Five things you need to know before the market opens on Wednesday May 17:
1. -- Stock Futures Higher On Debt Ceiling Optimism
U.S. equity futures moved higher Wednesday, while the dollar jumped to a one-month high against its global peers and Treasury yields held firm, as investors looked to progress in White House debt ceiling talks to drive stocks from their recent trading range.
A solid reading for April retail sales, which undershot Street forecasts but nonetheless snapped two consecutive months of decline, has added to optimism that U.S. consumers can continue to power a surprisingly resilient economy into the summer months.
The Atlanta Fed's GDPNow forecasting tool, in fact, suggests the economy is growing a 2.6% clip, a pace that could be tested by housing starts and building permits data for the month of April at 8:30 am eastern time, as well as jobless claims figures later in the week.
Prospects of a Fed rate hike continue to linger, however, amid the retail sales rebound and hawkish comments from various Fed officials on the need to stay vigilant on inflation risks. The CME Group's FedWatch is pricing in a 20.% chance of a 25 basis point increase in the Fed Funds rate next month in Washington, but still looks to anticipate at least 50 basis points of rate cuts by the end of the year.
Benchmark 2-year notes were pegged at 4.101% in overnight trading following yesterday's surge, while 10-year notes held at 3.524% and the U.S. dollar index, which tracks the greenback against a basket of its global peers, jumped 0.4% to 102.975.
Default risks, linked to the ongoing debt ceiling impasse, remain evident in short-term Treasury bills, with one-month paper holding at 5.808%, but yields have eased from their recent highs amid reports of progress in talks between President Joe Biden and House Speaker Kevin McCarthy.
On Wall Street futures contracts tied to the S&P 500 indicating a 10 point opening bell gain while those linked to the Dow Jones Industrial Average priced for a 100 point advance. The tech-focused Nasdaq was marked 25 points lower.
In Europe, the region-wide Stoxx 600 was marked 0.15% lower in early Frankfurt trading following data indicating a modest uptick in April inflation, which was pegged at 7%. Britain's FTSE 100 was marked 0.06% higher in London
Overnight in Asia, the region-side MSCI ex-Japan index was marked 0.65% lower into the close of trading while stocks in Japan extended their recent run, with the Nikkei 225 closing about the 30,000 point mark for the first time in nearly two years and the Topix index, the country's broadest measure of share prices, rising 0.3% to a fresh 33-year high.
2. -- Tesla Gains As Musk Says He'll Stay On As CEO, Spend Less Time At Twitter
Tesla (TSLA) shares bumped higher in pre-market trading after Elon Musk said he plans to carry on as CEO of the clean energy carmaker, adding that the time he will devote to Twitter under its new leadership will be "relatively small" compared to the past six months.
Speaking during a question-and-answer session with investors at Tesla's annual shareholders meeting, Musk said he has no plans to step down as CEO following his decision to relinquish the same role at Twitter, the social media platform he bought for $44 billion last year.
"There was a short-term distraction because I had to do major open-heart surgery on Twitter to ensure the company's survival," Musk said, noting that his responsibilities will diminish when NBCUniversal ad executive Linda Yaccarino takes over as CEO next month.
Musk added that he sees the Tesla Model Y becoming the top-selling car in the world as early as this year, but cautioned that the carmaker is "not immune global economic environment", which he expects to remain difficult "for at least the next twelve months".
Tesla shares were marked 1.34% higher in pre-market trading to indicate an opening bell price of $168.75 each.
3. -- Target Earnings On Deck As Retail Picture Remains Mixed
Target Corp. (TGT) moved higher in pre-market trading ahead of the retailer's first quarter earnings prior to the opening bell, with investors still reeling from yesterday's surprise profit warning from Home Depot HD.
Target is expected to see its bottom line to fall around 19.6% from last year to $1.76 per share, even as revenues nudge modestly higher, to $25.29 billion, and sale store sales rise 0.55%. Margins, then, are likely to remain a key focus for investors following three quarters of inventory rundown -- paired with heavy discounts -- that ate in Target's profits over last year.
Retail earnings will be in sharper market focus, as well, after Home Depot (HD) posted its biggest revenue miss in two decades yesterday, while warning that full-year profits would likely decline between 7% and 13%, amid a pullback in consumer spending and fading demand for home improvement projects.
Target shares were marked 1.57% higher in pre-market trading, indicating an opening bell price of $159.37 each.
4. -- Cisco Systems Edges Higher Ahead of Q3 Earnings After The Bell
Cisco System (CSCO) shares edged higher in pre-market trading ahead of the network equipment chipmaker's third quarter earnings after the closing bell.
Cisco is expected to post an 11.5% in adjusted earnings for the three months ending in April, taking the tally to 97 cents per share, with revenues rising 12.1% to $14.4 billion.
Earlier this year, Cisco forecast fiscal 2023 revenues to rise between 9% and 10.5%, nearly double its prior estimate, with earnings between $2.85 and $2.96 per share as supply chain backlogs improve and corporate spending on network infrastructure remains solid.
Following a series of quarters marred by supply chain disruptions linked to the Covid pandemic, Cisco unveiled plans earlier this month to begin manufacturing some of its equipment in India, with a target of $1 billion in domestic production over the next three years.
Cisco System shares were marked 0.23% higher in pre-market trading to indicate an opening bell price of $47.03 each.
5. -- President Biden To Cut Asia Trip Short As Debt Ceiling Talks Show Promise
President Joe Biden said late Tuesday that he would cut his upcoming Asia trip short in order to reach a debt ceiling deal with Republican lawmakers, suggesting a breakthrough in negotiations could be reached over the coming days.
Biden, who will travel to Japan for the G-7 leaders' summit in Hiroshima, told reporters in Washington that there is an "overwhelming consensus among the congressional leaders that defaulting on the debt is simply not an option" following a second round of talks at the White House, adding he'll scrap plans to visit Australia and Papua New Guinea in order to return to Washington later in the week.
House Speaker Kevin McCarthy said it was "possible to get a deal by the end of the week". a timeframe that still leaves several days before the June 1 deadline that Treasury Secretary Janet Yellen was deemed the U.S. at risk of potential default.
"We know we're not going to default," Republican Senate leader Mitch McConnell told reporters in Washington after the meeting.
