Disappointing Home Depot Results, Debt Ceiling Worries May Weigh On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Tuesday, with stocks likely to move back to the downside after ending yesterday’s lackluster session mostly higher.

A negative reaction to quarterly results from Home Depot (HD) may weigh on Wall Street, with the home improvement retailer falling by 2.4 percent in pre-market trading.

The drop by Home Depot comes after the company reported weaker than expected first quarter revenues and lowered its full-year guidance.

Ongoing concerns about the U.S. debt ceiling may also generate some negative sentiment ahead of a meeting between President Joe Biden and top congressional leaders this afternoon.

The futures saw some further downside after the Commerce Department released a report showing retail sales rebounded by less than expected in the month of April.

Stocks turned in a relatively lackluster performance for much of the trading session on Monday but managed to end the day mostly higher. The tech-heavy Nasdaq reached its best closing level in well over eight months, while the Dow snapped a five-session losing streak.

The major averages all finished the day in positive territory. The Nasdaq climbed 80.47 points or 0.7 percent to 12,365.21, the S&P 500 rose 12.20 points or 0.3 percent to 4,136.28 and the Dow inched up 47.98 points or 0.1 percent to 33,348.60.

The higher close on Wall Street may partly have reflected optimism about an eventual agreement on raising the U.S. debt following comments from Treasury Secretary Janet Yellen.

In an interview with the Wall Street Journal, Yellen said the administration and congressional Republicans are making progress in their negotiations over federal spending and raising the debt limit.

“I’m hopeful. I think the negotiations are very active. I’m told they have found some areas of agreement,” Yellen said in an interview following a meeting of G-7 finance ministers in Japan on Saturday.

Biden also expressed optimism about the talks in remarks to reporters over the weekend, although House Speaker Kevin McCarthy, R-Calif., told NBC News on Monday that the two sides are still “far apart.”

“It seems like they want to look like they’re in a meeting,” McCarthy said outside the Capitol. “They’re not talking anything serious.”

Overall trading activity remained somewhat subdued, however, as traders looked ahead to the release of some key economic data in the coming days.

Remarks by Federal Reserve officials are also likely to attract attention this week, with Fed Chair Jerome Powell due to participate in a Perspectives on Monetary Policy panel before the Thomas Laubach Research Conference on Friday.

The New York Fed released a report before the start of trading showing a substantial downturn in regional manufacturing activity in the month of May.

Semiconductor stocks moved sharply higher over the course of the session, resulting in a 2.7 surge by the Philadelphia Semiconductor Index.

Substantial strength also emerged among banking stocks, as reflected by the 2.6 percent jump by the KBW Bank Index.

Computer hardware stocks also showed a strong move to the upside on the day, driving the NYSE Arca Computer Hardware Index up by 2.5 percent.

Biotechnology, airline and steel stocks also saw notable strength, while considerable weakness was visible among utilities stocks.

Commodity, Currency Markets

Crude oil futures are rising $0.16 to $71.27 a barrel after jumping $1.07 to $71.11 a barrel on Monday. Meanwhile, after inching up $2.90 to $2,022.70 in the previous session, gold futures are sliding $12.30 to $2,010.40 an ounce.

On the currency front, the U.S. dollar is trading at 135.96 yen compared to the 136.12 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0880 compared to yesterday’s $1.0874.

Asia

Asian stocks ended mixed on Tuesday after Chinese economic data came in weaker than expected. Focus shifted to the U.S. debt ceiling, as U.S. President Joe Biden and congressional leaders are due to resume talks at the White House later in the day.

The dollar index pulled back and gold prices slipped, while oil traded sideways after rising sharply in the U.S. trading session overnight.

Chinese shares ended lower as the latest readings on industrial production, retail sales and fixed asset investment missed expectations, adding to signs the recovery in the world’s second largest economy might be faltering.

The benchmark Shanghai Composite Index dropped 0.6 percent to 3,290.99, while Hong Kong’s Hang Seng Index ended marginally higher at 19,978.25 on Chinese stimulus hopes.

Japanese shares rose notably on the back of recent favorable earnings results from domestic firms.

The Nikkei 225 Index climbed 0.7 percent to 29,842.99, touching its highest level since September 2021. The broader Topix settled 0.6 percent higher at 2,127.18, marking its highest level in around 33 years.

Tech shares followed their U.S. peers higher, with Advantest, Tokyo Electron and Screen Holdings rallying 3-5 percent. Japan Post Holdings slumped 6.9 percent after posting disappointing earnings for fiscal 2022.

Seoul stocks pared early gains to finish marginally higher as data showed the country’s export and import prices rose for a third consecutive month in April.

Tech heavyweight Samsung Electronics rose 1.4 percent and SK Hynix climbed 4.6 percent. LG Chem gained 0.6 percent after announcing it plans to increase sales of battery materials by six-fold by 2030.

