Morning Call For Wednesday, May 2

Overnight Markets and News

Jun E-mini S&Ps (ESM18 +0.11%) this morning are up +0.09% as technology stocks gain on the heels of a 3% increase in Apple in pre-market trading after it reported stronger-than-expected Q2 revenue and forecast better-than-expected Q3 revenue. Stock gains were contained ahead of the results of today's Fed meeting and whether policy makers may signal a faster pace to interest rate hikes. European stocks are up +0.43% at a 3-month high and found support after Eurozone Apr Markit manufacturing PMI was revised higher. The 10-year T-note yield ticked up to 2.99% ahead of the Treasury's announcement later this morning of its quarterly refunding plans and whether there will be any increases in the sizes of its T-note or T-bond offerings. Asian stocks settled mostly lower: Japan -0.16%, Hong Kong -0.27%, China -0.03%, Taiwan -0.37%, Australia +0.58%, Singapore +0.04%, South Korea -0.32%, India +0.05%. Chinese stocks were little changed ahead of the arrival of a U.S. trade delegation to Beijing Thursday, led by Treasury Secretary Mnuchin. Japan's Nikkei Stock Index retreated from a 2-3/4 month high and closed lower after Japan Apr consumer confidence unexpectedly fell to an 8-month low and after automakers declined when Toyota and Nissan reported weaker-than-expected U.S. Apr auto sales.

The dollar index (DXY00 -0.04%) is down -0.06%. EUR/USD (^EURUSD +0.05%) is up +0.08%. USD/JPY (^USDJPY -0.03%) is down -0.03%.

Jun 10-year T-note prices (ZNM18 -0-025) are down -3 ticks.

The China Apr Caixin (flash) manufacturing PMI unexpectedly rose +0.1 to 51.1, stronger than expectations of -0.1 to 50.9.

The Eurozone Apr Markit manufacturing PMI was revised higher to 56.2 from 56.0.

Eurozone Q1 GDP rose +0.4% q/q and +2,5% y/y, right on expectations.

The Eurozone Mar unemployment rate was unch at 8.5%, right on expectations.

The UK Apr Markit/CIPS construction PMI rose +5.5 to a 5-month high of 52.5, stronger than expectations of +3.5 to 50.5.

Japan Apr consumer confidence unexpectedly fell -0.7 to an 8-month low of 43.6, weaker than expectations of +0.2 to 44.5.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -0.2% to 398.5 with purchase sub-index unch at 262.4 and refi sub-index -0.3% to 1145.5), (2) Apr ADP employment (expected +198,000, Mar +241,000), (3) EIA weekly Petroleum Status Report, (4) FOMC announces interest rate decision.

Notable S&P 500 earnings reports today include: Mastercard (consensus $1.24), ADp (1.44), CVS Health (1.41), AIG (1.25), MetLife (1.17), Kraft Heinz (0.82), Yum Brands (0.68), Williams Cos (0.22), Marathon (0.14).

U.S. IPO's scheduled to price today: Asian Pharmaceuticals (ASLN), Inspire Medical Systems (INSP), UNITY Biotechnology (UBX).

Equity conferences this week: none.

Market Comments

June S&P 500 E-minis (ESM18 +0.11%) this morning are up +2.50 points (+0.09%). Tuesday's closes: S&P 500 +0.25%, Dow Jones -0.27%, Nasdaq +1.16%. The S&P 500 on Tuesday closed higher on strength in technology stocks led by a +2.0% gain in Apple. Stocks were undercut by the -2.0 point decline in the U.S. Apr ISM manufacturing index to a 9-month low of 57.3 (weaker than expectations of -0.8 to 58.5) and the unexpected -1.7% m/m decline in U.S. Mar construction spending (weaker than expectations of +0.5% m/m and the biggest decline in 11 months).

June 10-year T-notes (ZNM18 -0-025) this morning are down -3 ticks. Tuesday's closes: TYM8 -9.00, FVM8 -5.00. Jun 10-year T-notes on Tuesday closed lower on the +1.2 point increase in the U.S. Apr ISM prices paid sub-index to a 7-year high of 79.3, which was inflationary and was hawkish for Fed policy. There was also caution ahead of Wednesday's conclusion to the 2-day FOMC meeting, which could produce a more hawkish tilt in the post-meeting statement.

