Stock Market Update

Equity futures point to a lower future this morning following another session of tech leadership that sent the S&P 500 and Nasdaq Composite to fresh record highs. Stocks have been on a tear in recent sessions, though the somewhat narrow concentration of leadership across large tech names has invited some concerns around the sustainability of the rally.

Additionally, there are a few geopolitical developments that add to the less enthusiastic tone this morning. The summit between President Trump and President Xi concluded without any notable breakthroughs. Both leaders expressed a desire to keep the Strait of Hormuz open, but the U.S. and Iran remain locked in a stalemate, prompting concerns that military action could resume.

Oil prices are moving higher this morning, with WTI crude currently up $3.03 (+3.0%) to $104.20 per barrel.

In corporate news:

• Applied Materials (AMAT 435.00, -5.56, -1.3%) beat EPS expectations by $0.18, beat revenue expectations, and guided Q3 EPS and revenues above consensus.
• DexCom (DXCM 60.30, +2.48, +4.3%) is higher after headlines that Elliot Investment Management has taken a stake in the company, according to Reuters.
• Microsoft (MSFT 412.69, +3.26, +0.8%) is higher in the premarket after Pershing Square's Bill Ackman unveiled a new position, according to Bloomberg.

Reviewing overnight developments:

Equity indices in the Asia-Pacific region had a broadly lower finish to the week with South Korea's Kospi (-6.1%) plunging from a record high alongside a jump in the country's 10-yr yield (+16 bps to 4.25%) amid worries about a potential employee strike at Samsung Electronics, though the employee union indicated willingness to push talks back to early June. Japan's Nikkei: -2.0%, Hong Kong's Hang Seng: -1.6%, China's Shanghai Composite: -1.0%, India's Sensex: -0.2%, South Korea's Kospi: -6.1%, Australia's ASX All Ordinaries: -0.2%.

In news:

• Japanese debt was also pressured, sending yields to fresh highs for the year even though Finance Minister Katayama said that an extra budget will not be needed this year.
• U.S. Trade Representative Greer said that discussions about rare-earth materials with China went ok as President Trump wrapped up his visit to Beijing.
• Some CEOs that accompanied the president stayed behind to continue business discussions.

In economic data:

• Japan's April PPI 2.3% m/m (expected 0.7%; last 1.0%); 4.9% yr/yr (expected 3.0%; last 2.9%). April Machine Tool Orders 45.1% yr/yr (expected 28.1%; last 24.2%)
• South Korea's April Import Prices Index 20.2% yr/yr (last 20.4%); 40.8% yr/yr (last 29.5%)
• Hong Kong's Q1 GDP 2.9% qtr/qtr, as expected (last 1.0%); 5.9% yr/yr, as expected (last 3.8%)
• India's April trade deficit $28.38 bln (expected deficit of $27.00 bln; last deficit of $20.67 bln)
• New Zealand's April Business PMI 50.5 (last 52.8) and April Food Price Index 0.0% m/m (last -0.6%)

Major European indices are on track for a lower finish to the week. STOXX Europe 600: -1.2%, Germany's DAX: -1.6%, U.K.'s FTSE 100: -1.5%, France's CAC 40: -1.4%, Italy's FTSE MIB: -1.8%, Spain's IBEX 35: -1.3%.

In news:

• G-7 finance ministers will meet in France this weekend to discuss bond volatility.
• British Prime Minister Starmer may face a leadership challenge from Andy Burnham, who is the mayor of Greater Manchester. However, Mr. Burnham is not in parliament, so he would first need to win a special election to fill a vacant seat created by the resignation of a Labour MP.
• The European Central Bank's latest economic bulletin acknowledged the increase in energy costs due to the conflict in Iran, noting that households and firms are becoming more reluctant to consume and invest.