New York morning: new highs amid old risks

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

Foreign policy news will be a key factor of uncertainty at the beginning of this Friday's trading. On the eve, the market positively perceived reports about possible agreement on a 60-day ceasefire memorandum between the US and Iran. However, the optimism caused by these expectations was partially offset during overnight trading. Iranian state media reported missile strikes on unspecified targets. Hopes for a final deal on Iran's nuclear program are melting away. White House officials say they have economic and military leverage over Tehran if negotiations fail.

Market nervousness is exacerbated by Exxon Mobil 's (XOM) warning that global oil inventories are approaching critically low levels. This stimulates growth in energy prices and shares of companies in the sector, as well as strengthens inflation expectations and reduces the likelihood of the Fed returning to lower rates.

The most significant macro data release today will be the advance wholesale inventories data for April (consensus: +0.8% m/m, Ma: +1.3% m/m). The indicator is important in the context of uncertainty over import tariffs and the impact on second quarter GDP. The April goods balance statistics (consensus: -$88.2 billion, March: -$87.9 billion) will also be released. This release will help to refine net export forecasts.

The day before, it became known that Anthropic completed another investment round, overtaking OpenAI and becoming the most expensive AI startup with a valuation approaching $1 trillion. The news encourages investors to invest in the AI sphere, which supports the growth of shares of related companies.

No significant corporate reports are scheduled for today.

Futures on American stock indices demonstrate about zero dynamics. We assess the balance of risks for the upcoming session as neutral with moderate volatility. Strong results of the AI segment fuel optimism, but aggravation of the situation in the Middle East and stable inflation restrain risk appetite in other sectors.

- Shares of Dell Technologies (DELL) soared about 40% as its revenue and earnings for the latest quarter significantly outperformed average market benchmarks. The key driver was a nearly nine-fold increase in revenue from AI-optimized servers to $16.1 billion by last year's result. Management significantly raised its full-year outlook to reflect accelerating growth in AI infrastructure capital expenditures.

- MongoDB (MDB) is up about 3% as its revenue and adjusted EPS came in above average expectations and its full-year guidance was improved. The second-quarter outlook significantly beat analysts' consensus. An additional positive signal was the release of GAAP net income after a loss a year earlier.

- Gap (GAP) shares fell 16% as comparable sales growth for the Old Navy brand slowed to 1%. This was one of the factors behind the downward revision of the annual revenue forecast.

- American Eagle Outfitters (AEO) securities are down about 12% amid a 2% decline in comparable sales, while Aerie-branded product sales soared 25%.

- Shares of Autodesk (ADSK) are losing about 6%, although its quarterly results exceeded the upper bound of its own forecast, and part of the annual targets were raised. Quotes were pressured by the announcement of the acquisition of MaintainX, a provider of maintenance solutions, for $3.6 billion. Concerns were raised about the value of the deal and the sources of its financing.

- Okta (OKTA) shares gain about 9% as its revenue and RPO for the first quarter exceeded the guideline. Investors praised strong demand from large corporate clients, strong contract portfolio dynamics and interest in new solutions in the field of AI agent protection.

Ma 28 trading on the U.S. stock exchanges ended in the green zone. S&P 500 rose by 0.58%, Nasdaq 100 added 0.84%, Dow Jones rose by 0.05%, Russell 2000 rose by 0.57%.

The key positive driver was the reduction in geopolitical tensions following the mentioned reports of a possible 60-day ceasefire agreement between the US and Iran.

Additional support for the bulls was provided by the persistent demand for beneficiaries of artificial intelligence development. Within the "Magnificent Seven", Microsoft (MSFT: +3.47%) was the absolute leader on the news of the upcoming announcement of new AI models at the developers' conference.

In the broad market, the healthcare industry (XLV: +1.4%) led the way, thanks to demand for pharmaceutical stocks, and the IT sector (XLK: +1.31%) rallied on the back of a rally in software and chip makers. The utilities sector (XLU: -1.13%) was the outlier, as interest in defensive assets declined due to increased risk appetite.

Macroeconomic statistics were mixed, but in general contributed to the decline in Treasury bond yields. The most important inflation indicator for the Fed - Core Personal Consumption Expenditures (Core PCE) - showed a slowdown in April from 0.3% in Ma to 0.2% mom, although no change was expected. This eased market concerns about the sustainability of price pressure. The revised data on the dynamics of the US GDP for the first quarter recorded its increase by only 1.6% against the preliminary 2%. Durable Goods Orders in Ma increased by 7.9% m/m due to strong growth in the transportation segment against a consensus of 3.5%. At the same time, core capital orders unexpectedly declined by 1.1% m/m against expectations for a 0.4% increase. Signs of cooling were also seen in the labor market: the number of initial applications for unemployment benefits rose to 215k against a consensus of 211k.

Comments from Fed officials John Williams (FRB New York), Alberto Musalem (FRB St. Louis) and Thomas Barkin (FRB Richmond) focused on the macroeconomic effects of AI implementation. The officials noted that increased investment in the technology could lead to an upward revision of the neutral interest rate, and also urged that future productivity growth should not be viewed as a guarantee of curbing inflation. Nevertheless, optimism surrounding a potential end to the conflict in the Middle East drove the VIX volatility index below levels prior to the escalation of the conflict.

- Dell Technologies (DELL: +4.2%) has signed a $9.7 billion contract with the Pentagon to consolidate Microsoft software and services across all U.S. military departments through Dell Federal Systems. The market perceived this as a confirmation of steady demand for the company's IT infrastructure in the public sector.

- Microsoft (MSFT: +3.47%) announced the presentation of new AI models for writing code at the upcoming Build conference. According to specialized media, the move is aimed at strengthening the competitiveness of GitHub Copilot in the fast-growing developer tools market.

- Best Buy (BBY: +15.8%) beat Wall Street consensus for first-quarter earnings and profitability with strong performance from its advertising and marketplace businesses. The retailer also reported strong comparable sales results in May.

- HP PC sales (HPQ: -1.9%) exceeded consensus, with the share of AI-enabled devices expanding. At the same time, the upper end of the earnings guideline for the year was revised downward due to the impact of component cost inflation (especially memory chips) and fierce competition.

- Kohl's (KSS: +20.6%) reported a less pronounced than expected decline in comparable sales, with the retailer's earnings coming in above consensus. Management noted increased activity from its credit card holders and strong demand for its own brands, which, coupled with the reaffirmation of annual guidance, reinforces confidence in the success of the ongoing business transformation.

- Dollar Tree (DLTR: +17.9%) recorded margin expansion in its most recently reported quarter thanks to lower transportation costs and reduced merchandise losses. The discounter chain's profit beat average expectations. Management raised its full-year EPS guidance, noting that a strong increase in average check and assortment optimization successfully offset a slight decline in traffic.

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