Morning in New York: tech rally faces constraints

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

Nvidia (NVDA) report is in the market's spotlight. The company beat expectations on EPS ($1.87 vs. $1.75) and revenue ($81.62 bln vs. $79.01 bln), reporting 85% YoY revenue growth, gave above consensus guidance, and announced an additional $80 bln buyback and raised its dividend. However, the stock came under pressure (losing about 1% on the premarket) after comments from Jensen Huang that Nvidia has effectively ceded the AI chip market in China to Huawei due to US export restrictions. China previously accounted for at least 20% of the company's data center segment revenue (the forecast now excludes that revenue), but after the April restrictions, US President Donald Trump's administration demanded separate licenses for H200 chips. At the same time, Huang emphasized that Nvidia continues to actively invest in the supply chain and considers the scenario of multiple business growth realistic amid the expansion of AI infrastructure.

In the macroeconomic calendar, the focus will be on the preliminary PMI data from S&P Global for Ma: the consensus expects the manufacturing index to decline to 53.8 p. from 54.5 p. and the service PMI to rise to 51.8 p. from 51 p. We believe that activity in industry will remain stable due to the investment cycle, while the service sector may show a slight improvement. The market will also assess the new home construction data for April (consensus: -5.5% after +10.8%) and initial jobless claims (212.5k vs. 211k a week earlier). The statistics will help clarify the sustainability of the economy amid high interest rates and rising UST yields.

SpaceX IPO is of additional interest: the company has officially filed documents for listing on Nasdaq under the ticker SPCX. SpaceX was valued at $1.25 trillion after its merger with xAI in February, and the offering could become one of the largest IPOs in the history of the market. The company controls about 10,000 Starlink satellites, remains a key partner of NASA and is actively expanding its presence in AI and defense infrastructure.

Reporting before the open will be Walmart (WMT), Deere (DE), Ralph Lauren (RL), Advanced Drainage Systems (WMS), Hamilton Lane (HLNE), NetEase (NTES) and NIO (NIO). Workday (WDAY), Ross Stores (ROST), Zoom (ZM), Take-Two Interactive (TTWO), Copart (CPRT), Deckers Outdoor (DECK) and Webull (BULL) will report after the close.

Futures on the S&P 500 show about zero dynamics. We assess the balance of risks as moderately positive with increased volatility: strong results of Nvidia (although the first reaction is ambiguous) and expectations of SpaceX IPO support risk appetite. Additional influencing factors are macro releases, which may adjust expectations on the economy and inflation.

- Intuit (INTU) shares are down about 13% in premarket after reporting despite beating revenue and earnings expectations and raising its full-year guidance. The company expects FY 2026 revenue of $21.34-21.37 billion and continues to bet on its AI-integrated platform strategy, but investors were alerted to pressure in the most price-sensitive segment of self-filing tax returns via TurboTax. At the same time, management reported an increase in restructuring costs to about $300 million amid organizational structure changes.

- EnerSys (ENS) shares are up about 5% after reporting better-than-expected adjusted EPS of $3.19, while revenue rose 1.4% YoY to $988 million. Despite lower GAAP earnings, investors are positive on the outlook for the next quarter (EPS $2.70-2.90) and solid demand for data center and industrial infrastructure solutions.

- Applied Digital (APLD) shares are adding more than 9% after announcing a long-term agreement with a major hyperscaler for its fourth AI-campus Polaris Forge 3. The new facility will provide 300 MW of IT capacity for AI model training and operation tasks, strengthening the company's position in the fast-growing AI infrastructure segment.

- Rocket Lab (RKLB) is down about 7% after announcing a stock offering program of up to $3 billion. The company plans to use the funds to finance further growth, potential acquisitions and general corporate purposes, but the market is reacting negatively to the risk of shareholder dilution.

- Shares of e.l.f. Beauty (ELF) is up about 8% after strong reporting, with revenue up 35% YoY, gross margin up 140 bps, and adjusted EPS of $0.32 versus expectations of $0.29. The Rhode and Naturium brands provided support, but FY 2027 guidance was slightly below consensus, and the company also reported a negative impact from currency fluctuations and higher fuel costs.

- Shares of AEVEX Corp. (AVEX) are adding about 5% after strong reporting and raising its 2026 guidance. Q1 revenue rose 307% YoY to $216.7 million, EPS was $0.22 vs. guidance of $0.16, and funded backlog reached $356.6 million. An additional driver was the receipt of a $15.6 million U.S. Air Force contract to develop unmanned systems and AI-based solutions.

Trading on Ma 20 on the US stock exchanges ended with strong growth: S&P 500 added 1.08%, Nasdaq 100 - 1.66%, Dow Jones - 1.31%, Russell 2000 - 2.56%. The market was supported by stabilization of US Treasury bond yields (UST) after the recent spike, return of demand in AI and momentum segments, as well as expectations of progress in US-Iran negotiations. The "Magnificent Seven" securities closed in plus. The cyclical consumer staples sector (XLY: +2.53%) led the gains amid strong reports from select retailers and restaurant companies, while energy (XLE: -2.43%) came under pressure due to a 5.7% drop in WTI.

The macroeconomic agenda was quiet: there were no significant releases, and the minutes of the April FOMC meeting were expectedly hawkish. Most Fed representatives supported a wait-and-see stance, while admitting the need for additional policy tightening if inflationary pressures persist. UST yields declined by 7-10 bp, which helped the market to recover some of the recent correction.

The geopolitical backdrop partially improved: Donald Trump said that negotiations with Iran are at the "final stage", although there are no concrete agreements yet. This reinforced expectations of de-escalation and triggered a sharp decline in oil prices, but news noise around the Strait of Hormuz and Israel's position retains the risk of volatility.

- On the back of strong reporting from TJX Companies (TJX: +5.7% at the close of trading on May 20), investors were positive about the resilience of demand in the discount retail segment. Revenues and margins exceeded market expectations, with HomeGoods' comparable sales up 9%, well ahead of forecasts. Management also raised its full-year guidance for comparable sales and EPS growth, citing the strong start to Q2 and the continued availability of quality merchandise at attractive prices.

- Toll Brothers (TOL: +9.8%) shares rose after a strong fiscal Q2, with revenue and EPS exceeding expectations thanks to higher average selling prices and gross margin. Despite weaker Q3 delivery guidance (2.6-2.7k homes) and an expected gross margin of about 25%, the company raised its full-year guidance on key housing metrics.

- Shares of Analog Devices (ADI: -3.9%) declined despite reporting better-than-expected revenue and EPS that exceeded forecasts thanks to strong demand in the Consumer, Communications and Automotive segments. Investors, however, took note of Industrial's weaker performance and cautious outlook for fiscal Q3, despite analysts' positive reaction to the Empower acquisition and the company's increased exposure to AI infrastructure

- Shares of eBay (EBAY: +4.1%) added after GameStop (GME: +2.0%) disclosed an economic stake of about 6.55% through a put/call structure with Toronto-Dominion Bank. The news supported investors expecting further M&A pressure after GameStop's previously rejected offer to buy eBay.

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