Morning Call: Jun E-Mini S&Ps Up +0.35% As A Rally In Energy Stocks Lifts The Overall Market; Jun WTI Crude Oil Up +0.93% To A 3-1/2 Year High.
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Overnight Markets And News
Jun E-mini S&Ps (ESM18 +0.37%) this morning are up +0.35% on strength in energy stocks as Jun WTI (CLM18+1.15%) climbs +0.93% to a 3-1/2 year high. Crude oil prices continue to rally on speculation President Trump will decide by May 12 to pull out of the Iran nuclear deal and re-impose sanctions on Iran, which would take their crude oil exports out of the global market. European stocks are up +0.06%, although gains were limited after German Mar factory orders unexpectedly declined and after the Eurozone May Sentix investor confidence unexpectedly fell to a 15-month low. Asian stocks settled mixed: Japan -0.03%, Hong Kong +0.23%, China +1.48%, Taiwan +0.72%, Australia +0.36%, Singapore -0.35%, South Korea closed for holiday, India +0.84%. China's Shanghai Composite rallied to a 3-week high, led by strength in consumer stocks, and Japan's Nikkei Stock Index closed slightly lower after Friday's decline in USD/JPY to a 1-1/2 week low undercut Japanese exporter stocks with the stronger yen.
Jun 10-year T-note prices (ZNM18 -0-035) are down -3 ticks.
The Eurozone May Sentix investor confidence unexpectedly fell -0.4 to a 15-month low of 19.2, weaker than expectations of +1.4 to 21.0.
German Mar factory orders unexpectedly fell -0.9% m/m, weaker than expectations of +0.5%.
U.S. Stock Preview
Key U.S. news today includes: (1) Atlanta Fed President Raphael Bostic (voter) delivers welcoming remarks at the Atlanta Fed’s Financial Markets Conference, (2) USDA weekly grain export inspections, (3) Richmond Fed President Tom Barkin (voter) speaks in a moderated Q&A at George Mason University, (4) Mar consumer credit (expected +$16.0 billion, Feb +$10.601 billion), (5) Dallas Fed President Robert Kaplan (non-voter) speaks as part of a panel discussion at the Atlanta Fed’s Financial Markets Conference, (6) Chicago Fed President Charles Evans (non-voter) speaks at the Atlanta Fed’s Financial Markets Conference on “Machines Learning Finance, Will they Change the Game?,” USDA weekly Crop Progress.
Notable S&P 500 earnings reports today include: Tyson Foods (consensus $1.31), Intl Foods (1.60), Sempra Energy (1.67), Willis Towers (2.66), Cognizant Technologies (1.06).
U.S. IPO's scheduled to price today: none.
Equity conferences this week: Morgan Stanley E&P and Oil Services Conference on Mon-Tue, Goldman Sachs Global Staples Forum on Tue, J.P. Morgan Spring Biotech Conference on Tue, Deutsche Bank Health Care Conference on Tue-Wed, Oppenheimer Industrial Growth Conference on Tue-Wed, Wells Fargo Industrials Conference on Tue-Wed, Jefferies Global Technology Conference on Wed-Thu, Goldman Sachs Leveraged Finance Conference on Thu, Macquarie Business Services C-Suite Conference on Thu, UBS Utility & MLP Conference on Thu.
June S&P 500 E-minis (ESM18 +0.37%) this morning are up +9.25 points (+0.35%). Friday's closes: S&P 500 +1.28%, Dow Jones +1.39%, Nasdaq +1.89%. The S&P 500 on Friday closed higher on the -0.2 point decline in the U.S. Apr unemployment rate to an 18-year low of 3.9%, stronger than expectations of -0.1 to 4.0%. Stocks were also supported by the +0.1% m/m and +2.6% y/y increase in U.S. Apr avg hourly earnings (weaker than expectations of +0.2% m/m and +2.7% y/y), which showed slack wage pressures that were dovish for Fed policy. Technology stocks showed strength after Apple rose nearly +4% to a record high when Warren Buffet said he purchased an additional 75 million shares of Apple in Q1.
