North American Morning Briefing: Stocks Set to Extend Rally on Revived Rate Cut Hopes

OPENING CALL

Stock futures rose on Friday, extending a rally boosted by strong earnings and jobs data that has made investors more confident the Federal Reserve will begin cutting rates this year.

Investors will have more data to rake over next week, with April's inflation figures.

Overseas Markets

European indexes climbed. The U.K. economy exited its recession last quarter, new data showed.

Hong Kong's Hang Seng Index hit a nine-month high, boosted by a report of a potential tax break for some traders.

Premarket Movers

Akamai Technologies posted first-quarter adjusted profit that beat analysts' estimates but said it expects second-quarter adjusted earnings of $1.51 to $1.56 a share, below estimates of $1.63. The stock fell 10%.

Dropbox first-quarter earnings and revenue beat analysts' expectations and shares were up 2.5%.

JFrog's first-quarter earnings and revenue topped analysts' forecasts, however, the stock fell 13%.

Novavax was rising 36% after signing a co-exclusive licensing agreement with Sanofi for its Covid vaccine starting in 2025.

SoundHound reported first-quarter revenue of $11.6 million, up 73% from a year earlier and higher than analysts' forecasts of $10.1 million. Shares rose 15%.

TSMC revenue in April soared 60% on the year. Its ADRs rose 3%. Nvidia, Advanced Micro Devices, and Micron Technology rose premarket after TSMC's results.

Unity Software reported a first-quarter loss of 75 cents a share, wider than the GAAP loss of 64 cents anticipated by Wall Street. Revenue fell 8% to $460 million but beat forecasts. Shares declined 3.9%.

Victoria's Secret rose about 5% in off-hours trading after it said that its quarterly sales were improving, despite challenging U.S. retail conditions.

Yelp reported better-than-expected first-quarter profit but issued guidance that missed expectations as the company steps up marketing of its expanded offerings for home-services pros. The stock fell 4.7%.

Post Close Movers

FIGS warned on its third-quarter performance, saying it expected tough year-on-year comparisons for revenue growth. The company's profit fell in the first quarter as revenue edged down less than 1%. Shares fell 10%.

Funko named Cynthia Williams, former president of Hasbro's Wizards of the Coast and digital gaming unit, as its next CEO effective later this month. Shares rose 11%.

Groupon reported consolidated revenue growth in the first quarter for the first time in eight years and beat analysts' expectations. Shares rose 13%.

Natera achieved cash flow breakeven ahead of expectations in the first quarter, with a positive cash flow of about $3 million. Shares rose 16%.

Watch For:

University of Michigan Preliminary Consumer Survey for May; Canada Labour Force Survey for April; Earnings from Enbridge, DigitalOcean Holdings, Sphere Entertainment, and AMC Networks; Fedspeak from Kashkari, Goolsbee, Bowman, Barr

Today's Top Headlines/Must Reads:

- The Dow Is a Terrible Index. But It Is Telling Us Something Important.

- Even a State-Linked Giant Can't Escape China's Real-Estate Crisis

- Corporate America Is Sitting Out the Trump-Biden Rematch

MARKET WRAPS

Forex:

Two-year gilt yield and sterling edged higher after the latest U.K. GDP data came in stronger than forecast, lowering expectations of the Bank of England cutting interest-rates in June.

"We suspect that [the GDP data] puts a notable dent in the calls for a June start to policy easing, even in spite of [Thursday's BOE] communications," Monex said.

Energy:

Oil prices were on track for weekly gains, driven by persistent geopolitical risks in the Middle East and positive demand signals from top consumers the U.S. and China.

A weekly fall in U.S. crude inventories and China's latest trade data showing higher crude imports in April supported oil markets this week, suggesting a recovery in demand.

Metals:

Gold rose to its highest price since late April's crash on renewed hopes for Federal Reserve interest-rate cuts.

Inflation data due next week will offer further insights into the U.S. economy, BMI said.

"We expect gold prices to remain volatile in the coming months as the market reacts to macro drivers, tracking geopolitical events and Fed rate policy," it added.

Copper

With the pace of copper demand from electric vehicles now tipped to be slower than previously envisaged, there's a rising focus on how much of that slack could be picked up by growth in metal-intensive data centers and associated infrastructure, Bank of America said.

"Estimating the impact of data centers on copper demand is tricky, because the sector is evolving fast."

BofA estimates copper demand directly from data centers could be around 200,000 metric tons a year between 2025 and 2028.

Investment in electricity to feed data centers could fuel further demand of at least 500,000 tons annually, although that could be as high as 1 million tons a year to 2026, it added.

