New York Morning: Between AI Agenda and Geopolitics

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

The situation in the Middle East remains in the center of attention of stock exchange players. Iran announced the termination of indirect negotiations with the U.S. and announced its intention to completely block the Strait of Hormuz in response to continued military action in the region. Tensions were heightened by reports of the launch of two Iranian ballistic missiles at U.S. facilities in Kuwait. Despite the lack of damage, the market continues to lay in quotations the risk of disruption in oil supplies and escalation of the conflict. This supports increased volatility in commodity assets and inflation expectations.

On the macroeconomic calendar, the key event will be the release of JOLTS open job openings for April (consensus: 6.87 million, same as a month earlier). Also released today will be US auto sales data for Ma (consensus: 16 million, April: 15.92 million). FRB Minneapolis President Neel Kashkari will comment on the economy. Ahead of the publication of the May Labor Department report, investors will be interested in any signals of a weakening labor market and their impact on monetary policy.

The AI sector remains in focus. Anthropic reported about confidential filing of documents for IPO, which may increase expectations of new large placements, in particular OpenAI and other leading representatives of this sphere. Note that Anthropic recently gave an annual revenue guidance of $47 billion versus $10 billion in 2025.

Dollar General (DG), Victoria's Secret (VSCO) and Signet Jewelers (SIG) will report before the open. Palo Alto Networks (PANW), GitLab (GTLB) and Ulta Beauty (ULTA) will report quarterly results after the end of the main session.

Futures on S&P 500 demonstrate moderately negative dynamics. We assess the balance of risks for the upcoming trades as neutral with high volatility. AI-sentiment and stable corporate results support buyers, but tensions in the Middle East and rising oil prices limit the appetite for risk. Resistance for the broad market index is around 7620 points, with key support at 7500.

- Shares of Hewlett Packard Enterprise (HPE) are up about 25% in the premarket. The driver of this rise was a strong report and an increase in EPS and free cash flow guidance for fiscal year (FY) 2026 to $3.35-3.45 and at least $3.5 billion, respectively. The positive market reaction was supported by information on new AI orders totaling $1.8 billion for the quarter and a cumulative backlog that reached $5.9 billion.

- Microchip Technology (MCHP) stock is adding about 5% after updating its 2026 revenue guidance for its Data Center Solutions segment, which is expected to grow 65% to about $500 million, driven by robust demand for AI infrastructure.

- Credo Technology (CRDO) stock is down within 10%, although it generated record revenue in the reported quarter and provided a strong outlook. The company's proprietary guideline assumes more than 80% revenue growth in FY 2027 and revenues in excess of $600 million from optical solutions on the back of the integration of acquired Dust Photonics and increased demand from AI infrastructure.

- Shares of Praxis Precision Medicines (PRAX) are losing about 10% as studies of its vormatrigine drug against focal epilepsy failed to reach a primary endpoint. The company has put test programs on pause pending a review of its development strategy.

- Securities of AEVEX (AVEX) are getting cheaper by about 10% after the announcement of additional issue of 8 mln Class A shares. The company will place 5.73 mln securities, another 2.27 mln will be offered by existing shareholders. Negative reaction of quotations is caused by probable dilution of shares of current owners.

- Quotes Alphabet (GOOGL) reacts with a decrease within 2% on the announcement of a plan to raise $80 billion through a stock offering, including an investment of Berkshire Hathaway for $10 billion. The corporation intends to use these funds to expand the computing infrastructure for artificial intelligence.

On June 1, trading on American stock exchanges ended mixed. S&P 500 (+0.26%) and NASDAQ 100 (+0.6%) once again updated historical maximums. The Dow Jones rose by a symbolic 0.09%, while the Russell 2000 declined by 0.47%.

Positive dynamics was provided by the news background around the segment of artificial intelligence. Major semiconductor and software manufacturers were in the highest demand among buyers. Nvidia (NVDA: +6.26%) and Microsoft (MSFT: +2.28%) showed the most pronounced growth in the "Magnificent Seven".

In this regard, the IT sector (XLK: +2.48%) became the leaders of growth in the broad market. Utility providers (XLU: -2.97%) were the outsiders due to rising Treasury bond yields and weakening demand for protective assets.

WTI crude oil prices rose 5.5% and US government bond yields at the short end of the curve climbed 3-4 bps after conflicting reports regarding further negotiations between Tehran and Washington. Despite Iranian media statements about the cessation of dialog and threats of a complete blockade of the Strait of Hormuz, investors remained hopeful of a diplomatic settlement after reports of continued contacts between the parties and Israel's decision to postpone planned strikes on Lebanon at the request of the US.

Macroeconomic statistics was moderately positive. ISM Business Activity Index (PMI) in the manufacturing sector for Ma rose from April's 52.7 points to a three-year high of 54 points, while the consensus was 53.1. This signaled the continued resilience of US industry. At the same time, the employment component remained in contractionary territory and price indexes remained at elevated levels, indicating continued inflationary pressures. Construction spending in Ma increased 0.4% m/m in April, with a consensus of 0.3%. S&P Global's final manufacturing PMI estimate for Ma came in at 55.1 points (preliminary: 55.3), remaining near peaks of more than two years.

- Barry Diller's People has confirmed an offer to buy another 74% of MGM Resorts (MGM: +16.1%) for $48.3 per share in cash. The deal values MGM at more than $18 billion and reinforces expectations of further consolidation in the casino and entertainment sector.

- Cadence Design Systems (CDNS: +10.5%) has unveiled the first fully autonomous virtual AI engineer for chip design. The new platform enables automation of chip modeling and development, which strengthens the company's market position.

- Science Applications International (SAIC: +10.4%) reported earnings and operating margins above average market guidance for the latest quarter. The decline in organic revenue was less than forecast. The company also raised its EPS guidance for the full year, driven by revenue growth from existing contracts and the integration of SilverEdge.

- Humana (HUM: +7.5%) reiterated its full-year earnings guidance ahead of its June meeting with investors, which remains above consensus.

- Strategy (MSTR: -5.9%) sold 32 bitcoins during the week, the first such transaction in the company's history and raising questions about its future strategy for managing its largest corporate BTC portfolio.

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