MARKET WRAPS

Watch For:

Employment Report for May

Today's Top Headlines/Must Reads:

- Jobs Report Expected to Show Unemployment Still Historically Low

- Senate Approves Deal Raising Debt Ceiling, Averting U.S. Default

- As China Risks Grow, Manufacturers Seek Plan B-and C and D

- Nvidia Is Still a 'Buy' on Wall Street

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Opening Call:

Stock futures pointed to a higher open on Friday after a debt-ceiling bill cleared a final hurdle, and as investors turned their attention to jobs data that could help cement a pause in Federal Reserve interest-rate hikes.

"The Fed clearly sends a message that they no longer see urgency in hiking the rates, while also letting investors know that their job fighting inflation is not done just yet. That's a way of managing market expectations: pausing rate hikes, without however letting the market conditions loosen due to excess dovish speculation," Swissquote Bank said.

The next set of jitters, though, may come from an expected flood of Treasury bill issuance as the government tries to rebuild its coffers that have been drained by the weeks-long debt-ceiling standoff. Some analysts have warned of a potential liquidity squeeze that could trigger volatility for markets.

Overseas stocks gained. The Stoxx Europe 600 rose 0.7% while Hong Kong's Hang Seng rallied 4%. Japan's Nikkei 225 rose 1.2%.

Stocks to Watch

Broadcom stock pointed around 2% lower despite beating earnings estimates and offering a better-than-expected outlook for the current quarter. CEO Hock Tan said generative AI applications will boost demand for its chips.

Dell's revenue plunged in the first quarter by the largest percentage on record and executives said they expect a similar drop in the current period. Shares fell nearly 3% in off-hours trading.

Lava Therapeutics on Thursday said a lead candidate aimed at an undisclosed tumor-associated antigen was selected for further development toward clinical studies by Janssen Biotech. Shares rose 26% in after-hours trading.

Lululemon Athletica on Thursday raised its outlook for the year amid significant sales growth in China. Shares rose 15% premarket.

MongoDB reported better-than-expected first-quarter results and said it added the most net new customers in over two years. Shares rose 25% ahead of the opening bell.

Oncorus said it plans to cut nearly its entire workforce and anticipates its finances won't meet its needs beyond the third quarter. Shares fell 24% in after-hours trading.

Tilly's guided for wider-than-expected losses in the fiscal second quarter. Shares dropped 13% in after-hours trading.

Forex:

The dollar continues to fall after Fed officials hinted at a pause in raising rates in June, and non-farm payrolls data could help determine whether losses continue, ING said.

"Today's U.S. NFP [non-farm payrolls] data will have a major say in determining whether the Fed hikes in June or not," ING said, adding that only above-consensus data could dampen prospects of a pause.

"Unless the May NFP surprises on the upside we would say today's DXY bias lies towards the 103.20 area."

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The euro should find support as there is limited scope for lower front-end eurozone yields given that the European Central Bank looks set to raise interest rates further, MUFG Bank said.

Although data showed eurozone inflation eased in May, ECB President Christine Lagarde said on Thursday there wasn't clear evidence that underlying inflation had peaked, while ECB meeting minutes reinforced "the prospect of at least two more rate hikes," MUFG added.

Services inflation could "well drift higher over the summer on tourism-related inflationary pressures."

Bonds:

The 10-year U.S. Treasury-German Bund yield spread could narrow, in line with the usual behavior around the time the Federal Reserve delivers its last interest-rate rise, Societe Generale said.

"Euro area core inflation is not yet in free fall, and the European Central Bank's stance is less restrictive than the Fed's," it said. "This argues in favour of a narrower 10y UST-Bund spread."

Energy:

Oil prices jumped for a second day after the Senate passed a bill averting a default.

Focus now turns firmly to this weekend's OPEC+ meeting at which analysts broadly expect the group to keep production quotas unchanged.

Outlook

Oil's outlook in June is likely to hinge on supply trends, especially the upcoming decision from the OPEC+ meeting later this week, Hengtai Futures said.

It added that demand-side fundamentals are showing mixed signals, with U.S. data showing sharply lower inventories buoying sentiment, but a soft China macro recovery is weighing on trading confidence.

