Morning in New York: quotes are driven by foreign policy news

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

Investors will focus on the continuation of talks between Donald Trump and Xi Jinping. The first day of the summit was held in a constructive manner. The Chinese leader confirmed progress on trade issues, the American president positively assessed the prospects for bilateral relations. It is expected to extend last year's trade truce and expand China's purchases of American agricultural products and energy.

The parties are also working on reducing tariffs on non-strategic goods worth about $30 billion. Washington expects to stabilize imports from China of rare earth metals critical for the production of electric cars, defense equipment, and semiconductors. In response, Beijing insists on relaxing U.S. export controls on chip manufacturing equipment and advanced semiconductors.

Of additional interest to the market is a possible agreement with Boeing for the delivery of about 500 737 MAX airplanes and a batch of wide-body machines with GE Aerospace engines. Controversy over the Taiwan issue, which Xi labeled as the most sensitive item on the bilateral agenda, remains a constraint for the market. Beijing's reluctance to put pressure on Tehran as part of U.S. efforts to resolve the Middle East conflict also has an unfavorable impact on the sentiment of the investment community. Secretary of State Marco Rubio has announced his intention to persuade the Chinese side to take a more active part in the peace process. However, analysts are low on the likelihood of significant concessions from China, given the strategic importance of relations with the Islamic Republic.

The International Energy Agency (IEA) has raised its forecast of the global oil supply deficit for the current year to 3.9 million barrels per day. The cumulative fallout of the supply of this raw material from the Gulf countries since the beginning of the US military operation in the region has exceeded 1 billion barrels. At the same time, OPEC revised its benchmark for oil demand growth in 2026 from 1.4 million barrels per day to 1.2 million.

The main macroeconomic release this Thursday will be the retail sales statistics for April. The consensus assumes a 0.6% m/m increase in the total index and a 0.7% m/m increase in the core index (excluding autos), with a 0.4% m/m increase in the benchmark group sales (March: +1.7%, +1.9% and +0.7%, respectively). Freedom Broker analysts' forecast includes a 0.3% and 0.4% m/m increase in the general and core indexes, respectively, with a 0.2% m/m increase in benchmark group sales. We also expect a 0.5% m/m decline in auto sales and a 0.4% m/m decline in sales of furniture, electronics, apparel and care products after their notable increase in Ma. The overall figure will be supported by a 2.6% m/m increase in gasoline station sales. Although nominal consumer activity remains pronounced, a significant part of it is attributable to expenditures related to the jump in gasoline prices.

As usual on Thursdays, weekly jobless claims data will be released. Consensus for initial claims: 205k after 200k a week earlier, benchmark for reapplications: 1780k after 1766k in the previous period.

Intuitive Machines (LUNR), Viking Holdings (VIK), Bitdeer Technologies (BTDR), Nova (NVMI), Klarna (KLAR) and Legence (LGN) will report quarterly results before the main session opens. Applied Materials (AMAT), Nu Holdings (NU), Figma (FIG), Globant (GLOB) and Credicorp (BAP) will report after the close of trading.

Futures on US stock indices are trading in moderate plus, reflecting an increase in risk appetite. We assess the balance of risks for the upcoming session as moderately positive with increased volatility. We forecast the S&P 500 to move in the range of 7400-7500 points.

- Shares of Nvidia (NVDA) are up about 3% following news that it has received authorization to sell H200 chips to several Chinese companies, including Alibaba (BABA), Tencent (TCEHY), ByteDance, JD.com (JD), as well as their distribution through Lenovo (LNVGY) and Foxconn. Given Nvidia's significant weightage in key benchmarks, this could set a positive tone for the performance of stock indices during the main session.

- Quotes of Cisco Systems (CSCO) reacted to the quarterly release with growth within 20%. The corporation's revenue increased 12% YoY to $15.84 billion, exceeding average expectations. The volume of orders for AI infrastructure from hyperscalers has already reached $5.3 bln with the annual target of over $9 bln.

- The IPO of AI chip maker Cerebras Systems, which went for $185 per share, above its forecast range, is drawing investor attention. The issuer raised $5.55 billion at a valuation of $56.4 billion on a fully diluted basis. Cerebras is positioning its Wafer Scale Engine 3 as an alternative to Nvidia's GPUs. In January, the company signed a contract worth over $20 billion with OpenAI for 750 MW of computing power.

- Doximity (DOCS) securities were down about 12% after the close of major trading. The company reported adjusted EPS of $0.26 with a consensus of $0.28. The company's own revenue guidance for fiscal 2027 puts it in the range of $664-676 million with an average market guidance of $697.4 million.

- Enovix (ENVX) stock is down 13%, although the company's quarterly revenue and earnings beat forecasts. Investors were disappointed by the lack of specifics about the timing of completion of qualification of smartphone batteries at the largest customer.

