Month: June 2023

(C) Reuters

Investing.com — U.S. stock futures traded higher Friday, on course to register a positive quarter ahead of the release of key inflation data which could guide future Federal Reserve action.

By 06:50 ET (10:50 GMT), the Dow futures contract was up 115 points, or 0.3%, S&P 500 futures traded 20 points, or 0.4% higher, and Nasdaq 100 futures climbed 85 points, or 0.6%.

Core PCE index due

The hawkish nature of the recent comments by U.S. Federal Reserve head Jerome Powell has led investors to largely factor in another interest rate hike in the near future, probably in July.

With this in mind, investors are keeping a close eye on the core personal consumption expenditures index, due later in the session, as this is the Fed’s preferred gauge of inflation.

PCE prices are expected to rise 4.6% for the year and 0.5% for May, and could help decide the next step on interest rates, with the Fed’s last meeting indicating that they still see potentially two more hikes of 25 basis points this year.

Positive month, quarter coming to a close

This is the last trading day of the week, the month, and the quarter, and the period has largely been a positive one for investors, helped by increasing confidence of a soft-landing scenario after the release of generally strong economic data.

The broad-based S&P 500 is on course for monthly gains of over 5%, its best monthly performance since January, and a quarterly improvement of almost 7%.

The tech-heavy Nasdaq Composite is even more impressive, with a monthly gain of around 5%, and a quarterly return of over 11%, while the blue-chip Dow Jones Industrial Average has climbed just under 4% in June, on track for its best month since November, up around 2.5% on the quarter.

Nike disappoints with revenue forecast

In corporate news, earnings are due from spirits and brewing giant Constellation Brands (NYSE:STZ), but the focus will be on Nike (NYSE:NKE) after the sportswear giant offered up a gloomy forecast for first-quarter revenue, predicting that still-high inflation will lead consumers to cut back discretionary spending in North America, the company’s biggest market.

Oil edges higher; monthly gains likely

Crude prices edged higher Friday, on course to record healthy gains this month helped by signs of resilience by the U.S. economy, the largest consumer of crude in the world.

By 06:50 ET, U.S. crude futures were 0.1% higher at $69.88 a barrel, while the Brent contract rose 0.1% to $74.59 per barrel. Both contracts were set to add between 2% and 3% for June, with Brent marking its first positive month this year after WTI recorded a gain in April.

The tone this week has been helped by U.S. crude inventories dropping far more than expected last week, while both Thursday’s quarterly growth data and jobless claims numbers pointed to a U.S. economy that looked set to avoid recession even with the Federal Reserve set to tighten monetary policy further.

On a quarterly basis, however, Brent looks set for a loss of about 6% while WTI appears headed for a decline of about 7%, the first back-to-back quarterly losses since 2019.

Additionally, gold futures fell 0.2% to $1,931.50/oz, while EUR/USD traded 0.2% lower at 1.0848.

(Oliver Gray contributed to this item.)

(C) Reuters. FILE PHOTO: An Apple logo hangs above the entrance to the Apple store on 5th Avenue in the Manhattan borough of New York City, July 21, 2015. REUTERS/Mike Segar/File Photo

By Noel Randewich and Tiyashi Datta

(Reuters) -Apple Inc’s market value on Friday breached the $3 trillion mark for the first time since January last year, lifted by signs of improving inflation and bets that the iPhone maker will successfully expand into new markets.

Shares of the world’s most valuable company jumped 1.8% to an intraday record high of $193.03, giving it a market capitalization of $3.035 trillion, Refinitiv data showed.

The stock was on track for its fourth straight record high close.

The Cupertino, California-based company’s market cap briefly peaked above $3 trillion in intraday trading on Jan. 3, 2022 before closing the session just below that mark.

Heavyweight growth stocks including Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA) Corp and Tesla (NASDAQ:TSLA) Inc rose sharply on Friday after a Commerce Department report showed the Personal Consumption Expenditure price index advanced less in May than in April, reflecting progress in the Federal Reserve’s fight against inflation.

Apple has surged 48% so far in 2023 in a rally by several of Wall Street’s most valuable companies, fueled by bets that the Fed is nearing the end of its campaign of interest rate hikes, and by optimism about the potential for artificial intelligence.

Apple’s most recent quarterly report in May showed revenue and profits fell but still beat analysts’ expectations. Along with a steady track record of stock buybacks, the financial results reinforced its reputation as a safe investment at a time of global economic uncertainty.

“It’s a testament to one of the greatest publicly traded companies that’s ever existed. It continues to grow and diversify its revenue streams, has shareholder-friendly management, buys back shares, throws off a dividend and has a fortress balance sheet with strong and defendable cash flows,” said Art Hogan, chief market strategist at B. Riley Wealth.

Apple’s $3 trillion milestone follows the June 5 launch of a pricey augmented-reality headset, its riskiest bet since the introduction of the iPhone more than a decade ago.

The stock has climbed over 6% since then, compared to the S&P 500‘s 4% rise.

