June S&P 500 E-Mini futures (ESM26) are up +0.31%, and June Nasdaq 100 E-Mini futures (NQM26) are up +0.23% this morning as optimism surrounding artificial intelligence helped offset concerns about renewed U.S.-Iran tensions.
Stock index futures were boosted by a more than +2% rise in Nvidia (NVDA) in pre-market trading after the company late on Sunday unveiled the RTX Spark, which it called “the most efficient PC chip ever built,” designed to enable personal devices to run AI agents. Also, AI infrastructure stocks climbed in pre-market trading, with Micron Technology (MU) rising over +5% and Sandisk (SNDK) gaining more than +4%.
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However, gains in U.S. equity futures were limited as oil prices and bond yields advanced. The price of WTI crude climbed over +3% on Monday as uncertainty persisted over whether the U.S. and Iran were making headway toward a deal for a lasting ceasefire and the resumption of flows through the Strait of Hormuz. The outlook for the deal dimmed after Israel intensified its offensive against Tehran-backed Hezbollah in Lebanon. Also, Iran hit a Kuwaiti air base over the weekend, while the U.S. carried out “self-defense strikes” on Iranian radar and command and control sites for drones in Goruk and Qeshm Island.
Treasuries fell across the curve as higher oil prices fueled inflation concerns, with the benchmark 10-year yield rising three basis points to 4.47%.
Meanwhile, the U.S. and Iran reportedly exchanged messages over the weekend to revise a draft agreement. U.S. President Donald Trump, in a Truth Social post late on Sunday, called for calm regarding the Iran deal, saying it will all work out well.
This week, investors look ahead to a slew of U.S. labor market data, comments from Federal Reserve officials, and earnings reports from several high-profile companies.
In Friday’s trading session, Wall Street’s major equity averages ended in the green, with the S&P 500, Dow, and Nasdaq 100 posting new record highs. Dell Technologies (DELL) popped over +32% and was the top percentage gainer on the S&P 500 after the hardware maker posted upbeat Q1 results and raised its full-year revenue guidance amid surging demand for servers that power AI workloads. Also, software stocks rallied, with Atlassian Corp. (TEAM) jumping more than +15% and ServiceNow (NOW) surging over +14%. In addition, Okta (OKTA) soared more than +30% after the identity-security company reported stronger-than-expected Q1 results and boosted its annual guidance. On the bearish side, Clorox (CLX) slid over -6% and was the top percentage loser on the S&P 500 after CEO Linda Rendle said she was stepping down for health reasons following more than 20 years at the company.
“Stocks were propelled higher on Friday by the same two forces that have been driving them for the last couple of months: great earnings and anticipation of an Iran deal,” said Adam Crisafulli at Vital Knowledge.
Economic data released on Friday were positive for equities. The U.S. May Chicago PMI jumped to 62.7, stronger than expectations of 50.6 and marking its highest level since January 2022. Also, U.S. April wholesale inventories rose +0.5% m/m, compared to expectations of +0.6% m/m.
Kansas City Fed President Jeff Schmid said on Friday he remains focused on elevated inflation and that policymakers should make it clear they are prepared to do what is necessary to achieve price stability. Also, Philadelphia Fed President Anna Paulson said that Fed rate policy is ready “to react if the risks become manifest” and added, “I think it is healthy that market participants have taken on board scenarios where the funds rate remains unchanged for an extended period, as well as scenarios where further tightening becomes necessary.” At the same time, Fed Vice Chair for Supervision Michelle Bowman said it is too early to assess the inflationary impact of the Iran war and that officials need to look through temporary price shocks. In addition, Minneapolis Fed President Neel Kashkari said it is too soon to conclude that interest rates need to rise, while maintaining that the central bank should keep all options on the table.
Meanwhile, U.S. rate futures have priced in a 99.4% chance of no rate change and a 0.6% chance of a 25 basis point rate hike at the Fed’s monetary policy committee meeting later this month.
