Higher Stocks, Week Ahead, VMware, Apple, Zoom – 5 Things to Know
Here are five things you need to know for Monday, May 23:
1. — Stock futures rise, dollar slips as markets debate ‘Fed Put’
U.S. stock futures edged higher on Monday as the dollar extended modest declines against global peers and Treasury yields stabilized as markets eyed a cautious start to a crucial week Fed rate signal after one of the worst runs for domestic equities in two decades.
However, bets on growth and inflation continue to dominate investor sentiment, as many forces underlying short-term inflation, such as Russia’s war against Ukraine, China’s Covid and disrupted global supply chains persist as the Federal Reserve vows to stifle the fastest acceleration in consumer prices in more than four decades with aggressive rate hikes.
The impact on stocks was clear: The S&P 500 suffered another five-day loss last week, taking its streak of consecutive weekly declines to eight, the longest losing streak since 2001. The Dow Jones, meanwhile him, is also on a period of eight weeks. series of declines the market has not seen in almost a century.
Still, the Atlanta Fed’s GDPNow forecasting tool pegs current US growth at 2.4%, a result that would signal a sharp rebound from last quarter’s contraction and suggests a strong economy underpins weakness in the domestic stock market.
This leaves open the question of a so-called Fed put, a reference to an investment technique that limits losses on the downside: if growth remains constant, but stocks continue to fall, the central bank can pause its current rate hike cycle to allow for equity valuations. to recover.
However, little evidence of this so-called “Fed put” can be found in the CME Group’s FedWatch tool, as rate traders continue to bet on a 96.6% chance of a 50% rate hike. basis points next month, while placing a 91.1% probability on a similarly sized move in July.
In overseas markets, stocks were briefly jolted by President Joe Biden’s comments that the United States would be prepared to use force to protect Taiwan from any invasion by China, a remark that overshadowed his unveiling of a new “Indo-Pacific economic framework” in Tokyo. .
The regional MSCI ex-Japan index fell 0.12% as markets neared the close, while Europe’s Stoxx 600 rose 0.27% despite unusually blunt comments from the President of the European Central Bank , Christine Lagarde, who indicated that rate hikes should begin later this summer. .
In the US, yields on benchmark 10-year Treasuries held steady at 2.815% while the dollar index fell 0.9% against a basket of six global currencies at 102.246 in early European trading. .
On Wall Street, futures tied to the Dow Jones Industrial Average pointing to an opening bell lead of 160 points while those tied to the S&P 500, which is down 18.14% for the year, are priced for an upward move of 22 points. Nasdaq-linked futures are looking at an opening bell gain of 55 points.
2. — Week Ahead: Fed’s Inflation Fight in Focus, Earnings Near Close
The Federal Reserve and its fight against inflation will take center stage again this week as investors turn to the minutes of the central bank’s April meeting for any suggestion of a desire for inflation. accelerate rate hikes as consumer prices continue to accelerate.
Fed Chairman Jerome Powell has tried to scrap the prospect of a 75 basis point rate hike for June and July meetings, but traders still expect at least a 10% chance of such a hike. decision before the end of the summer. .
Minutes from the April meeting, to be released Wednesday at 2:00 p.m. EST, may provide some guidance for that view, particularly if Friday’s reading of the inflation gauge The Fed’s favorite, the PCE core price index, is hotter than the market 0.3%. provide. The data will arrive at 8:30 a.m. Eastern Time.
Scroll to continue
A light week of revenue will be highlighted by an April quarter update from chipmaker Nvidia (NVDA) – Get the NVIDIA Corporation report after markets close Wednesday, with discount retailers Dollar General (CEO) – Get the Dollar General Corporation report and Dollar Tree (LTRD) – Get the report from Dollar Tree, Inc. is expected to release before trading begins on Thursday and Costco (COST) – Get Costco Wholesale Corporation Report statement after closing.
The Commerce Department will also release its second first-quarter GDP outlook Thursday at 8:30 a.m. EST, with economists looking for a slight increase from its initial estimate of a 1.4% contraction.
3. — VMware shares rise as Broadcom eyes potential $50 billion takeover
vmware (vmw) – Get the Class A report from VMware, Inc. shares jumped in premarket trading amid reports that Dell Technologies’ former cloud computing division (Dell) – Get Dell Technologies Inc Class C Report is a takeover target of chipmaker Broadcom (AVGO) – Obtain report from Broadcom Inc..
Bloomberg, Reuters and the Wall Street Journal each reported that Broadcom, which is seeking to expand its business interests from its chipmaking base, is in preliminary talks with VMware for a deal that could be valued at $50 billion. VMware was spun off from Dell Technologies in 2019 but is still 40% controlled by billionaire tech magnate Michael Dell.
Shares of VMware hovered near their lowest level in five years last week after the US Cybersecurity and Infrastructure Security Agency ordered federal agencies to update or remove its products following the discovery that hackers had found a backdoor vulnerability that could put government computer systems at risk.
VMware shares rose 19.14% in premarket trading to show an opening price of $14.03 each. Broadcom, meanwhile, fell 2.4% to $530 apiece and Dell gained 1.4% to point to an open of $40.60.
4. — Apple Seeks to Expand Production Outside of China – Report
Apple (AAPL) – Get the Apple Inc. Shares rose in premarket trading following a report suggesting the world’s biggest tech company is looking to expand its manufacturing base outside of China.
The Wall Street Journal reported on Monday that Apple, which by some estimates makes about $90 of its hardware products in China, is looking to expand its manufacturing centers in India and Vietnam to both diversify its supply chain and to counter the impact of China’s draconian policy. Covid lockdowns.
Apple CEO Tim Cook said last month that Covid and supply chain disruptions around what he called the “Shanghai Corridor”, as well as Russia’s war in Ukraine , would shave between $4 billion and $8 billion from current-quarter revenue, spoiling an otherwise impressive second quarter. earnings beat.
Apple shares rose 0.5% in premarket trading to point to an opening price of $138.20 each, a move that would still leave the stock down more than 24.4% for the year. .
5. — The zoom is higher ahead of Q1 earnings
Focus on video communications (ZM) – Get the Class A report from Zoom Video Communications, Inc. shares edged higher in premarket trading ahead of video conferencing specialists’ first quarter results after markets closed.
Zoom, one of the pandemic’s top performers that rose to carry a market value that overtook Exxon Mobile (XOM) – Get Exxon Mobil Corporation report at its peak in October 2020, struggled to build momentum as workers returned to the office last year, bigger competitors such as Microsoft (MSFT) – Get the Microsoft Corporation report and Cisco (CSCO) – Get the report from Cisco Systems, Inc. have upped their game and the group has sniffed out an attempted $15 billion takeover bid for call center software group Five9 (IVNF) – Get the report from Five9, Inc..
Analysts expect Zoom to post a 12% increase in first-quarter revenue, which is forecast at $1.07 billion, but see rising costs eat away at its bottom line, which is expected to fall 34% to 87 cents per share.
Zoom shares rose 0.29% in premarket trading to indicate an opening price of $90.00 each.