MARKET WRAPS

Watch For:

ADP National Employment Report for May, Weekly Jobless Claims, Revise Productivity and Costs, ISM Report on Business Manufacturing PMI, EIA Weekly Petroleum Status Report

Today's Headlines/Must Reads

- House Approves Debt-Ceiling Deal Struck by Biden and McCarthy

- Profit Numbers Get Spruced Up as Business Slows

- ESG Blowback: Exxon, Chevron Investors Reject Climate Measures

- Traders Unfazed by Potential OPEC Production Cuts

Follow WSJ markets coverage here .

Opening Call:

Stocks were on course for a muted start on Thursday, but with support provided by easing debt-ceiling angst, better China data and hopes official U.S. interest rates would not rise this month.

The House of Representatives voted 314-117 in favor of a crucial debt-ceiling bill on Wednesday night, keeping Washington on track to avoid a technical default by June 5.

There was no great relief bounce in futures, however. The S&P 500 sits just shy of 10-month highs suggesting many investors were not pricing in the default scenario.

Investors were also parsing the latest comments from Federal Reserve officials who implied the central bank should not raise interest rates in less than two weeks time.

The chances of a 25 basis point rate hike by the Fed to a range of 5.25% to 5.5% on June 14 has fallen from 67% on Wednesday to 36% on Thursday.

Read Fed Prepares to Skip June Rate Rise but Hike Later

There was also better news on China's economy. The Caixin survey of smaller manufacturers released earlier on Thursday showed the sector expanding slightly in May, better than expected.

Read China Caixin Manufacturing PMI Returns to Expansion

Stock Fallers

Premarket fallers were dominated by software names as several companies failed to meet expectations when it came to forward guidance.

https://urldefense.com/v3/__http://C3.ai__;!!F0Stn7g!Ha5tmRz5IyjN7PCtdRx_R2b6YrVMEQvnehiLUlyT_OGcRg7k8QfhdbjNTGxPVXJLgIs89drucFn-Epvgcb0b4cSghtvt7jPi6cPBG1s56Ac$ stock fell 20% in premarket trading after its earnings outlook failed to live up to the hype.

CrowdStrike stock fell close to 11% as revenue growth slowed and the company's full-year forecast fell short of expectations.

Shares of Okta were down 19% ahead of the open despite it beating earnings estimates and raising full-year guidance. A warning from its CEO about increasing macroeconomic pressures appeared to spook investors.

Salesforce shares fell more than 5% after investors were left disappointed that the company didn't raise its full-year guidance following better-than-expected first-quarter earnings.

Stock Risers

Nordstrom stock was up 7.5% ahead of the open after it beat earnings and sales estimates in the first quarter. The company also reiterated its outlook for the full fiscal year

Forex:

The dollar has stalled, pulling away from recent highs, after two Fed officials suggested the central bank could opt to keep interest rates steady in June and raise them in July instead.

As a result, the dollar shrugged off approval of the debt-ceiling deal, and the comments will make upcoming data key in determining whether the Fed does indeed skip a rate rise in June, ING said.

The dollar could edge marginally lower if Thursday's ADP, jobless claims and ISM manufacturing data are on the weak side, although moves should be limited ahead of Friday's key monthly jobs figures, ING said.

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The euro was little moved even after data showed eurozone inflation eased by more than expected in May.

Lower-than-expected Spanish, French and German inflation data earlier in the week had the market speculating about a soft eurozone inflation print so was unlikely to materially impact the euro, ING said.

Read Cooling Eurozone Inflation Opens Path for ECB Rate Pause

Bonds:

The current economic cycle is looking good for the performance of bonds, with the asset class likely to generate "very strong" returns in 2023 and 2024, Schroders said.

It said bond markets generally perform strongly when inflation is decelerating, growth is softening, and when central banks cut interest rates.

"It is highly likely all those three play out this year," Schroders said.