Therefore, supply-side factors may be essential in driving prices. "If officials don't offer clear price support actions at the upcoming OPEC+ meetings, investors are unlikely to turn more bullish," Hengtai said.

Metals:

Base metals prices were pushing higher, while gold was flat in early London trading, with investors looking to the U.S. jobs report as the next big macroeconomic indicator.

Aluminum

Aluminum prices will likely remain in range-bound trading this month, Hengtai Futures said.

It notes that Chinese supply of the base metal is likely on the rise, with several main producing regions expected to ramp up output as hydropower capacity becomes more abundant in the summer rainy season.

More hydropower also means lower production costs of the metal, which could further weigh on prices, Hengtai said, advising investors to stay on the sidelines and monitor the supply trend in the near term.

TODAY'S TOP HEADLINES

Nvidia Is Still a 'Buy' on Wall Street as Analysts Race to Boost Price Targets

An investor craze for artificial intelligence has powered Nvidia's dizzying rise and pushed the stock to lofty valuations. Wall Street analysts are predicting it has more room to run.

Nvidia shares have nearly tripled in 2023, making them the best performers by far in the S&P 500. The graphics chip maker has gained more than $650 billion in market value since hitting a two-year low in October and briefly crossed the $1 trillion mark earlier this week.

Exxon, Chevron Near Deals to Drill in Gas-Rich Algeria

ALGIERS, Algeria-Exxon Mobil and Chevron are in advanced negotiations with Algeria on a deal that would allow the U.S. energy giants to drill for the first time in the gas-rich North African nation, according to the Algerian energy minister and people familiar with the discussions.

The deals, which the energy minister said could be complete by the end of the year, would give the companies a foothold in a country that is an increasingly important supplier of natural gas to Europe following Russia's invasion of Ukraine.

The RV Boom Is Over, But These Stocks Promise a Sweet Ride

Here's a sweet deal: a vehicle big enough for your whole family to live in on "clearance" at 30% off the manufacturer's suggested retail price!

Unfortunately, that 39-foot long Thor Challenger 37FH motor home still will set you back $188,895. Even with a 240 month loan-much longer than those available to car buyers-your monthly payment would come to $1,221. Inflation means parking that recreational vehicle at a campground will cost about 30% more than it would have just a few years ago and, while pump prices are down from their peak, a behemoth that gets about 8 miles a gallon makes dealer Camping World Holdings' "See America for Less" promotion something of a relative statement.

Twitter's Top Content Moderation and Safety Executive Leaves

Twitter's top official for monitoring safety and content moderation said she resigned Thursday, the second time an executive with that role has departed since Elon Musk bought the social-media company in October.

Ella Irwin, Twitter's head of trust and safety, declined to comment on the reason for her departure in an interview with The Wall Street Journal. She said she felt she had always been honest in her work. Irwin, who joined Twitter about a year ago, had publicly defended the company's actions since Musk took over as she navigated a high-profile and often-scrutinized role handling content-moderation decisions.

Judge in Disney-DeSantis Case Recuses Himself

The federal judge handling Walt Disney Co.'s lawsuit against Florida Gov. Ron DeSantis recused himself Thursday, landing the case in the hands of a judge who has in the past sided with the governor in blocking challenges to the sex-education law at the heart of the lawsuit.

U.S. District Judge Mark Walker was originally assigned to Disney's case, prompting DeSantis and other defendants to seek to disqualify him, citing comments he made in other cases that they said raised doubts about his impartiality. Disney challenged the motion, saying it misstated facts and misread the law.

Jobs Report Expected to Show Unemployment Still Historically Low

Friday's jobs report will show whether the labor market remained resilient in May in the midst of rising interest rates and elevated inflation.

Economists surveyed by The Wall Street Journal estimate that U.S. employers added 190,000 jobs in May. That would be a modest slowdown from April's gain of 253,000 and the 29th straight monthly increase. They expect that the unemployment rate ticked up to 3.5% in May from 3.4% in April, which matched the lowest reading since 1969.

Senate Approves Deal Raising Debt Ceiling, Averting U.S. Default

WASHINGTON-The Senate passed wide-ranging legislation Thursday that suspends the $31.4 trillion debt ceiling while cutting federal spending, backing a bipartisan deal struck by President Biden and House Speaker Kevin McCarthy to avert an unprecedented U.S. default.