The U.S. May Nonfarm Payrolls report will be the main highlight this week, as investors assess the outlook for interest rates. Economists expect the key jobs report to show the unemployment rate holding steady at 4.3% while payrolls increase by 95K, a gain that would bring the 3-month average to its highest level in more than a year. “Another beat like April’s could further cement the idea that rates are not going to be cut any time soon, particularly if there is evidence of significant wage growth. On the other hand, a weaker-than-expected number could create worries about recession while shifting the calculus on rates,” according to AJ Bell analysts. Other jobs data to watch include JOLTS Job Openings, the ADP Nonfarm Employment Change, and Initial Jobless Claims. The U.S. S&P Global Services PMI, the ISM Non-Manufacturing PMI, Factory Orders, Nonfarm Productivity, Unit Labor Costs, and Consumer Credit data will also attract attention.
Market watchers will also focus on earnings reports from several high-profile companies. Semiconductor leader Broadcom (AVGO), cybersecurity firms CrowdStrike (CRWD) and Palo Alto Networks (PANW), and other notable companies such as Hewlett Packard Enterprise (HPE), Dollar General (DG), and Ciena (CIEN) are scheduled to report their quarterly results this week.
In addition, the Fed will release its Beige Book survey of regional business contacts this week, providing anecdotal insight into economic conditions across the country. The Beige Book is published two weeks before each meeting of the policy-setting Federal Open Market Committee. Market participants will also parse comments from a host of Fed officials, including Waller, Kashkari, Hammack, Barr, Logan, Barkin, and Daly, throughout the week.
Today, investors will focus on the U.S. ISM Manufacturing PMI and S&P Global Manufacturing PMI, set to be released in a couple of hours. Economists expect the May ISM manufacturing index to be 53.3 and the S&P Global manufacturing PMI to be 55.3, compared to the previous month’s values of 52.7 and 54.5, respectively.
U.S. Construction Spending data will also be released today. The figures will provide the latest indication of the pace of the ongoing data center buildout. Economists project April construction spending to rise +0.3% m/m after the +0.6% m/m gain a month earlier.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.47%, up +0.59%.
The Euro Stoxx 50 Index is up +0.08% this morning, tracking gains in U.S. equity futures and some Asian markets, while investors weighed the latest developments in the Middle East. Technology stocks climbed on Monday. Energy stocks also advanced as oil prices rose. At the same time, defense stocks underperformed. A survey released on Monday showed that growth in Eurozone manufacturing slowed in May as demand for goods stalled and supply-chain disruptions tied to the Middle East conflict drove input costs to their highest level in four years. Separately, a European Central Bank survey showed that Eurozone consumers either held steady or reduced their inflation expectations in April, an encouraging sign for policymakers. In addition, data showed that the Eurozone’s unemployment rate held steady in April, highlighting resilience despite elevated economic uncertainty stemming from the Middle East conflict. Meanwhile, Goldman Sachs lifted its 12-month target for the STOXX 600 index to 660, citing resilient corporate earnings growth despite the Middle East conflict. Investor focus this week is on the Eurozone’s preliminary inflation data for May. The data “will be one of the last key data points that the European Central Bank will have prior to its June meeting,” said Sandra Horsfield, an analyst at Investec. Eurozone PPI and retail sales data for April will also draw attention. In corporate news, easyJet (EZJ.LN) climbed over +9% after U.S. investment firm Castlelake valued any potential bid for the U.K. budget airline at at least 3.06 billion pounds ($4.12 billion).
Germany’s Retail Sales, Eurozone’s Manufacturing PMI, and Eurozone’s Unemployment Rate were released today.
The German April Retail Sales fell -0.3% m/m, stronger than expectations of -0.4% m/m.
Eurozone’s May Manufacturing PMI came in at 51.6, stronger than expectations of 51.4.
Eurozone’s April Unemployment Rate was 6.3%, weaker than expectations of 6.2%.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.27%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.91%.