Under certain conditions including the duration of a fund, interest rate cuts could mean very high single digit, or potentially double digit returns from fixed income, it added.

"The environment to me feels like the 90s when we saw 600 basis points in bond yield, and that was in 1994."

Energy:

Oil prices edged higher as Chinese data pointed to expanding factory activity.and with expectations for an OPEC+ meeting this weekend fluctuating.

Most bank analysts take the view the cartel will hold off from adjusting production levels for now. Investors had been concerned the group could cut production to counter a decline in oil prices.

"We don't expect the group to announce production cuts at the 4 June meeting, but bullish rhetoric is likely to continue," ANZ said.

Metals:

Base metals edged higher, while gold faltered, as expectations that strong jobs data will likely cement further Fed rate hikes this year counterbalanced more positive economic data from China.

Gold

Gold faces increasing risk of bearish reversal, based on charts, UOB Global Economics & Markets Research said.

Following its recent slide, gold fell further to a low of $1,932/oz on Tuesday, which seems to have slightly broken the 21-week exponential moving average and the rising trendline connecting the lows of October 2022 and March 2023, UOB said.

These price actions, together with weekly moving average convergence divergence indicator turning negative last week suggest an increasing risk of a bearish reversal, UOB said, pegging support at bottom of daily Ichimoku cloud, now at $1,920/oz.

Read Gold Prices Likely to Find Support in Recession Risks, Central Bank Demand

Copper

The copper market looks to be closing in on a fundamental inflection point, UBS said. copper market looks to be closing in on a fundamental inflection point, UBS said. copper market looks to be closing in on a fundamental inflection point, UBS said. copper market looks to be closing in on a fundamental inflection point, UBS said.

UBS, which said it has done a detailed review of its supply and demand estimates for the metal, now forecast only a modest surplus in 2023 and expect a growing deficit from 2025.

"This increases the risk of material price upside over the next 2-3 years [potentially copper's 'lithium moment']," it said.

Prices could dip in the near term if "already weak physical signals deteriorate further," but UBS said it doesn't expect any oversupply to push prices down into the cost curve for an extended period.

TODAY'S TOP HEADLINES

ESG Blowback: Exxon, Chevron Investors Reject Climate Measures

An investor-driven climate change push at some of the world's largest oil companies has stalled out.

On Wednesday, Exxon Mobil and Chevron's shareholders struck down a raft of proposals urging the companies to cut greenhouse-gas emissions derived from fuel consumption, put out new reports on climate benchmarks and disclose certain oil-spill risks, among other initiatives.

Broadcom Is a Bellwether for Chips. Earnings Will Be Focused on AI.

Chip investors are eagerly awaiting the latest results from semiconductor bellwether Broadcom after the market close to get an update on its businesses and progress in the artificial intelligence market.

Some of the company's chips have exposure to generative AI systems, which has been a popular investment theme this year. The technology ingests text, images, and videos in a brute-force manner to create content. Interest in this form of AI was sparked by OpenAI's release of ChatGPT late last year.

Jamie Dimon Says He Never Discussed Jeffrey Epstein's Accounts at JPMorgan; Jes Staley Says Dimon Did

A former top JPMorgan Chase executive said in legal documents that for years he communicated with Chief Executive Jamie Dimon about the bank's business with convicted sex offender Jeffrey Epstein-setting the stage for a conflict with his former boss, who maintains he had no such conversations.

Jes Staley's statements, made in documents viewed by The Wall Street Journal that haven't been made public, are his first remarks to emerge about conversations between him and Dimon regarding Epstein. The bank on Tuesday said Staley's statements are false.

Purdue Appeals Court Ruling Curbs Lawsuits Against Corporate Leaders

An appeals court's ruling this week that corporate bankruptcy filings can protect insiders from liability cements the chapter 11 system as a powerful tool for resolving misconduct claims.