The 63-36 vote reflected support from both Democrats and Republicans, with backers saying the need to raise the nation's borrowing limit outweighed concern about provisions related to military and domestic spending and energy policy, among other contentious issues.

As China Risks Grow, Manufacturers Seek Plan B-and C and D

SINGAPORE-For much of the past decade, Western companies have sought an alternative to China to manufacture goods-a shift executives call "China plus one." Increasingly, the strategy looks more like China plus many.

Apple, with a sprawling production base in China, is rapidly expanding in Vietnam and India, an emerging smartphone-making hub. Crocs, which shifted production of a large share of its colorful shoes from China to Vietnam, recently stepped up sourcing from Indonesia and is also setting up in India.

When Markets Melt Down, These Traders Cash In

As investors fretted about the possibility that the White House and Republican lawmakers would fail to raise the debt ceiling, one $20 billion firm wasn't concerned about the potential stock-market mayhem.

That's because Miami-based Universa Investments reaps huge rewards in market crashes. It made billions in 2008 when the market collapsed during the global financial crisis, as well as in the 2020 crash sparked by the Covid-19 pandemic.

Cybersecurity Risks and Privacy Rules Add Pressure on Boards

Companies shouldn't wait for new rules around cybersecurity, privacy and emerging technologies to be finalized before preparing for them, lawyers say, particularly as senior executives with the right experience can be hard to come by.

Proposed cybersecurity rules from the Securities and Exchange Commission would require public companies to disclose which board members have security knowledge or experience, along with details about the board's approach to cyber oversight. The SEC published draft rules in March 2022 and is expected to finalize them in the coming months.

U.S. Is Willing to Begin Nuclear Arms Dialogue With Russia

The Biden administration is prepared to begin talks without preconditions with Moscow on steps to limit nuclear arms after the New Start treaty expires in 2026, national security adviser Jake Sullivan plans to say in a speech Friday.

But the limits on U.S. nuclear forces that the administration might accept at that point will be influenced not only by the size of Russia's nuclear arsenal but also by the pace of China's nuclear buildup, according to senior administration officials familiar with the address.

Ukraine Says It Stopped Russia's Latest Missile and Drone Attacks on Kyiv

Russia continued its aerial campaign against the Ukrainian capital of Kyiv, launching cruise missiles and drones against the city Thursday night, according to Ukraine's armed forces.

The Ukrainian air force said its air defenses intercepted all 15 of the Russian cruise missiles and all 21 of the Iranian-made Shahed drones.

Debt-Limit Bill Cancels Almost $30 Billion in Pandemic Relief Funding

WASHINGTON-A deal between President Biden and congressional Republicans to lift the debt ceiling claws back billions of dollars in unspent pandemic relief funding but leaves money in place for front-line Covid-19 investments such as next-generation vaccines and testing.

Almost $30 billion in unspent funding approved during the pandemic will be rescinded under the legislation, which passed the Senate Thursday and is headed to Biden's desk, but most of that is unrelated to Covid-19. Instead, it will be taken from a host of agencies that have been looking at spending the money on such programs as highway infrastructure, disaster loans, and rural broadband expansion, according to people familiar with the deal.

Debt-Ceiling Deal Makes It Kevin McCarthy 3, Detractors 0

WASHINGTON-For House Speaker Kevin McCarthy, pursuing a bipartisan deal to avoid defaulting on the nation's debt meant putting his own job at risk. Now he is taking a victory lap, even as threats to his leadership endure in corners of his party.

On Wednesday, the California Republican successfully shepherded a must-pass bill through the House to suspend the $31.4 trillion debt ceiling into early 2025 in exchange for reining in federal spending. The bill, crafted in breakneck talks with the White House, then headed to the Senate, where lawmakers quickly passed it Thursday, to make a June 5 deadline and avoid an unprecedented U.S. default.