China’s Shanghai Composite Index closed lower today, dragged down by weakness in the tech sector, as tepid factory data heightened worries about slowing growth momentum. Semiconductor and other AI-related stocks sank on Monday. Limiting losses, energy and bank stocks advanced. China Galaxy Securities analysts said, “Markets are looking crowded, with some profit-taking and increased disagreement among investors likely in the short term.” An official survey released on Sunday showed that China’s factory activity stalled in May as new export orders declined and input costs continued to rise, highlighting the strain from higher energy prices since the Middle East conflict began. At the same time, China’s non-manufacturing PMI, which covers both services and construction activity, returned to expansionary territory last month, supported by a surge in travel spending during the five-day May Day holiday. Separately, a private survey released on Monday showed that China’s manufacturing sector grew for a sixth consecutive month in May, though at a slower pace. Barclays economists said that a breakdown of China’s manufacturing PMI data, together with high-frequency indicators, points to a bifurcated growth pattern, with resilience in high-tech and export-driven sectors and weakness in traditional sectors. Meanwhile, China unveiled broad new rules on Monday tightening oversight of overseas deals involving Chinese investors, technology, data, and national security, as authorities aim to protect the economy amid intensifying technology rivalry with the U.S. The announcement followed a move a month earlier by China to block Meta Platforms’ acquisition of AI startup Manus on national security grounds. Elsewhere, Goldman Sachs said that China’s planned index rebalancing is projected to generate an estimated $48 billion in two-way passive investment flows.
The Chinese May Manufacturing PMI came in at 50.0, weaker than expectations of 50.2.
The Chinese May Non-Manufacturing PMI arrived at 50.1, stronger than expectations of 49.5.
The Chinese May RatingDog Manufacturing PMI stood at 51.8, stronger than expectations of 51.4.
Japan’s Nikkei 225 Stock Index closed higher today, topping the 67,000 mark for the first time as investors doubled down on the AI trade. Gains in technology stocks led the overall market higher on Monday. SoftBank Group was by far the largest contributor to the benchmark index, jumping more than +14% to add 845 points to the rally. The shares soared after the tech investor unveiled a $52 billion data-center plan in France, a move aimed at leveraging the country’s nuclear-powered energy surplus and diversifying its data-center footprint beyond the U.S. and Japan. Notably, SoftBank overtook Toyota Motor as Japan’s most valuable company on Monday, marking a milestone for the global AI boom. Meanwhile, Japanese government bond yields climbed on Monday as oil prices rose amid heightened uncertainty surrounding the Middle East conflict. On the economic front, data showed on Monday that Japanese companies’ annual spending on plant and equipment was nearly flat in the first quarter, marking a pause after a year of robust growth as concerns grow over the impact of the Middle East conflict. Separately, a survey showed that Japan’s manufacturing sector grew in May at a slightly slower pace, as record export order growth was offset by soaring costs linked to the conflict and inflated output driven by stockpiling. Investor focus now turns to Japan’s April wage data due later this week for indications that pay gains are broadening sufficiently to sustain domestic demand. Market participants will also closely monitor a speech from Bank of Japan Governor Kazuo Ueda for clues on the timing of the central bank’s next rate hike. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +9.60% to 28.54.
The Japanese May S&P Global Manufacturing PMI remained unrevised at 54.5, in line with expectations.
The Japanese Capital Spending rose +0.047% y/y in the first quarter, weaker than expectations of +4.1% y/y.
Pre-Market U.S. Stock Movers
Nvidia (NVDA) rose over +2% in pre-market trading after the company late on Sunday unveiled the RTX Spark, which it called “the most efficient PC chip ever built,” designed to enable personal devices to run AI agents.
AI infrastructure stocks climbed in pre-market trading, with Micron Technology (MU) rising over +5% and Sandisk (SNDK) gaining more than +4%.
Cadence Design Systems (CDNS) surged more than +8% in pre-market trading after unveiling an autonomous engineer for chip design powered by Nvidia.
Microsoft (MSFT) advanced over +3% in pre-market trading as Nvidia CEO Jensen Huang brushed aside concerns about AI disrupting the software industry. Also, Citizens initiated coverage of the stock with an Outperform rating and a $550 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - June 1st
Hewlett Packard Enterprise Company (HPE), Science Applications International (SAIC), Village Super Market (VLGEA).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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