Australian stocks fell after minutes of the RBA’s May meeting revealed the central bank is still wary on persistent inflation.

Also weighing on sentiment, a private survey showed Australian consumer sentiment saw its sharpest drop in nearly three years in early-May after a surprise interest rate hike by the Reserve Bank.

The benchmark S&P/ASX 200 Index dropped 0.5 percent to 7,234.70, while the broader All Ordinaries Index closed 0.5 percent lower at 7,424.10.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index finished marginally higher at 11,945.87, recovering from an early slide.

Europe

European shares are little changed on Tuesday as investors digest disappointing data from China and looked for progress in the U.S. debt ceiling talks.

Meanwhile, Eurostat data showed the euro zone economy grew marginally in the first quarter, matching preliminary estimates. The euro zone economy grew by 0.1 percent in the quarter.

Elsewhere, the German ZEW headline number showed that the economic sentiment index deteriorated sharply to -10.7 in May from 4.1 in April.

The U.K.’s jobless rate came in higher than expected in the three months to March, reducing concerns over more interest rate hikes from the Bank of England.

Data from the Office for National Statistics showed that the unemployment rate rose to 3.9 percent in the three months to March from 3.8 percent in the preceding period. The rate was forecast to remain unchanged at 3.8 percent.

While the German DAX Index is up by 0.2 percent, the French CAC 40 Index is up by 0.1 percent and the U.K.’s FTSE 100 Index is just above the unchanged line.

Telecom Italia has declined on a Bloomberg report that Italy’s state lender Cassa Depositi e Prestiti will drop its 19.3 billion euros ($21 billion) offer for the company’s landline network.

Swedish game developer Embracer Group has shown a substantial move to the downside after lowering its full-year adjusted EBIT forecast.

British telecom giant Vodafone has also slumped after its new boss Margherita Della Valle said she would cut 11,000 jobs over the next three years. The company also warned of a 1.5 billion euro decline in free cash flow this year.

Imperial Brands has also moved lower after the cigarette maker said it is on track to meet its full-year guidance.

French construction-to-telecoms conglomerate Bouygues has also fallen after reporting a slightly wider first-quarter net loss.

Hornbach Holding has plummeted over 7 percent after saying it expects sales to remain more or less flat in 2023/24.

Meanwhile, Drinks group Britvic has moved to the upside after reporting a rise in first-half pre-tax profit on strong sales.

Land Securities has also rallied. After posting an annual loss, the landlord said it is seeing buoyant consumer demand.

Infineon has also jumped after the German semiconductor company bought Stockholm-based startup Imagimob AB for an undisclosed sum.

U.S. Economic Reports

Retail sales in the U.S. rebounded by less than expected in the month of April, according to a report released by the Commerce Department on Tuesday.

The Commerce Department said retail sales rose by 0.4 percent in April after falling by a revised 0.7 percent in March.

Economists had expected retail sales to climb by 0.7 percent compared to the 1.0 percent slump originally reported for the previous month.

Excluding an increase in sales by motor vehicle and parts dealers, retail sales still rose by 0.4 percent in April after sliding by 0.5 percent in March. The rebound in ex-auto sales matched economist estimates.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of April. Industrial production is expected to come in unchanged in April after rising by 0.4 percent in March.

The National Association of Home Builders is due to release its report on homebuilder confidence in the month of May at 10 am ET. The housing market index is expected to be unchanged at 45.

Also at 10 am ET, the Commerce Department is scheduled to release its report on business inventories in the month of March. Business inventories are expected to come in unchanged in March after inching up by 0.2 percent in February.

New York Federal Reserve President John Williams is due to participate in a conversation organized by the University of the Virgin Islands at 12:15 pm ET.

At 3:15 pm ET, Dallas Federal Reserve President Lorrie Logan is scheduled to moderate Policy Session 4: Mitigating Risks and Preserving Financial Stability in an Appropriately Restrictive Policy Environment before the Federal Reserve Bank of Atlanta 2023 Financial Markets Conference.

Atlanta Federal Reserve President Raphael Bostic and Chicago Federal Reserve President Austan Goolsbee are due to participate in an Economic Outlook and Monetary Policy panel before the Federal Reserve Bank of Atlanta 2023 Financial Markets Conference at 7 pm ET.

Stocks In Focus

Shares of Sea Limited (SE) are moving sharply lower in pre-market trading after the Singapore-based technology company reported weaker than expected first quarter results.

Biotechnology company Seagen (SGEN) may also come under pressure after Daniel Welch, who serves on the company’s board of directors, disclosed the sale of 1,864 shares.

On the other hand, shares of Capital One (COF) are likely to see initial strength on news Warren Buffet’s Berkshire Hathaway (BRKa) has taken stake in the credit card and banking company worth over $950 million.

Fintech firm Nu Holdings (NU) is also likely to move to the upside after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.