Write to ina.kreutz@wsj.com TODAY IN CANADA

Earnings:

Nothing major scheduled

Economic Calendar (ET):

Nothing major scheduled

Stocks to Watch:

MCAN Mortgage Names Don Coulter as CEO, President, to Board; Names Derek Sutherland as Interim CEO; Sutherland Succeeds Karen Weaver; Coulter to Succeed Sutherland on Dec. 1

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StorageVault Purchases Brossard, Quebec Property With Automotive Properties REIT; StorageVault and Automotive Properties Real Estate Investment Entered 50/50 Joint Venture to Acquire Automotive Dealership Property

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Tidewater Midstream Resumes Operations at Brazeau River Complex After Wildfire Shutdown

Expected Major Events for Friday

06:45/FRA: Apr Industrial production index

08:30/UK: 1Q Bank of England external business stats

12:30/US: U.S. Weekly Export Sales

12:30/US: May U.S. Employment Report

All times in GMT. Powered by Onclusive and Dow Jones.

Expected Earnings for Friday

Abraxas Petroleum (AXAS) is expected to report for 1Q.

Andrea Electronics Corp (ANDR) is expected to report for 1Q.

Environmental Tectonics Corp (ETCC) is expected to report for 4Q.

Exicure Inc (XCUR) is expected to report for 1Q.

Hurco Cos (HURC) is expected to report for 2Q.

Ocean Biomedical Inc (OCEA) is expected to report for 1Q.

Odonate Inc (ODTC) is expected to report $-1.17 for 1Q.

Webco Industries Inc (WEBC) is expected to report for 3Q.

Wins Finance Holdings Inc (WINSF) is expected to report for Interim.

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ANALYST RATINGS ACTIONS

Adicet Bio Cut to Neutral From Overweight by JP Morgan

Advance Auto Parts Cut to Market Perform From Strong Buy by Raymond James

Advance Auto Parts Cut to Neutral From Buy by Goldman Sachs

Advance Auto Parts Cut to Neutral From Overweight by JP Morgan

Alteryx Raised to Buy From Neutral by B of A Securities

AutoZone Raised to Neutral From Underperform by B of A Securities

bluebird bio Raised to Overweight From Equal-Weight by Barclays

https://urldefense.com/v3/__http://C3.ai__;!!F0Stn7g!HhngI5El2PYbhgh7jbLyCbKbyrbnV6e_G5NTJ_KWjE4kblTeB4wxH5kk8rk-uW3MS0oWs6lvt7MaHQf61BXtDw6_ON9s_TBfXnJrWGPaHQo$ Cut to Neutral From Buy by DA Davidson

https://urldefense.com/v3/__http://C3.ai__;!!F0Stn7g!HhngI5El2PYbhgh7jbLyCbKbyrbnV6e_G5NTJ_KWjE4kblTeB4wxH5kk8rk-uW3MS0oWs6lvt7MaHQf61BXtDw6_ON9s_TBfXnJrWGPaHQo$ Raised to Outperform From Neutral by Wedbush

Cheniere Energy Partners Cut to Underperform From Peer Perform by Wolfe Research

Chevron Raised to Outperform From Sector Perform by RBC Capital

Chewy Raised to Buy From Hold by Gordon Haskett

CSX Corp Raised to Buy From Neutral by UBS

Domino's Pizza Raised to Overweight From Neutral by JP Morgan

DZS Cut to Market Perform From Outperform by Northland Capital Markets

Entergy Cut to Neutral From Outperform by Evercore ISI Group

Equitrans Midstream Raised to Outperform From Peer Perform by Wolfe Research

Exxon Mobil Cut to Sector Perform From Outperform by RBC Capital

First Solar Raised to Hold From Sell by GLJ Research

Genuine Parts Raised to Buy From Neutral by B of A Securities

Lear Raised to Outperform From Neutral by Exane BNP Paribas

NextEra Energy Partners Raised to Neutral From Underperform by B of A Securities

Novan Cut to Perform From Outperform by Oppenheimer

Nucor Raised to Peer Perform From Underperform by Wolfe Research

Okta Cut to Neutral From Overweight by JP Morgan

Phillips 66 Raised to Outperform From Market Perform by TD Cowen

Presto Automation Raised to Buy From Neutral by Chardan Capital

Salesforce Cut to Hold From Buy by Societe Generale

Sphere Entertainment Cut to Neutral From Outperform by Macquarie

US Steel Cut to Underperform From Peer Perform by Wolfe Research

Veeva Systems Raised to Buy From Neutral by Guggenheim

Veritone Cut to Neutral From Buy by Roth MKM

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

(END) Dow Jones Newswires

June 02, 2023 06:15 ET (10:15 GMT)

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