June 10-year T-notes (ZNM18 -0-035) this morning are down -3 ticks. Friday's closes: TYM8 +0.50, FVM8 -0.25. Jun 10-year T-notes fell back from a 2-week high Friday and closed little changed. T-note prices were undercut by the decline in the U.S. Apr unemployment rate to an 18-year low of 3.9%, which bolsters the case for additional Fed tightening. T-note prices were supoprted by the weaker=than-expected Apr payroll and hourly earnings reports.
The dollar index (DXY00 +0.16%) this morning is up +0.273 (+0.29%). EUR/USD (^EURUSD -0.42%) is down -0.0042 (-0.35%). USD/JPY (^USDJPY +0.20%) is up +0.16 (+0.15%). Friday's closes: Dollar Index +0.152 (+0.16%), EUR/USD -0.0028 (-0.23%), USD/JPY -0.07 (-0.06%). The dollar index on Friday rose to a 4-1/4 month high and closed higher on the larger-than-expected decline in the U.S. Apr unemployment rate to an 18-year low of 3.9%, which was hawkish for Fed policy. There was also weakness in EUR/USD which tumbled to a 4-1/4 month low after Eurozone Mar retail sales rose less than expected.
Metals prices this morning are weaker with Jun gold (GCM18 -0.08%) -1.2 (-0.09%), Jul silver (SIN18 -0.27%) -0.049 (-0.30%), and Jul copper (HGN18 -0.03%) -0.015 (-0.49%). Friday's closes: Jun gold +2.00 (+0.15%), Jul silver +0.072 (+0.44%), Jul copper +0.0050 (+0.16%). Metals on Friday closed higher on slack wage inflation that was dovish for Fed policy. Copper prices were supported by news that LME copper inventories fell -5,025 MT to a 1-3/4 month low of 311,375 MT. Metals prices were undercut by the rise in the dollar index to a 4-1/4 month high.
Jun WTI crude oil prices (CLM18 +1.15%) this morning are up +65 cents (+0.93%) at a news 3-1/2 year nearest-futures high and Jun gasoline (RBM18 +0.71%) is +0.0152 (+0.72%). Friday's closes: Jun crude +1.29 (+1.89%), Jun gasoline +0.0265 (+1.27%). Jun crude oil and gasoline on Friday closed higher with Jun crude at a 3-1/2 year nearest-futures high. Crude oil prices were supported by speculation the President Trump will re-impose sanctions on Iran by the self-imposed deadline of May 12.
Overnight U.S. Stock Movers
Deere & Co (DE +0.31%) was upgraded to 'Outperform' from 'In-Line' at Evercore ISI with a price target of $187.
Illumina (ILMN +2.04%) was upgraded to 'Overweight' from 'Equal-Weight' at Barclays with a price target of $300.
CVR Refining LP (CVRR -1.42%) was upgraded to 'Buy' from 'Neutral' at Goldman Sachs with a price target of $25.
FirstEnergy (FE +0.68%) was upgraded to 'Buy' from 'Neutral' at Mizuho Securities USA with a price target of $36.50.
Eaton Corp (ETN +2.46%) was downgraded to 'Underweight' from 'Equal-Weight' at Barclays with a price target of $71.
Mastercard (MA +0.91%) was downgraded to 'Equal-Weight' from 'Overweight' at Renaissance Macro Research LLC.
LendingTree (TREE +0.33%) was upgraded to 'Buy' from 'Neutral' at UBS.
Shake Shack (SHAK +18.01%) was downgraded to 'Underweight' from 'Neutral' at JPMorgan Chase on valuation.
BWX Technologies (BWXT +0.29%) may open lower this morning after it forecast after-hours Friday full-year adjusted EPS of $2.45 to $2.55, the midpoint below consensus of $2.51.
Wells Fargo (WFC +1.69%) will pay $480 million to settle a securities fraud class action suit in California that alleged misstatements and omissions related to sales practices.
Fitch Ratings put Community Health System’s (CYH +0.63%) CCC issuer default rating on rating watch negative, saying the company's offer to exchange three series of notes is a distressed exchange.