The Second Circuit Court of Appeals backed a chapter 11 plan for drugmaker Purdue Pharma that releases its owners, members of the wealthy Sackler family, from civil lawsuits related to the opioid crisis. In return, the family members will pay up to $6 billion over time to Purdue's creditors, believed to be the largest settlement ever by shareholder parties to a bankruptcy case.

Facebook Parent Threatens to Remove News From Its Platforms in California

Facebook parent Meta Platforms is threatening to pull news from its sites in California if the state passes a law requiring technology platforms to pay publishers, the latest in a series of warnings from the company as various governments consider similar legislation.

The bill is set to receive a vote on the California assembly floor Thursday and, if it passes, would move next to the state Senate. The legislature's final deadline for passing bills this year is Sept. 14.

New Pfizer RSV Vaccine Rolls Out Into Headwinds of Hesitancy

Vaccine makers are confronting a post-Covid conundrum: New shots are taming a widening range of diseases, but people are more skeptical of them than ever.

The newest vaccine, from Pfizer for a deadly respiratory virus known by the acronym RSV, was approved in the U.S. on Wednesday. Its green light follows clearance of the first RSV shot from GSK earlier this month and a pneumonia shot from Merck & Co. last year. Meantime, new vaccines for HIV, Lyme disease and other pathogens are in the works.

Eurozone Inflation Fell More than Expected as Core Rate Falls

Eurozone inflation fell more than expected in May on easing food and declining energy prices, as the core rate also dropped, a signal that the European Central Bank could be nearing the end of its tightening cycle.

The consumer price index increased 6.1% in May on year, tumbling from a 7.0% rise in April, preliminary data from the European Union's statistics agency Eurostat showed Thursday, the lowest level since February 2022. It also came in below the 6.4% consensus forecast from economists in a poll by The Wall Street Journal.

China Caixin Manufacturing PMI Returns to Expansion in May

A private gauge of China's factory activity bounced back to expansion in May, the first improvement in the manufacturing sector's health since February.

The China Caixin manufacturing purchasing managers index rose to 50.9 in May from 49.5 in April, according to data released Thursday by Caixin Media and S&P Global. The 50 mark separates expansion from contraction.

Oil Traders Are Unfazed by Potential OPEC+ Production Cuts

Oil traders are betting prices will continue to drop despite the best efforts of producing countries to boost them.

Prices have slid since the Organization of the Petroleum Exporting Countries and its allies, the coalition known as OPEC+, jolted markets in October by cutting production by 2 million barrels a day. A February vow from Moscow to curtail another half-million barrels and a voluntary April move by eight OPEC+ members to cut 1.2 million barrels more haven't stopped the slide.

Debt Ceiling: House Approves Deal Struck by Biden and McCarthy

WASHINGTON-The House passed a sweeping bill that suspends the federal government's $31.4 trillion debt ceiling in exchange for spending cuts, as Republican Speaker Kevin McCarthy muscled through a deal struck with President Biden to avert a looming government default.

The 314-117 vote relied on support from both Republicans and Democrats. Passage of the deal sends the measure to the Senate, where leaders have promised quick action, and Biden has said he is eager to sign the measure into law. Treasury Secretary Janet Yellen has said the government could run out of the cash it needs on June 5 to pay its bills on time and warned of severe economic damage and market disruptions unless Congress acts.

Fed Prepares to Skip June Rate Rise but Hike Later

Federal Reserve officials signaled they are increasingly likely to hold interest rates steady at their June meeting before preparing to raise them again later this summer.

Investors in recent days had expected the Fed would lift rates at its meeting June 13-14, prompting two policy makers Wednesday to publicly underscore their preference to forgo a hike, barring a sizzling jobs report on Friday.

Profit Numbers Get Spruced Up as Business Slows

Business slowed last year for Google's parent, Alphabet. The tech giant still beat earnings expectations in this year's first quarter, in part because it said that its computer servers would last longer than expected.

