Five things you need to know before the market opens on Monday, May 15:
1. Equity futures higher with debt and earnings talks in focus
US stock futures rose on Monday, while the dollar maintained gains against its global peers and short-term Treasury yields extended their recent gains, as markets prepare for a dip in the first-quarter earnings season while eyeing developments in the face of Washington’s debt ceiling.
Only fifteen companies on the S&P 500 are expected to report first-quarter earnings this week, though three major retail updates will provide important clues regarding the health of the American consumer, as a modestly better-than-expected reporting season approaches.
S&P 500 collective earnings are expected to have fallen 0.6% from a year ago to a share-weighted $438.5 billion, confirming the so-called stagnant earnings after the 3.2% drop recorded during the three months ending in December.
However, about 76.6% of the reporting companies beat Street’s forecast, producing one of the strongest “cadence” rates in years that not only beats the average for the last four quarters of 73.5% but also the long-term average of 66.3%.
However, that momentum wasn’t enough to move stocks out of their narrow two-month trading range, even as CBOE Group’s main measure of market volatility traded firmly below the 20-point mark, with investors eyeing both developments in the face of the debt ceiling, weak growth prospects and rising inflation levels as winds. opposite in the near term.
The weak reading in the University of Michigan’s benchmark Consumer Sentiment Index confirmed some of those concerns, with the headline number falling more than six points in April to 57.7, and long-term inflation expectations rising 20 basis points to 3.2%.
That helped push Treasury yields higher in the Friday session, and again through Monday, with the 2-year note holding steady at 4.006% and the 10-year note trading at 3.479%.
The US Dollar Index, which measures the greenback against a basket of global peers, was down 0.04%, at 102,644.
Meanwhile, the Turkish lira hit a two-month low against the dollar after an election weekend that saw incumbent President Recep Tayyip Erdogan fail to reach the 50% threshold needed to avoid a runoff, calling his rule of nearly three decades into question. to worry. Regional allies of a NATO member.
As the trading day begins on Wall Street, futures contracts linked to the S&P 500 are priced up 16 points from an opening while those linked to the Dow Jones Industrial Average are set to gain 110 points. The technology-focused Nasdaq rose 42 points.
In Europe, the region-wide Stoxx 600 Index rose 0.25% in early Frankfurt trading while the London-based FTSE 100 rose 0.38%. Overnight in Asia, the region-wide MSCI ex-Japan index rose 0.72% at the close, while the Nikkei 225 closed 0.81% higher at 29,626.34 points.
2. – Next week: retail sales and earnings to test the strength of the US consumer
Wall Street will navigate a series of earnings releases and data points focused on the US consumer this week as sentiment eases into the summer months amid rising jobless claims and a slowing economy.
The Commerce Department will publish its regular reading of retail sales for April on Tuesday, as analysts look forward to a modest recovery in spending from March levels, although the main gain of 0.7% is likely to be supported by higher spending on gasoline.
Walmart (wmt) – Get a free reportGoal (TGT) – Get a free reportand Home Depot (HD) – Get a free reportFirst-quarter earnings will also be released this week, as investors look to gauge the pace of same-store sales growth at the nation’s largest retailers, as well as profit margin pressures related to labor, input and operating costs that continued to rise from year-ago levels.
Home Depot will report before the market opens on Tuesday, with Walmart and Target reporting Wednesday and Thursday, respectively.
Housing and manufacturing data will also be in focus, with April homebuilding and building permit numbers expected on Wednesday, with analysts looking for a modest slowdown from March levels to an annualized rate of 1.4 million units.
The Empire State Manufacturing Index for April is expected before the market opens on Monday, with the Philadelphia Fed Regional Manufacturing Activity Index released on Thursday.
Finally, Federal Reserve Chairman Jerome Powell will close out the week with a sitting discussion at the Thomas Lubach Research Conference in Washington with his predecessor, Ben Bernanke.
3. – Tesla top Elon Musk also met with French President Macron
Tesla (TSLA) – Get a free reportShares rose in pre-market trading ahead of a meeting between CEO Elon Musk and French President Emmanuel Macron later in the day at a business conference in Paris.
Macron, who is looking to reinvigorate his second term at the Elysee Palace after a series of bitter disagreements with labor leaders over his decision to raise the country’s retirement age, will meet with Musk, as well as Pfizer CEO Alberta Bourla and Disney chief Bob Iger. , as part of the country’s annual “Choose France” investment event in neighboring Versailles.
Macron’s method is also trying to entice Musk to choose France for the site of Tesla’s next EV battery factory, following Taiwan’s ProLogium’s move to build a $5.7 billion factory in the port of Dunkirk earlier this month.
Tesla shares ticked up 0.5% in pre-market trading, indicating an opening bell price of $168.88 per share.
4. – Shake Shack jumps as activists target high-end burger chain
Shake Shack (rock) – Get a free reportShares rose in pre-market trading after reports that activist investors will seek at least three seats on the restaurant chain’s board and push for changes that will halt the stock’s two-year slump.
The Wall Street Journal reported Sunday that Engaged Capital, a Newport Beach, Calif., hedge fund with a 6.6% stake in Shake Shack, will be locked in a proxy battle for three board seats after failing to reach agreement on strategic changes from talks with management. earlier this year.
Shares of Shake Shack have fallen more than 50% over the past two years as lunchtime upscale dining has slowed amid changing post-pandemic business patterns and rising consumer price inflation. Earlier this month, the group reported a smaller-than-expected first-quarter loss of 4 cents per share, but said system-wide sales rose 27.5% from a year ago to $394.7 million.
Shares of Shake Shack are up 3.8% in premarket trading to indicate an opening bell price of $67.69 per share.
5. – Biden is “optimistic” on the debt ceiling deal as Yellen reiterated the June 1 deadline
Treasury Secretary Janet Yellen reiterated her warning that the US could face default risks as early as June 1 without a solution to the debt ceiling, adding that the current standoff is still “much more difficult” than a similar partisan showdown from 2011.
Speaking on the sidelines of a meeting of finance ministers from the Group of Seven major industrial nations in Niigata, Japan, Yellen told Reuters she still expected a resolution to the current impasse in which Republican lawmakers demand spending concessions from their Democratic rivals before allowing a vote on an increase. But she stuck to her predictions that the United States might run out of money to pay its debts by June 1.
Meanwhile, President Joe Biden told reporters in Delaware that he expects to hold the next meeting with House Speaker Kevin McCarthy on Tuesday, adding that he is “hopeful” that a deal can be struck. Biden is scheduled to leave for the G7 leaders’ summit in Hiroshima on Wednesday.
House Republicans passed a bill late last month calling for $4.8 trillion in spending cuts, phased over the next 10 years, in exchange for a $1.5 trillion increase in the $31.4 trillion debt ceiling for a year. Democrats, who control the Senate, have dismissed the cuts as “dead on arrival.”