The dollar index (DXY00 -0.04%) this morning is down -0.059 (-0.06%). EUR/USD (^EURUSD +0.05%) is up +0.0010 (+0.08%). USD/JPY (^USDJPY -0.03%) is down -0.03 (-0.03%). Tuesday's closes: Dollar Index +0.608 (+0.66%), EUR/USD -0.0085 (-0.70%), USD/JPY +0.52 (+0.48%). The dollar index on Tuesday climbed to a 3-1/2 month high and settled higher on the increase in T-note yields, which improved the dollar's interest rate differentials. The dollar was also boosted by the increase in the prices-paid sub-index of the Apr ISM manufacturing index to a 7-year high, which is hawkish for Fed policy.

Metals prices this morning are stronger with Jun gold (GCM18 +0.29%) +3.7 (+0.28%), Jul silver (SIN18 +1.60%) +0.243 (+1.51%), and Jul copper (HGN18 +1.19%) +0.038 (+1.25%). Tuesday's closes: Jun gold -12.40 (-0.94%), Jul silver -0.274 (-1.67%), Jul copper -0.0365 (-1.19%). Metals on Tuesday sold off with Jun gold at a 4-1/4 month low, Jul silver at a 4-1/2 month low, and Jul copper at a 3-1/2 week low. Metals prices were undercut by the jump in the dollar index to a 3-1/2 month high and by the weaker-than-expected U.S. Apr ISM manufacturing index and Mar construction spending reports, which suggested reduced industrial metals demand.

Jun WTI crude oil prices (CLM18 +0.25%) this morning are up +16 cents (+0.24%) and Jun gasoline (RBM18 -0.47%) is -0.0109 (-0.52%). Tuesday's closes: Jun crude -1.32 (-1.93%), Jun gasoline -0.0432 (-2.03%). Jun crude oil and gasoline on Tuesday closed lower on the rally in the dollar index to a 3-1/2 month high and on the fall in the U.S. Apr ISM manufacturing index to a 9-month low, which was negative for energy demand. Crude oil prices were also undercut by expectations for Wednesday's weekly EIA crude inventories to rise by +1.0 million bbl.

Overnight U.S. Stock Movers

Apple (AAPL +2.32%) rose 3% in pre-market trading after it reported Q2 revenue of $61.1 billion, higher than consensus of $60.9 billion, and forecast Q3 revenue of $51.5 billion to $53.5 billion, better than consensus of $51.4 billion.

Martin Marietta Materials (MLM +0.18%) was upgraded to 'Buy' from 'Neutral' at Bank of America/Merrill Lynch with a price target of $229.

Coherent (COHR +4.70%) slid nearly 5% in after-hours trading after it reported Q2 adjusted EPS of $3.37, weaker than consensus of $3.49.

Gilead Sciences (GILD +0.46%) fell almost 6% in after-hours trading after it reported Q1 adjusted EPS of $1.48, well below consensus of $1.66.

Shutterfly (SFLY +0.78%) jumped 9% in after-hours trading after it reported Q1 revenue of $199.7 million, better than consensus of $192.0 million.

Yum China Holdings (YUMC -0.68%) dropped 7% in after-hours trading after it reported Q1 comparable sales rose +3.0%, below consensus of +3.3%.

Zendesk (ZEN -0.35%) climbed 7% in after-hours trading after it reported Q1 revenue of $129.8 million, stronger than consensus of $126.5 million, and then forecast full-year revenue of $565 million to $572 million, better than consensus of $562.5 million.

Brooks Automation (BRKS +3.14%) rose 6% in after-hours trading after it reported Q2 adjusted EPS of 40 cents, above consensus of 37 cents, and forecast Q3 EPS of 40 cents to 46 cents, higher than consensus of 38 cents.

Nanometrics (NANO +6.33%) rallied 8% in after-hours trading after it reported Q1 adjusted EPS of 67 cents, higher than consensus of 44 cents, and forecast Q2 adjusted EPS of 57 cents to 74 cents, well above consensus of 45 cents.

Juniper Networks (JNPR +0.61%) climbed over 4% in after-hours trading after it reported Q1 net revenue of $1.08 billion, better than consensus of $1.05 billion.

MACOM Technology Solutions Holdings (MTSI +5.42%) rose nearly 4% in after-hours trading after it reported Q2 revenue of $150.4 million, above consensus of $145.5 million.

Cray (CRAY +2.10%) jumped over 7% in after-hours trading after it reported Q1 revenue of $79.6 million, well above consensus of $50.1 million, and forecast Q2 revenue of $110 million, much better than consensus of $86.1 million.

Snap (SNAP -1.40%) tumbled 16% in after-hours trading after it reported Q1 revenue of $230.7 million, below consensus of $244.9 million, and reported 191 million daily active users in Q1, below consensus of 194.3 million.

Big 5 Sporting Goods (BGFV +2.98%) rose 5% in after-hours trading after it reported Q1 net sales of $234.2 million, above estimates of $230 million.