Recent gains in Apple’s shares have outpaced analysts’ estimates for the company’s future earnings. It is now trading at over 29 times expected earnings, its highest since January 2022, according to Refinitiv data. That compares to a median PE ratio of about 13 for the S&P 500 technology index.

Four other U.S. companies have valuations of more than $1 trillion – Alphabet (NASDAQ:GOOGL) Inc, Amazon.com Inc (NASDAQ:AMZN), Nvidia and Microsoft Corp (NASDAQ:MSFT), which follows Apple with a market value of $2.5 trillion.

Shares of Tesla and Meta Platforms Inc (NASDAQ:META) have more than doubled this year, while a 190% gain in shares of Nvidia has catapulted the chipmaker into the trillion-dollar club.

(C) Reuters

Here is your Pro Recap of the biggest analyst picks you may have missed since yesterday: Initiation at Apple, upgrades at NVIDIA, Carnival, and Frontline.

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Citi starts coverage on Apple with Buy

Citi initiated coverage on Apple (NASDAQ:AAPL) with a Buy rating and a price target of $240.00, as reported in real-time on InvestingPro.

While shares are up 46% YTD as the company is navigating the macro slowdown and inflationary pressure on consumer spending by consistently gaining share from Android phones, Citi expects approximately 30% further upside potential from current levels.

The firm believes the Street is underestimating continued gross margin expansion, driven by (1) the shift in iPhone sales towards higher-priced Pro/Pro Max models, leading to a higher blended average selling price, (2) anticipated further market share gains in China and India, (3) ongoing development of self-designed cellular chips to reduce costs, and (4) a higher-margin services sales mix.

NVIDIA upgraded to Outperform

Daiwa Securities upgraded NVIDIA (NASDAQ:NVDA) to Outperform from Neutral and raised its price target to $475.00 from $408.00.

Following its recent tech tour and checks, the firm has a higher level of confidence that NVIDIA’s commanding position for AI, and Generative AI, will be difficult to replicate near term by the competitors such as Advanced Micro Devices (NASDAQ:AMD), Intel (NASDAQ:INTC), and others.

2 more upgrades

Carnival (NYSE:CCL) shares rose more than 2% pre-market today after Jefferies upgraded the company to Buy from Hold and raised its price target to $25.00 from $9.00.

Deutsche Bank upgraded Frontline (NYSE:FRO) to Buy from Hold with a price target of $17.00 (from $19.00). Shares surged more than 3% pre-market today.

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(C) Reuters. FILE PHOTO: A man walks past the Federal Reserve in Washington, December 16, 2015. REUTERS/Kevin Lamarque/File Photo

(Reuters) – The Federal Reserve is seen slightly less locked in to a July interest rate hike, traders bet on Friday, after a government report showed price pressures eased slightly in May but remained far above the Fed’s goal.

Inflation by the Fed’s preferred personal consumption expenditures index rose last month at a year-on-year pace of 3.8%, data Friday showed, easing from April’s 4.4% pace. Underlying core inflation rose 4.6%, a touch less than the 4.7% economists expected. Futures tied to the Fed’s policy rate, which had before the data priced in a nearly 90% chance of a July Fed rate increase, now reflect about an 85% probability.

(C) Reuters.

Here is your Pro Recap of the biggest analyst cuts you may have missed since yesterday: downgrades at Citizens Financial, Core Laboratories, Concentrix, and Sonder.

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Citizens Financial slashed to Neutral at JPMorgan

JPMorgan downgraded Citizens Financial (NYSE:CFG) to Neutral from Overweight and cut its price target to $27.00 from $29.00, citing concerns about the bank’s capital requirements and profitability levels.

The recent 2023 DFAST results showed that all banks in JPMorgan’s coverage had capital in excess of minimum requirements, but Citizens is expected to face increased capital requirements, leading to pressure on profitability.

According to the firm, Citizens has a lower cushion relative to peers above minimum CET1 requirements based on 3/31 levels and has continued to buy back stock in Q2. The bank also faces challenges from high losses on commercial real estate (CRE) loans due to the high level of maturities of office CRE loans in 2023 and 2024.

Core Laboratories downgraded to Sell at Citi

Core Laboratories (NYSE:CLB) shares fell more than 1% pre-market today after Citi downgraded the company to Sell from Neutral and cut its price target to $21.00 from $22.00, as reported in real time on InvestingPro.

The bank cut its Q2/23 EBITDA forecast by approximately 5% to $18.9 million, around 6% below the Street estimate, on NAM completion weakness negatively impacting Production Enhancement.

Shares are up approximately 20% YTD and have outperformed its SMID OFS peers materially, but Citi believes this run likely ends soon given negative revisions.

2 more downgrades

BofA Securities downgraded Concentrix (NASDAQ:CNXC) to Neutral from Buy and cut its price target to $95.00 from $165.00. The company reported its Q2 results earlier this week, with EPS and revenues coming in worse than the consensus estimates.

JMP Securities downgraded Sonder (NASDAQ:SOND) to Market Perform from Market Outperform.