The shift reduced its depreciation expense by nearly $1 billion and helped push per-share earnings ahead of analysts' estimates.

A big short in Treasurys? Traders are building up bets around a debt ceiling resolution

Speculators have been building up a "historically massive" short position in U.S. Treasury futures ahead of what could be $1 trillion of new debt issuance on the heels of a debt-ceiling resolution, according to Macquarie's sales and trading global macro strategy desk.

Bond speculators have been taking up a large number of short positions in 2-year, 5-year and 10-year Treasury futures TY00 (see chart), according to the Macquarie team, which pinpointed the combined tally of contracts at nearly 3 million as of late May, or the most since 2000.

Drones Hit Russian Oil Refineries as Moscow Shores Up Front Line

KYIV, Ukraine-Drones struck two oil refineries in southern Russia on Wednesday as Western officials said Moscow was moving to shore up defenses in border areas and along the 900-mile front with Ukraine ahead of a planned counteroffensive by Kyiv.

Authorities in Russia's Krasnodar region said the Ilyinsky oil refinery was largely unaffected by a suspected drone attack, but a blaze at the Afipsky refinery engulfed over 1,000 square feet of territory likely as a result of a drone, according to regional governor Veniamin Kondratyev, who said no one had been injured.

Republicans Probing Bidens Step Up Threats Against FBI Chief Christopher Wray

WASHINGTON-Top Republican lawmakers on Wednesday escalated threats to hold FBI Director Christopher Wray in contempt over what they view as his stonewalling of a congressional investigation into the business dealings of President Biden and his family.

Following a phone call with Wray, Rep. James Comer of Kentucky and Sen. Chuck Grassley of Iowa assailed the Federal Bureau of Investigation director for not turning over a document that the House Oversight Committee subpoenaed as part of its investigation into the Biden family's business dealings. Comer, chairman of the House Oversight Committee, and other Republicans have said the FBI record contains allegations that President Biden engaged in a bribery scheme with a foreign national during his vice presidency.

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

BRP 1Q

Laurentian Bank of Canada 2Q

Economic Calendar (ET):

0930 May Canada Manufacturing PMI

Stocks to Watch:

D-Box Technologies 4Q Rev C$34.1M; 4Q Loss C$100,000

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Filo Mining: Largest Shareholders Have Indicated Intention to Participate in Private Placement; Proceeds to Be Used for Exploration, Development of Filo del Sol Project, Working Capital

Expected Major Events for Thursday

00:30/JPN: May Japan Manufacturing PMI

05:00/JPN: May Auto sales

06:00/RUS: May Russian Manufacturing PMI

06:00/GER: Apr Retail Trade

06:00/UK: May Nationwide House Price Index

07:45/ITA: May Italy Manufacturing PMI

07:50/FRA: May France Manufacturing PMI

07:55/GER: May Germany Manufacturing PMI

08:00/ITA: Apr Unemployment

08:30/UK: Apr Money and Credit - Lending to Individuals, Lending to Businesses, Broad Money and Credit

08:30/UK: Apr Bank of England effective interest rates

08:30/UK: Apr Monetary & Financial Statistics

08:30/UK: May S&P Global / CIPS UK Manufacturing PMI

11:30/US: May Challenger Job-Cut Report

12:15/US: May ADP National Employment Report

12:30/US: 05/27 Unemployment Insurance Weekly Claims Report - Initial Claims

12:30/US: 1Q Revised Productivity and Costs

13:00/RUS: Weekly International Reserves

13:30/CAN: May Canada Manufacturing PMI

13:45/US: May US Manufacturing PMI

14:00/US: May ISM Report On Business Manufacturing PMI

14:00/US: Apr Construction Spending - Construction Put in Place

14:30/US: 05/26 EIA Weekly Natural Gas Storage Report

15:00/US: May Global Manufacturing PMI

15:00/US: 05/26 EIA Weekly Petroleum Status Report

16:00/US: May Monthly U.S. Retail Chain Store Sales Index

20:00/US: May Domestic Auto Industry Sales

20:30/US: Foreign Central Bank Holdings

20:30/US: Federal Discount Window Borrowings

23:01/UK: May POSTPONED: BRC-Sensormatic IQ Footfall Monitor

23:50/JPN: May Monetary Base

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Expected Earnings for Thursday

ACELYRIN Inc (SLRN) is expected to report for 1Q.

