Today in the Market (5/31/2023)

Good Evening! On Wednesday, the US stock market experienced a decline due to investors’ cautiousness regarding the anticipated House floor vote on the debt-limit agreement. The global markets were under pressure due to the impact of China’s economic struggles and the release of robust employment figures in the U.S.

All three benchmarks finished the day down in the red with the S&P 500 down 0.61%, the Dow Jones falling by 0.41%, and Nasdaq Composite declining by 0.63%

A BAD SIGN....

Advance Auto Parts (AAP) experienced a significant decline of 35% in its stock value due to the company’s decision to reduce its full-year guidance and decrease its dividend (Usually a bad sign). Let’s see if the numbers can explain it:

  • Revenue: $3.4 Billion vs. $3.4 Billion Expected
  • Earnings Per Share: $0.72 vs. $2.65 Expected
  • Dividend Reduction: $0.25 vs. $1.50 Prior

Let’s see what the company had to say… In the earnings report, CEO Tom Greco expressed that the company’s performance during the first quarter fell short of its projected outcomes despite having foreseen the difficulties that would arise during this period. The company also stated that it is anticipated that the competitive dynamics encountered in the first quarter will persist, leading to a deficit in meeting the projected 2023 expectations

So what happened? The automotive aftermarket parts sector exhibited a favorable performance during the pandemic, as a result of consumers retaining their vehicles for longer periods or purchasing pre-owned automobiles due to limited inventory. However, things are changing According to executives at Advance Auto Parts, the company is still facing obstacles due to increased expenses, inflationary pressures, and difficulties in the supply chain.

THE NUMBERS ARE IN!

Source: https://www.statista.com/chart/25036/job-openings-quits-and-layoffs-in-the-united-states/

The number of job openings in the month of April reached its peak level since  January. The robust labor market statistics contribute to an expanding discourse that persistent positive economic data could motivate the Federal Reserve to increase interest rates once more in June.

  • Job Openings: 10.1 Million Increase vs. 9.8 Million Increase in March

What are the chances? Following the release of the Job Opening and Labor Turnover Survey (JOLTS) report, there was a notable increase in the market pricing for a potential rate hike in June. At the start of the day, the stock market had factored in a probability of a hike in June that was below 60%. However, the CME FedWatch Tool indicates that 15 minutes after the report, the markets had factored in a probability of 71% for a hike.

What’s next? The upcoming point of interest for Wall Street will be the May employment report. According to Bloomberg data, it is anticipated that the coming report, slated for publication on Friday, will reveal the addition of 195,000 nonfarm payroll jobs to the US economy in the previous month. Additionally, the unemployment rate is projected to experience a marginal increase of 3.5%

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