Growers (CVGW), lululemon athletica (LULU), Tesla (TSLA), Rivian (RIVN), Lucid (LCID) areconstituents of the Tematica BITA Cleaner Living Index
• Calavo Growers (CVGW), lululemon athletica (LULU), Tesla (TSLA), Lucid (LCID) are constituentsis a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index
• Ciena (CIEN), PagerDuty (PD) are constituents of the Tematica BITA Digital Infrastructure & Connectivity Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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