Market Wrap
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- 9 out of 11 sectors in the S&P 500 finished higher, with financials, energy, and consumer discretionary leading gains, all of which were up more than 2%. Defensive sectors like utilities and consumer staples were the only sectors that finished lower on risk-off sentiment.
- Tesla’s share jumped more than 4% following the shareholders’ annual meeting. CEO Elon Musk said Tesla would deliver its first Cybertrucks this year, expecting 250,000 to 500,000 deliveries this year.
- Target’s shares bounced 3% from a session low amid its earnings report. The retailer beat expectations on both earnings per share and revenue in the first quarter but expected sales to remain sluggish, anticipating a low-single-digit decline to a low-single-digit increase for the fiscal year.
- The Chinese internet giant Tencent’s shares fell slightly on the Hong Kong stock market due to a miss on net income expectations, despite the fastest revenue growth of 11% in more than a year. The company is also engaging with AI development amid the heating up ChatGPT-alike race, calling technology a “growth multiplier”. However, China’s economic uncertainty may continue to press on sentiment in the Chinese market.
- Yuan weakened further against the USD, with USD/CNH rising above 7 for the first time since December 2022. DUE TO THE DIVERGENT MONETARY POLICY, the US dollar firmed against most of the other major currencies, particularly in Asia. The uneven Chinese economic recovery also added to the downside pressure on Yuan
- Gold prices fell below key support of the 50-day moving average due to a firmed USD and a jump in the US bond yields. A potential double-top pattern may take the metal price to approach further potential support of 1,900.
- Crude oil jumped amid an improved demand outlook and the broad relief rally in risk assets. While the double-bottom reversal pattern is still in play, WTI oil futures could rebound further toward resistance at the 50-day moving average of $75.
Equities
Stocks closed higher after President Biden expressed optimism about debt-ceiling talks and said he's confident a default will be avoided.
The Dow Jones Industrial Average rose 1.2%, the S&P 500 also gained 1.2%, and the Nasdaq Composite Index advanced 1.3%.
Biden said that talks with Republicans have been productive and that he believes an unprecedented U.S. default will be avoided. Regional-bank shares jumped after Western Alliance - a lender investors have worried about - gave a positive update on deposit growth.
Those two headlines put traders in bullish spirits, said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management. "One of the economic headwinds is supposedly coming off, and the banking system appears a bit more solvent, and that's causing people to buy," Schutte said, adding that his team remains concerned that a recession is approaching.
In Asian trading, Japan's Nikkei Stock Average ended 0.8% higher, closing above the 30000 threshold for the first time since September 2021. Chip-related stocks led the day's gains, driven by hopes for earnings growth and a weaker yen.
Chinese shares closed mixed, with sentiment weighed by China's disappointing April economic data, which sparked concerns that the country's post-Covid recovery is losing steam. Factory activity also disappointed, falling 0.5% last month compared with March, reflecting softening export demand. The Shanghai Composite Index ended 0.2% lower, the Shenzhen Composite Index ended 0.3% higher, and the ChiNext Price Index ended flat.
Elsewhere, Australia's S&P/ASX 200 closed 0.5% lower amid losses in shares of the country's heavyweight banks and miners. Data showed wages grew by slightly less than expected in the first quarter.
New Zealand's NZX-50 closed less than 0.1% higher, stretching the streak of indecision that has characterized trading ahead of this week's federal government budget announcement.
Broker Upgrades/Downgrades
(WEB) Webjet Price Target Raised 2.8% to A$7.40/Share by Goldman Sachs
Commodities
Oil futures ended ended at their highest in more than a week, with prices finding support as comments from President Biden fueled expectations that the U.S. will reach a deal on the debt ceiling - easing worries about the nation's economy.
West Texas Intermediate crude for June delivery rose 2.8% to settle at $72.83 a barrel on the New York Mercantile Exchange. July Brent crude, the global benchmark, added 2.7% at $76.96 a barrel on ICE Futures Europe.
Investors are "increasingly hopeful there will be a resolution in U.S. debt talks, while forecast of a tighter oil market in the second half of the year is also helping to keep the bulls happy," said Fawad Razaqzada, market analyst at StoneX.
Gold prices finished at their lowest since late March as the yellow metal's recent rally continued to unravel.
June gold declined by 0.4% to settle at $1,984.90 per ounce on Comex. The settlement was the lowest for a most-active contract since March 29, according to Dow Jones Market Data.
"The correction in gold has scope to continue if the odds of another (Federal Reserve) hike next month keep rising or rate-cut bets cool further," said Marios Hadjikyriacos, senior investment analyst at XM.
ASX and NZX announcements/news:
- Australian Agricultural Company (ASX: AAC) reported revenue at A$313.4 million for FY23, up 14% from a year ago. The operating profit rose 35% to A$67.4 million.
- Nufarm Limited (ASX: NUF) ‘s underlying net profit increased 7% to A$142 million for the 6 months ended 31 March 2023, declaring an interim dividend of A5 cents, up 25% from a year ago.
- Xero (ASX/NZX: XRO) reported a net loss of $NZ113.5 million, compared to $NZ9.1 million from a year ago. The software company’s revenue grew 28% to $NZ1.4 billion the FY23 due to subscriber growth.
Today's Announcements
- Australian employment change for April
