[Platinum Insights] (5.18.23)

Good morning.  

U.S. stock index futures inched higher on Thursday amid optimism over a potential deal to avoid a catastrophic debt default.  

Brokerage firm Charles Schwab Corp (SCHW) said on Thursday it was looking to raise up to $2.5 billion through a debt offering. The disclosure comes a day after another filing with the U.S. Securities and Exchange Commission, in which the brokerage firm said it would use the proceeds for “general corporate purposes.”  

Big box retailer Target on Wednesday signaled a bleak second quarter as customers steer away from spending on non-essential electronics and home goods because of high prices, a day after Home Depot cut annual sales estimates. Walmart Inc (WMT) raised its annual sales and profit targets on Thursday as the retail behemoth drew from price-conscious shoppers trading down to cheaper groceries, easing worries of softening consumer spending due to inflation.  

WTI crude futures traded around $72.85 per barrel. Gold held below $1,990 an ounce while the yield on the US 10-year Treasury note rose past the 3.5% mark.  

The S&P 500 is trading at a rich 18 times forecast earnings, buoyed by the tech mega-stocks that dominate the index. Apple’s market capitalization exceeds that of the small-cap Russell 2000 index, and the tech-heavy Nasdaq 100 is up 24% this year. Tech has boomed on predictions the U.S. Federal Reserve will start cutting rates from July, increasing appetite for rate-sensitive growth companies whose valuations are flattered when money gets cheaper. Further out-performance depends on markets being right about the Fed’s willingness to notch interest rates lower from July.  

In the latest commentary, Chicago Fed President Austan Goolsbee said it was “far too premature to be talking about rate cuts,” while Cleveland Fed President Loretta Mester said rates were not yet at a point where the central bank could hold steady due to stubborn inflation. 

 Have a great day!