ASA Gold & Precious Metals Ltd (ASA) is expected to report for 1Q.

Asana Inc (ASAN) is expected to report for 1Q.

Aurora Cannabis Inc (ACB,ACB.T) is expected to report for 3Q.

BARK Inc (BARK) is expected to report for 4Q.

BRP Inc (DOO.T,DOOO) is expected to report $2.38 for 1Q.

Broadcom Inc (AVGO) is expected to report $7.85 for 2Q.

Buckle Inc (BKE) is expected to report.

Caleres Inc (CAL) is expected to report $0.94 for 1Q.

Canaccord Genuity Group (CF.T) is expected to report $0.15 for 4Q.

ChargePoint Holdings Inc (CHPT) is expected to report for 1Q.

Conn's (CONN) is expected to report $-1.28 for 1Q.

Cooper Companies Inc (COO) is expected to report $2.23 for 2Q.

Costco Wholesale Corp (COST) is expected to report.

DATATRAK International Inc (DTRK) is expected to report for 1Q.

Dell Technologies Inc - Class C (DELL) is expected to report $0.42 for 1Q.

Dollar General (DG) is expected to report $2.42 for 1Q.

Duluth Holdings Inc (DLTH) is expected to report $-0.03 for 1Q.

Five Below (FIVE) is expected to report $0.63 for 1Q.

Guidewire Software Inc (GWRE) is expected to report $-0.60 for 3Q.

Hormel Foods Corp (HRL) is expected to report $0.40 for 2Q.

IMPAC Mortgage Holdings Inc (IMPM) is expected to report for 1Q.

Iteris Inc (ITI) is expected to report $0.04 for 4Q.

Lands' End Inc (LE) is expected to report for 1Q.

Laurentian Bank of Canada (LB.T,LRCDF) is expected to report $1.07 for 2Q.

Lululemon Athletica Inc (LULU) is expected to report $1.98 for 1Q.

Macy's Inc (M) is expected to report $0.45 for 1Q.

MongoDB Inc (MDB) is expected to report $-1.16 for 1Q.

PagerDuty Inc (PD) is expected to report for 1Q.

Quanex Building Products Corp (NX) is expected to report $0.41 for 2Q.

Reeds (REED) is expected to report for 1Q.

Samsara Inc (IOT) is expected to report for 1Q.

SentinelOne Inc (S) is expected to report for 1Q.

SpartanNash Co (SPTN) is expected to report $0.50 for 1Q.

Statera Biopharma Inc (STAB) is expected to report for 4Q.

System1 Inc (SST) is expected to report for 1Q.

Tilly's (TLYS) is expected to report $-0.36 for 1Q.

VMware (VMW) is expected to report $0.70 for 1Q.

Zscaler Inc (ZS) is expected to report $-0.34 for 3Q.

Zumiez (ZUMZ) is expected to report $-0.85 for 1Q.

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ANALYST RATINGS ACTIONS

Akebia Therapeutics Raised to Overweight From Neutral by Piper Sandler

Ambarella Cut to Sector Weight From Overweight by Keybanc

Avis Budget Group Raised to Buy From Hold by Deutsche Bank

Chevron Raised to Neutral From Underweight by JP Morgan

GreenLight Biosciences Cut to Hold From Buy by Canaccord Genuity

Q2 Holdings Raised to Buy From Neutral by BTIG

Xylem Raised to Outperform From Neutral by Baird

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

June 01, 2023 06:11 ET (10:11 GMT)

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