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(C) Reuters

Investing.com — The Federal Reserve’s favorite gauge of inflation is due later Friday, while disappointing results from sports fashion retailer Nike will also be in focus. Wall Street is expected to post a positive month and quarter, but the U.K. housing market remains under pressure.

1. Key inflation data in focus

Both Jerome Powell and Christine Lagarde-the heads of the U.S. Federal Reserve and the European Central Bank, respectively-were insistent at the ECB’s annual gathering at Sintra that conquering inflation was key, and their job was not done yet.

Evidence of how much further they still have to go is likely to emerge Friday, with important inflation numbers emerging on both sides of the Atlantic.

The most important release will be the U.S. core personal consumption expenditures index the Fed’s preferred inflation gauge, which is expected to rise 4.7% for the year and 0.3% for May.

This would be the same as April’s annual figure, proving inflation remains sticky and largely cementing expectations for another quarter of a percentage point interest rate hike, probably at the July meeting.

In Europe, Lagarde has already largely confirmed that the ECB will hike once more in July, and the release of the consumer price data for the whole eurozone will provide clues as to how many more rate increases are likely this year.

The June CPI figure came in at 5.5%, slightly better than expected and a fall from 6.1% last month. French inflation followed Spanish and Italian down to a 14-month low, while German consumer-price gains accelerated this month.

2. Nike slumps premarket after sales disappointment

Nike (NYSE:NKE) is likely to be in the spotlight Friday, after the sportswear giant offered up a gloomy forecast for first-quarter revenue after the close Thursday, predicting that still-high inflation will lead consumers to cut back on spending in North America, the company’s biggest market.

Nike stock traded over 3% lower premarket after the company said it expects first-quarter reported revenue growth to be flat to up low-single digit, compared with an average expectation of a 5.8% rise.

The fourth quarter was also depressing as sales rose 5% in North America in the fourth quarter, the slowest in four quarters, while in Europe, Middle East and Africa sales increased just 3%.

Additionally, the company’s gross margin decreased 140 basis points to 43.6%, driven by higher costs, higher markdowns and continued “unfavorable changes in net foreign currency exchange rates.”

There was one bright spot – China. Sales in the region jumped 16% following the reversal of the country’s rigid zero-COVID-19 policy, which had resulted in sales in the region declining in the first three quarters.

3. Futures edge higher; positive quarter likely

U.S. futures edged higher Friday, ahead of the release of key inflation data as a positive month and quarter draw to an end.

At 05:00 ET (09:00 GMT), the Dow futures contract had climbed 35 points or 0.1%, S&P 500 futures rose 10 points or 0.2%, and Nasdaq 100 futures gained 70 points or 0.5%.

Investors are waiting for the release of the U.S. Personal Consumption Expenditures index, the Fed’s favored inflation gauge, later in the session for clues ahead of the July policy-setting meeting.

Friday is the final trading day of the month, and the broad-based S&P 500 is on course for monthly gains of over 5%, its best monthly performance since January, and a quarterly improvement of almost 7%.

The Nasdaq Composite is even more impressive, with a monthly gain of around 5%, but a quarterly return of over 11%.

4. U.K. housing market under pressure

The average price of U.K. homes fell the most in June on an annual basis since 2009, according to Nationwide Building Society, illustrating the impact of soaring mortgage rates on borrowers.

The data showed that the pace of declines stepped up to 3.5%, from 3.4% a month earlier, taking the price of an average home to ?262,239 (?1 = $1.2636).

More weakness is likely as much of June’s housing market activity will have come before the Bank of England authorized a 50 basis-point hike, taking its base rate to 5%, with inflation remaining at 8.7% in May, more than four times the BOE’s 2% target.

“The sharp increase in borrowing costs is likely to exert a significant drag on housing market activity in the near term,” said Nationwide chief economist Robert Gardner. “Longer-term borrowing costs have risen to levels similar to those prevailing in the wake of the mini-Budget last year, but this has yet to have the same negative impact on sentiment.”

5. Brent on course for first monthly gain this year

Crude prices traded higher Friday, boosted by a big drawdown in U.S. oil stocks as well as signs of resilience by the U.S. economy, the largest consumer of crude in the world.

By 05:00 ET, U.S. crude futures were 1% higher at $70.53 a barrel, while the Brent contract rose 1% to $75.23 per barrel.

Both contracts were set to add between 2% and 3% for June, with Brent marking its first positive month this year after WTI recorded a gain in April.

Providing support was the news that U.S. crude inventories dropped by 9.6 million barrels last week, suggesting tightening supply in this key market, while U.S. gross domestic product in the first quarter was revised up to a 2.0% annualized rate from the 1.3% pace reported previously.

That said, on a quarterly basis, Brent looks set for a loss of about 6% while WTI appears headed for a decline of about 7%, the first back-to-back quarterly losses since 2019, on the back of China’s sluggish economic recovery and aggressive interest-rate hikes by western central banks.

The week closes with the U.S. oil rig count from Baker Hughes, an indicator of future supply, and CFTC positioning data.