Morning in New York: the situation is favorable for buying

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

The focus of attention of the participants of the upcoming session will be the development of the negotiation process between the United States and Iran. On the eve of Donald Trump said that the memorandum of understanding is "largely agreed". This document provides for the opening of the Strait of Hormuz, cessation of hostilities, partial unfreezing of Iranian assets and further discussion of Tehran's nuclear program. At the same time, on Sunday, the White House chief urged the negotiating team not to rush to conclude the agreements and to continue the naval blockade of Iranian ports until its signing. Secretary of State Marco Rubio in New Delhi characterized the progress as "significant but not definitive," allowing that an agreement could be reached within days. The degree of readiness of the agreement is estimated at about 95%. Former CIA Director David Petraeus noted that Iran appears to be "in the process of making concessions" on the Strait of Hormuz issue, and the successful outcome of the first stage of the settlement should be the opening of this transportation corridor without conditions.

The fragility of the situation was confirmed after the U.S. Central Command reported strikes"in self-defense" against southern Iran. The targets of the attack were missile launch sites and boats allegedly planting mines. Tehran's position remains an additional factor of uncertainty. No agreement has been reached on the transfer of highly enriched uranium stockpiles. The issue of the nuclear program will be brought to the final stage of negotiations. Israeli Prime Minister Benjamin Netanyahu, for his part, reiterated that Israel reserves the right to respond to threats in the region, including from Lebanon. And this could also limit the possibilities for sustainable de-escalation.

The oil market remains significantly undersupplied, limiting the potential for rapid price normalization even in the event of a peaceful settlement. According to the head of Abu Dhabi National Oil Company (ADNOC), full restoration of flows through the Strait of Hormuz to pre-war levels is unlikely to occur before the first half of 2027. Taking into account the set of unresolved issues in the region and physical constraints to restore supplies, the market puts into quotations the probability of de-escalation rather than the fact of supply normalization. This explains the increased sensitivity of prices to negative news signals.

The most important macro publication this Tuesday will be the May consumer confidence index from the Conference Board (consensus: 92 points, April: 92.8). Weak data may increase concerns about GDP dynamics, but in the current environment the market focuses primarily on oil prices and foreign policy agenda. Also today will be published the business activity index from FRB Chicago CFNAI (March: -0.2 points) and a similar indicator in the industry from FRB Dallas for Ma (April: -2.3 points).

The unblocking of the Strait of Hormuz will provide the Fed with additional opportunities for a pause in the adjustment of monetary policy. If the geopolitical premium in oil prices persists, the regulator may consider the opposite scenario.

Autozone (AZO) and Pony AI (PONY) will report their quarterly results before the opening of the main session. Zscaler (ZS), Semtech (SMTC) and Box (BOX) will report after the close of trading. Zscaler's release will be important to the investment community as an indicator of demand for cybersecurity solutions.

Futures on US stock indices are moving upwards. We assess the balance of risks for the upcoming session as positive with increased volatility amid progress in the US-Iran talks and support from the technology sector.

- Shares of Super Micro Computer (SMCI) remain in focus after Nvidia (NVDA) CEO Jensen Huang publicly urged a partner to step up enforcement of U.S. export regulations. The statement comes amid an investigation in Taiwan into three individuals who made false declarations when shipping servers based on Nvidia chips to Greater China, Hong Kong and Macau, as well as an ongoing U.S. case involving $2.5 billion worth of equipment smuggled through front structures in Southeast Asia.

- Nvidia (NVDA) securities are attracting increased interest of investors. Its head confirmed obtaining a license to supply H200 chips to China. This market for the future Vera CPU platform is estimated at $200 bln.

- Huawei announced the development of chips with the equivalent of 1.4-nanometer process technology by 2031 based on its own Tau Scaling Law principle. Against the backdrop of the LogicFolding architecture presentation, shares of SMIC (981-HK), the largest contract manufacturer in China and a key partner of Huawei, showed notable growth. This news may put pressure on the shares of US chipmakers.

- DeepSeek has taken a step towards price competition in the large language model segment: the company has converted a temporary 75% discount on its flagship V4-Pro model to permanent status.

