Traders Market Weekly: Debt Ceilings and The Consumer

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    The Consumer Price Index (CPI) rose 0.4% month-over-month in April (consensus 0.4%) after a 0.1% increase in March.

    Core-CPI, which excludes food and energy, rose 0.4% in April (consensus 0.3%) following a 0.4%
    increase in March and up 5.5% year-over-year, versus up 5.6% in March.

    The index for shelter (+0.4%) was the largest contributor to the increase in total CPI and core-CPI; however, the 0.4% increase was the smallest increase for the shelter index since January 2022.

    The key takeaway from the report as far as the market is concerned is that the moderation in inflation, coupled with the moderation in the shelter index, should at least spur the Fed to entertain keeping its policy rate on hold when it meets again in June.


    Treasury yields took a sharp turn lower in response to the CPI data.

    The 2-yr note yield, at 4.07% earlier, is down two basis points to 3.98%. The 10-yr note yield, at 3.51% earlier, is down four basis points to 3.47%.


    President Biden said after last night’s meeting with Congressional leaders that he is ready to discuss spending, but not under a threat of default.

    Moody’s sees a 10% likelihood of a debt ceiling breach and is no longer assigning a zero chance to a lengthy stand-off.


    European Stocks close down for day:

    German #DAX -59.25 or -0.37% at 15896.24
    France #CAC -35.97 or -0.49% at 7361.21
    UK #FTSE100 -282.78 or -0.29% at 7741.32
    Spain #Ibex -15.50 or -0.17% at 9167.71
    Italy #FTSE MIB -120.11 points or -0.44% at 27263.42


    At European close:

    Dow industrial average -85.63 points or -0.25% at 33476.64
    S&P index +9.83 points or 0.24% at 4129.15
    NASDAQ index +98.21 points or 0.81% at 12278.51


    Dow 33,531.33 -30.48 -0.09%
    S&P 500 4,137.64 18.47 0.45%
    Nasdaq 12,306.44 126.89 1.04%
    VIX 16.81 -0.90 -5.08%
    Gold 2,037.60 -5.30 -0.26%
    Oil 72.76 -0.95 -1.29%


    Earnings After Close

    Allegro Microsystems (ALGM) beats by $0.01, beats on revs; guides JunQ EPS above consensus, revs above consensus… ALGM up 7.0%

    AppLovin (APP) misses by $0.07, beats on revs; guides Q2 revs above consensus… APP up 10.5%

    Cheesecake Factory (CAKE) beats by $0.02, reports revs in-line, comps of +5.7%; guides on the call: sees Q2 revs below consensus; reiterates FY23 revenue outlook… CAKE up 2.3%

    Magnite (MGNI) beats by $0.08, beats on revs; guides Q2 revs above consensus… MGNI up 6.5%

    Purple Innovation (PRPL) beats by $0.01, beats on revs; guides Q2 revs above consensus; reaffirms FY23 revs guidance… PRPL up 26.0%

    Robinhood Markets (HOOD) beats by $0.04, beats on revs… HOOD up 2.3%

    Sonos (SONO) misses by $0.06, beats on revs; guides FY23 revs below consensus… SONO down 19.6%

    The Trade Desk (TTD) beats by $0.11, beats on revs; guides Q2 revs above consensus; promotes Laura Schenkein to CFO… TTD up 3.1%

    Unity Software (U) reports Q1 (Mar) results, beats on revs; guides Q2 revs above consensus; reaffirms FY23 revs guidance… U up 11.6%

    Walt Disney (DIS) misses by $0.01, reports revs in-line, Disney+ subscribers down 2% yr/yr, DTC operating loss decreased by $200 mln… DIS down 4.6%


    Fair Value for Thursday, May 11:

    S&P 500: 4,151
    Nasdaq 100: 13,402
    DJIA: 33,594


    Equity indices in the Asia-Pacific region ended Thursday on a largely flat note.

    —Equity Markets—

    Japan’s Nikkei: UNCH
    Hong Kong’s Hang Seng: -0.1%
    China’s Shanghai Composite: -0.3%
    India’s Sensex: -0.1%
    South Korea’s Kospi: -0.2%
    Australia’s ASX All Ordinaries: UNCH


    Major European indices are mixed.

    —Equity Markets—

    STOXX Europe 600: UNCH
    Germany’s DAX: -0.4%
    U.K.’s FTSE 100: -0.6%
    France’s CAC 40: UNCH
    Italy’s FTSE MIB: -0.9%
    Spain’s IBEX 35: -0.2%


    China’s April CPI increased at its slowest yr/yr pace since early 2021 while PPI fell at its fastest rate since 2020.
    China’s April CPI -0.1% m/m (expected 0.0%; last -0.3%); 0.1% yr/yr (expected 0.4%; last 0.7%). April PPI -3.6% yr/yr (expected -3.2%; last -2.5%). April New Loans CNY718.80 bln (expected CNY1.403 trln; last CNY3.890 trln) and total social financing CNY1.220 trln (expected CNY2.00 trln; last CNY5.38 trln)

    Australia’s trade minister is in China, looking to improve relations between the two countries.

    China is reportedly looking to resume and improve dialog with Taiwan.


    Nikkei reported that two Japanese insurers are reducing their U.S. Treasury holdings in favor of Japanese Government Bonds.

    Japan’s March Current Account surplus JPY1.01 trln (expected surplus of JPY1.32 trln; last surplus of JPY1.23 trln). April Bank Lending 3.2% yr/yr (expected 2.9%; last 3.0%). April Economy Watchers Current Index 54.6 (expected 54.1; last 53.3)


    Australia’s May MI Inflation Expectations 5.0% yr/yr (expected 5.0%; last 4.6%)

    New Zealand’s April FPI 0.5% m/m (expected 0.4%; last 0.8%)


    There is a growing number of European Central Bank policymakers talking about the need for rate hikes to continue past the summer.

    The European Central Bank’s latest Consumer Expectations survey showed that one-year inflation expectations rose to 5.0% from 4.6% while three-year expectations increased to 2.9% from 2.4%.

    The Bank of England voted 7-2 to raise its base rate by 25 bps to 4.50%, as expected.


    Northrop Grumman (NOC 438.45, -4.58, -1.0%): downgrade to Equal Weight from Overweight at Barclays

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