Five things you need to know before the market opens on Friday June 2:
1. -- Stock Futures Higher As Senate Confirms Debt Ceiling Deal
U.S. equity futures extended gains Friday, while the dollar retreated against its global peers amid improved risk sentiment from investors around the world following the Senate's approval of the debt ceiling bill that puts the issue to rest for at least the next two years.
Senate lawmakers voted 53-36 late Thursday to approve the Fiscal Responsibility Act, which cleared the House on Wednesday by a vote of 314-117, in a move that suspends debt ceiling negotiations until after the Presidential elections in 2024.
President Joe Biden called the bipartisan agreement "a big win for our economy and the American people" and said he planned to make a formal statement at 7:00 pm eastern time on Friday.
Global stocks ticked firmly higher following the Senate's approval, with markets in Asia surging 2.25% and Japan's Nikkei 225 extending its recent advance to a fresh 33-year high of 31,524.22 points. Europe's Stoxx 600 was up around 0.7%.
Treasury bond yields were also in retreat, tracking moves in the dollar, as investors moved into riskier assets now that the specter of a U.S. default, which could have come as early as June 5, was removed from the market.
Investor focus is now likely to shift to today's May non-farm payroll report from the Labor Department, which is expected to show a slowdown in overall hiring and a modest move higher in the headline unemployment rate.
Benchmark 2-year Treasury note yields eased were pegged at 4.347% while 10-year notes held at 3.6016%, with markets anticipating around $600 billion in new paper over the coming weeks as the Treasury rebuilds the reserves it had depleted since breaching the debt ceiling on January 19.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.11% lower in overnight dealing at 103.446, while the CME Group's FedWatch is now pricing in a mere 24% chance of a 25 basis point increase on June 14.
On Wall Street, futures tied to the S&P 500, which closed at a nine-month high last night, were indicating an 18 point opening bell gain while those linked to the Dow Jones Industrial Average were priced for a 150 point move to the upside.
The tech-focused Nasdaq, which also closed at a nine-month high and is riding its longest weekly winning streak in three years, is expected to open 68 points higher.
2. -- May Jobs Report In Focus As Labor Market Strength Impresses
The Labor Department is expected to confirm a slowdown in overall hiring when it publishes its highly-anticipated employment report prior to the start of trading, with investors focused on the pace of wage gains heading into the summer months.
Around 180,000 new jobs were likely added to the economy last month, according to revised Street forecasts, a tally that would mark a notable slowdown from the 253,000 recorded in April and the 2023 average of around 285,000.
Better-than-expected data throughout the week, however, could see the overall total rising higher, with payroll processing group ADP's monthly estimate showing 278,000 private sector hires and the National Federation of Independent Businesses indicating a 2 point increase in its May hiring intentions index.
Nonetheless, wage increases are likely to be the key to today's market reaction, with investors looking for average hourly earnings growth to ease to around 0.4% on the month, and 4.3% on the year, with the headline unemployment rate rising modestly to 3.5%.
"The job market is still quite solid, but not red-hot like a year ago," said Bill Adams, Chief Economist for Comerica Bank in Dallas. "From the Fed’s perspective, the labor market is becoming less of a concern for the inflation outlook."
3. -- Broadcom Slides After Earnings Beat, AI-Powered Sales Outlook
Broadcom (AVGO) shares moved lower in pre-market trading despite a stronger-than-expected first quarter earnings report and a solid near-term revenue outlook.
Broadcom's adjusted earnings of $10.32 per share, 7.9% higher than a year earlier, topped Wall Street forecasts by around 24 cents, while revenue rose 7.8% to an analyst-beating $8.73 billion. Current-quarter revenue, the group said, should come in at around $8.85 billion.
AI-related revenue, Broadcom said, now makes up around 15% of overall chip sales, a figure that company said could rise to 20% over the coming quarters.
"While there is strong demand and a strong urgency of demand (for AI-related chips), the ability to ramp up will be more measured and addressing demands that are most urgent," said CEO Hock Tan.
Broadcom shares, which have risen more than 42% so far this year, were marked 2.5% lower in pre-market trading to indicate an opening bell price of $770.26 each.
4. -- Lululemon Surges After Blasting Earnings Forecasts On High-End Demand
Lululemon Athletica (LULU) shares surged higher in pre-market trading after the high-end athletic clothing retailer posted better-than-expected first quarter earnings and boosted its full-year profit outlook
Lululemon said adjusted earnings for the three months ending in April were pegged at $2.28 per share, a 54% increase from the same period last year and well ahead of the Street consensus forecast of $1.98 per share. Group revenues, Lululemon said, were also up 24% at $2 billion, coming in just ahead of analysts' estimates of a $1.925 billion tally.
Looking into the current financial year, Lululemon said it sees sales in the region of $9.44 billion and $9.51 billion, up from its earlier forecast of $9.3 billion to $9.4 billion with earnings of between $11.74 and $11.84 per shares.
"We remain comfortable with our inventories, and we're well-positioned to continue to fulfill guest demand," CFO Meghan Frank told investors on a conference call late Thursday. "We continue to be mindful of the uncertainties in the macro environment, and as a result, we remain prudent as it relates to planning the business."
Lululemon shares were marked 14.7% higher in pre-market trading to indicate an opening bell price of $376.48 each.
5. -- U.S. Banks Continue To Trim Emergency Borrowing From Fed
U.S. banks continued to reduce borrowing from the Federal Reserve's various lending programs this week, suggesting the March regional bank crisis has yet to spill-over into the broader financial sector.
Banks borrowed just $3.97billion from the Fed's main discount window over the seven-day period ending on May 24, according to Fed data, down from the $4.2 billion handed-out over the prior period and the lowest since early March.
The Fed's "other credit" account, which has been used to allocate borrowing from First Republic Bank, which was sold to JPMorgan Chase (JPM) last month, and well as the cost of winding down other failed lenders, fell $14.5 billion to $188.1 billion.
Borrowing from the Fed's new Bank Term Funding Program, which allows banks to exchange high-quality assets for one-year loans, was up $1.7 billion to $93.6 billion. The Fed's overall balance sheet, meanwhile, shrunk by around $50 billion to $8.436 trillion.