- Shares of Kodiak Gas Services (KGS) are down 5% after announcing a $750 million additional share issue. The funds raised will be used for general corporate purposes, partial repayment of a credit facility and investment in power generation equipment.

- Shares of Aeluma (ALMU) fell by more than 18% after the publication of its financial statements. The company's revenue amounted to $1.22 mln while the consensus was $1.35 mln. The full-year guidance for the index was revised from $4-6 mln to $4.2-4.6 mln due to delays in signing contracts and the impact of the shutdown.

Ma 13 trading on the U.S. stock exchanges ended mixed. S&P 500 and Nasdaq 100 added 0.58% and 1.04% respectively, setting new highs. Dow Jones decreased by 0.14%, and Russell 2000 rose by a symbolic 0.04%.

The equal-weighted S&P 500 lagged behind the "classic" benchmark by about 100 bps, indicating that growth was concentrated in the securities of the largest issuers.

The rally in the semiconductor and memory chip segments continued. The "Magnificent Seven", with the exception of Microsoft (MSFT: -0.63%), closed in plus, with Alphabet (GOOGL: +3.94%) showing the highest result.

The IT sector (XLK: +0.94%) and telecoms (XLC: +0.78%) were the leaders of growth in the broad market. Utility providers (XLU: -1.15%), the financial sector (XLF: -1.14%) and the real estate industry (XLRE: -0.83%) were outsiders. The pressure on rate-sensitive segments was due to fears of maintaining a relatively tight monetary policy against the backdrop of accelerating inflation.

A surprise for traders was the publication of April producer price index (PPI). The overall indicator rose by the maximum since March 2022 by 1.4% m/m with the consensus of 0.5%. The previous month's indicator was revised from +0.7% to 0.5%. Core PPI (excluding food and energy) rose 1% mom with the average forecast of 0.3%, while the result for Ma was upgraded to 0.2%. High energy prices made a significant contribution to the acceleration of inflation. In particular, the gasoline index increased by 15.6% mom, which is consistent with the data of the core CPI published the day before.

Despite higher-than-expected inflation, the secondary market for Treasuries showed relative resilience, while weak signals came from the primary market. The 10-year UST yield corrected downward after reaching its highest level since July 2025, although the curve showed signs of increasing slope. The auction for the issue of 30-year securities for $25 billion was held with the lowest coverage ratio since November and became the first placement of "long" bonds with yields above 5% since August 2007.

The head of FRB Boston Susan Collins assessed the course of monetary policy as adequate and allowed its slight tightening. Her Minneapolis counterpart Neel Kashkari emphasized the need to slow inflation to the target 2% and warned against shifting the benchmarks. Earlier, Kashkari and Dallas FRB Chair Laurie Logan voted against an easing bias in the communiqué of the May FOMC meeting.

Nvidia (NVDA: +2.29%) CEO Jensen Huang's (NVDA: +2.29%) participation in the negotiation process between China and the US was perceived by the market as a signal of discussion of H200 chips supply. After confirmation of approval of sales of these products to a number of Chinese companies, this signal can be considered as materialized.

- Tower Semiconductor 's (TSEM: +22.61%) revenue and earnings for the last reported quarter beat consensus, and the second-quarter guidance was also above average expectations. Management pointed to solid demand and commitments from the largest customers in the silicon photonics (SiPho) segment through 2027.

- AI infrastructure provider Nebius Group 's (NBIS: +15.72%) first-quarter results significantly exceeded average market guidance. The company secured up to 1.2 GW of capacity for a new AI data center in Pennsylvania and revised upward the annualized guideline for capacity additions.

- The Federal Trade Commission (FTC) has approved EchoStar 's (SATS: +2.98%) sale of frequency spectrum to AT&T (T) and SpaceX.

-Wix.com (WIX: -27.1%) reported first-quarter revenue, margin and free cash flow below consensus. Management reaffirmed its full-year guidance for billing and revenue, but lowered its FCF margin forecast. The quotes were pressured by weak performance of the partner segment and postponement of new product launches due to the conflict with Iran.

-Dynatrace (DT: -11.43%) generated fourth-quarter revenue and EPS slightly above consensus. Its FY 2027 recurring revenue guidance (ARR) also beat average expectations. However, analysts highlighted the modest outperformance of ARR guidance and the lack of acceleration in NNARR.

- Oklo (OKLO: -5.39%) generated a better-than-expected operating loss in its most recent reporting period, although it had $2.5 billion in cash and marketable securities on its balance sheet at the end of the quarter. In addition, the U.S. Nuclear Regulatory Commission (NRC) approved the design plan for the Aurora-INL reactor. The test reactor in Texas is scheduled to go critical by July 4.

This article was AI-translated and verified by a human editor