TODAY'S TOP HEADLINES

Bundles Are the Hottest New Show in Streaming

Can old enemies make for good friends? The future of streaming media might depend on the answer.

Disney and Warner Bros. Discovery surprised investors this week with plans to launch a new streaming bundle that will combine Disney+, Hulu and Warner's Max service. The bundle will make all ad-supported and ad-free options of the three streamers available for one price that will be announced later this year when the bundles are launched.

Honda Motor Expects Annual Profit Fall, Announces Share Buyback

Honda Motor projected a drop in fiscal-year net profit and announced a share buyback after posting a sharp increase in annual profit for the previous year driven by a car business recovery.

The Japanese automaker said Friday that it expects net profit to decline 9.7% to 1.000 trillion yen ($6.43 billion) and revenue to fall 0.6% to Y20.300 trillion for the year that began in April. The company is expecting higher research and development expenses and a stronger yen that reduces the value of profits earned overseas in yen terms.

Apple Apologizes for iPad Ad Depicting Crushed Creative Tools

Apple has apologized for an advertisement that depicts an array of creative tools being crushed and reveals a new iPad in their place, saying it fell short of the company's standards.

The ad, which Chief Executive Tim Cook posted on X after Apple unveiled new iPads on Tuesday, depicts a studio filled with musical instruments, a record player, cans of paint with vibrant colors and other items being physically crushed by what appears to be a giant compressor.

Saudi Arabia's Economy Isn't Just About Oil. 4 Stocks to Consider.

The war in Gaza drives home the image of a Middle East stagnating amid bloody, irresolvable conflicts. Not everywhere, though.

Former conservative bulwark Saudi Arabia has become one of the world's fastest-changing societies, with economic ambitions to match. Under the de facto leadership of Mohammed bin Salman, female employment has doubled, and formerly nonexistent entertainment and leisure industries have sprung to life.

Demolition Lined Up to Free Containership Dali From Baltimore Bridge Wreckage

The Port of Baltimore expects to resume most operations next week following a controlled demolition this weekend to free the Dali containership from the wreckage of the Francis Scott Key Bridge.

Demolition crews are planting explosives on an outer section of an eight- to 12-million-pound steel truss that has been lying across the Dali's bow since the ship plowed into a support pillar in the early hours of March 26.

House Democrats' Surprise Campaign Play: Embracing Border Security

WASHINGTON-Some House Democrats are leaning into border security on the campaign trail after years of playing defense against Republican criticism, hoping to defuse a top political liability headed into the fall elections.

The party now argues that Democrats in competitive races can run on fixing the border, while painting Republicans as obstructionists for rejecting the Senate's bipartisan border deal, according to a memo from House Democrats' campaign arm. Republicans currently have a 217-213 majority in the House, and the fight for control of the chamber is seen as a tossup.

Biden's Threat to Freeze Some Weapons Deliveries Raises Alarm in Israel

TEL AVIV-President Biden's threat to withhold some weapons deliveries to Israel set up a high-stakes showdown with Prime Minister Benjamin Netanyahu and raised alarms in the country about a rupture in relations with its most important international supporter.

Israeli officials and analysts said Biden's warning appeared to be a political message that in the short term wouldn't affect Israel's ability to wage war. But the country's long-term ability to fight on several fronts could be threatened if the U.S. president followed through on his threat to pause more weapons deliveries if Israel launches a major assault in the southern Gaza city of Rafah. More than one million Palestinians are sheltering there from the war.

Write to ina.kreutz@wsj.com

TODAY IN CANADA

Earnings [Q1 Unless Stated Otherwise]:

Algonquin Pwr & Utl

CareRx

CI Fincl

Crescent Point

dentalcorp Hldgs

Enbridge

Neo Perfrmnc Mtrls

Sagicor Fincl

Economic Indicators (ET):

0830 Apr Labour Force Survey

Stocks to Watch:

Canacol Energy 1Q EPS 11c; 1Q Rev $77.7M

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Canfor Announces Permanent Closure of Polar Sawmill, Suspension of Planned Reinvestment in Houston, British Columbia; Polar Sawmill Has Been Curtailed Since January 2024; Polar Sawmill Permanent Closure to Affect About 180 Employees; Plan to Build New Sawmill in Houston, British Columbia, Suspended

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Canfor Pulp to Indefinitely Curtail One Production Line at Northwood Facility; Curtailment to Result in Reduction of About 300,000 Tons of Market Kraft Pulp Annually; Reduction in Capacity to Affect About 220 Jobs

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Crew Energy 1Q EPS C$0.07; 1Q Sales C$84.4M

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May 10, 2024 06:28 ET (10:28 GMT)

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