- Eli Lilly (LLY) presented positive interim results from the Heart-2 Phase Ib study of VERVE-102. A single infusion provided a dose-dependent reduction in PCSK9 levels by 51-88% and LDL-cholesterol levels by up to 62%, while maintaining the effect for up to 18 months. The FDA granted Fast Track status to the drug, with Phase II planned to be launched by the end of the year, which may become a positive driver for LLY quotations.

-Delivery Hero has confirmed it has received a takeover offer from Uber Technologies (UBER) for €33 per share. DoorDash has shown additional interest in the asset, with both bidders already discussing a buyout with a number of Delivery Hero shareholders. Earlier, Uber increased its stake in the latter to 19.5%, becoming the company's largest shareholder.

On Monday, Ma 25, the U.S. stock exchanges were closed as the country celebrated Memorial Day, but trading on Ma 22 on U.S. stock exchanges ended in the plus. The S&P 500 added 0.37%, the Nasdaq 100 was up 0.42%, the Dow Jones rose 0.58% and the Russell 2000 gained 0.91%. The broad market index has spent three consecutive sessions in the green, closing the last eight weeks up, its best performance since 2023. The benchmark is about 0.3% away from a record close.

The performance of the "Magnificent Seven" stocks was mixed: Tesla (TSLA: +1.95%) was the most popular with buyers, while Nvidia (NVDA: -1.9%) showed the most notable drawdown.

The healthcare industry (XLV: +1.17%) and the IT sector (XLK: +1%), which was supported by semiconductor manufacturers, including memory chips, were the leaders of growth in the broad market. Only telecoms (XLC: -0.55%) closed in the negative.

Increased pressure on interest rates after hawkish comments by Christopher Waller, a member of the Board of Governors, and a new jump in inflation expectations did not hinder the positive trend in the stock market. The University of Michigan's consumer sentiment index fell to a historic low of 44.8 from a preliminary 48.2 points, according to the final estimate. The sub-indices of current conditions and expectations also adjusted downward to record lows. Inflation expectations at the one-year horizon rose 0.3 p.p. to 4.8%, while longer-term expectations rose 0.5 p.p. to 3.9%. Against this backdrop, Treasury yields at the short end of the curve increased by 5-6 bps.

An additional factor that influenced the mood of trading participants was the swearing-in of Kevin Warsh as the new Fed Chairman. President Donald Trump said during the ceremony that the new head of the regulator will limit the practice of preliminary signals on the adjustment of monetary policy. Member of the Board of Governors Christopher Waller, in turn, noted that he favors keeping the rate unchanged in the near term and supports the idea of excluding from the statements of the committee indications of readiness to ease monetary conditions, emphasizing that this does not imply consideration of the possibility of raising the rate in the foreseeable future.

-Imax (IMAX: +15.47%) is exploring the possibility of selling the business. To this end, the company has held preliminary talks with potential buyers from the entertainment industry.

- Merck (MRK: +5.64%) presented interim results from the Phase III OptiTROP-Lung05 study in China in partnership with Kelun Biotech. The use of the antibody-drug conjugate sacituzumab tirumotecan (sac-TMT) in combination with Keytruda provided a 65% reduction in the risk of disease progression compared to Keytruda monotherapy.

- Flowers Foods (FLO: +13.27%) reported first quarter earnings and Adjusted EBITDA margin above consensus with revenues in line with expectations. The management pointed to positive revenue dynamics in the premium bread and confectionery segments, and the midpoint of the annual EPS guidance was above market expectations.

- Advanced Micro Devices (AMD: +3.99%) will channel $10 billion through Taiwanese partners to expand production of central processing units (CPUs) for next-generation AI infrastructure. CEO Lisa Su notes strong demand for CPUs and forecasts their global market to grow by more than 35% annually.

- Although BJ's Wholesale Club's (BJ: -8.25%) first-quarter revenue and earnings beat average expectations, its comparable sales excluding fuel were below consensus. Management characterized the subscriber revenue trend positively, but warned of a moderate slowdown in growth during the year. An additional negative was the reduction in gross margin due to investments in pricing. EPS guidance for the current year was confirmed at the level of average market expectations.

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