Morning in New York: Broadcom's reporting will affect shares of Nvidia and other chipmakers

Daily review and forecast of events on the US stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

This Thursday's weekly jobless claims data will guide the upcoming release of the Labor Ministry's report for May and its key component, the estimate of nonfarm payroll employment. Consensus expects a decline in benefit claims from 240k to 236k, which would signal a stable labor market.

Also today, the trade balance statistics for April will be released. The market-wide forecast assumes a decline in the deficit from $140.5 bln in March to $67.5 bln, which implies a sharp decline in imports after a boom in the first quarter. If these expectations are realized, it will provide moderate support to the GDP for the second quarter, although due to the uncertainty of the US foreign trade policy, the impact of this factor on the underlying economic indicator may be more unpredictable.

After the close of the main session on June 5, Broadcom (AVGO), Lululemon Athletica (LULU), Samsara (IOT), Rubrik (RBRK), DocuSign (DOCU), ServiceTitan (TTAN) will present quarterly results.

Broadcom's report will attract increased attention of the investment community. Its shares are growing for the seventh week in a row, having risen from April lows by 90%. Quotes are updating historical records, signaling a highly optimistic market sentiment regarding the issuer's quarterly results. In the last couple of weeks, interest in the AI topic has come back to the forefront. If Broadcom fails to meet investors' inflated expectations, it will trigger a correction in its stock and in the securities of other chipmakers, including Nvidia.

Futures on American indices are trading in a slight plus. Before the opening of the main session there is a neutral balance of risks with average volatility. We expect continuation of sideways dynamics (no significant growth or decline) due to weakening of investors' activity in anticipation of today's publication of Broadcom reports and tomorrow's labor market statistics. We focus on S&P 500 movements in the range of 5920-6020 points (from -0.8% to +0.8% to the closing level of June 4).

- MongoDB (MDB) reported revenue of $549 million and adjusted earnings per share (EPS) of $1 for the quarter, with consensus of $528 million and $0.66, respectively. An $800 million share repurchase was announced, bringing the entire active buyback program to $1 billion. Revenue and EPS guidance for the current quarter was raised to $548-553 million and $0.62-0.66 with consensus of $549.9 million and $0.59. The full-year outlook for these metrics is also well above FactSet's average guidance.

- According to Bloomberg, the court rejected Apple's (AAPL) bid to halt changes to the App Store that allow apps to bypass commissions on purchases on the platform.

- Boeing (BA) has reached an agreement with the Justice Department to suspend prosecution after the airline company paid $1.1 billion.

- Starbucks (SBUX) has appointed Mike Grams as chief operating officer as part of a personnel reshuffle aimed at improving business performance.

Trading on June 4 on the U.S. stock exchanges were multidirectional. S&P 500 remained virtually unchanged, Nasdaq 100 added 0.27%, Dow Jones and Russell corrected by about 0.2%. The energy (XLE: -1.95%) and utilities (XLU: -1.75%) sectors were outsiders. IT companies (XLK: +0.15%) and representatives of the communications industry (XLC: +0.64%) showed moderate growth.

According to ADP, new job openings in the private sector totaled 37k with a consensus of 130k. The report noted a slowdown in hiring after a strong start to the year. However, given the strong JOLTS (Job Openings and Labor Turnover Survey) statistics, it is premature to conclude that the labor market is deteriorating. After the publication of ADP data, Donald Trump again called on Fed Chairman Jerome Powell to ease monetary policy.

Business activity indices (PMI) in the service sector showed contradictory dynamics. The ISM PMI for May fell to 49.9 points, indicating a contraction, while the consensus was 52.2 points. The new orders component declined, while the price component rose. The index from S&P Global rose to 53.7 points, with average expectations at 52.3. 

«The Fed's Beige Book» recorded a decline in economic activity, moderate price increases and expectations of accelerating spending growth. At the same time, no significant change in the state of employment was noted, although all survey participants noted the weakening of demand for labor due to general uncertainty.

The Congressional Budget Office concluded that the White House's proposed tax bill would increase the budget deficit, while the tariff policy in place since mid-May would reduce it by about $2.8 trillion.

- Shares of Tesla (TSLA: -3.55%) declined amid reports of an eight-month consecutive decline in sales of Chinese-made electric vehicles, which fell 15% y/y in May. Investors are concerned about a possible conflict between Elon Musk and Donald Trump, as the Tesla CEO has strongly criticized a major Republican bill.

- Shares of AT&T (T: -2.2%) came under pressure after reports of a massive data leak. Hackers published information on 88 million customers, including their decrypted Social Security numbers.

- Dollar Tree (DLTR: -8.4%) declined, although the retailer's comparable sales and EPS for the first quarter came in above estimates. Investors were disappointed by mixed expectations for April-June and that while the full-year EPS guidance was improved by buyback support, the revenue guideline was left unchanged.

- CrowdStrike (CRWD: -5.8%) reported first-quarter earnings within expectations, but its outlook for the next three months was weaker than consensus, although its full-year guidance was reiterated. On the positive side, ARR exceeded expectations, profitability improved, Falcon Flex success and the adoption of a $1 billion buyback program.