Dow jumps 300 points as Wall Street grows hopeful that a debt ceiling deal will be reached: Live updates

Don’t write off this AI-related rally, UBS said.

“AI is fueling growth for a wide range of companies, including semiconductors and cloud computing,” wrote Mark Haefele, CIO at UBS Global Wealth Management. “The broad AI hardware and services market was nearly USD 36bn in 2020, based on IDC and Bloomberg Intelligence data We expect the market to grow by 20% CAGR to reach USD 90bn by 2025.”

“So, we don’t see the AI-related rally as unsustainable,” Haefele said.

— Fred Imbert, Michael Bloom

Target shares are still down following the recent controversy around its Pride Month marketing initiatives, but Evercore ISI says customers will be back and still sees about 17% upside from its current price.

“We think Target will get through this, and while the situation remains fluid, we believe the risk is less than what AB InBev has seen with the recent Bud Light fiasco, which has seen volumes fall ~25%,” Evercore analyst Michael Montani said in a note Friday.

— Tanaya Macheel

Citi upgraded U.S. stocks to neutral from underweight, as a pause in Federal Reserve rate hikes becomes more likely and the U.S. economy fares better than expected.

“With a recession not imminent yet, and the Fed in the very last innings of its hiking cycle, we think that U.S. equities may well do better once the Fed actually does go on hold — in line with the pattern of the last 30+ years,” strategists led by Dirk Willer wrote.

— Fred Imbert

The market’s recent tech-fueled gains has led to something that hasn’t happened in more than 20 years, Deutsche Bank warned Friday.

In a post, the bank pointed out that the S&P 500’s outperformance over its equal-weighted counterpart is the largest since 1999. In other words, only a few stocks are contributing to the S&P 500’s overall gains recently.

This comes as strong results from Nvidia stoked excitement around the prospects of artificial intelligence, leading to outsized gains in tech. However, the rest of the market is not faring nearly as well, as concern around the U.S. debt ceiling loom.

“There’s no doubt it was a good week to do the series as the investment world has gone AI crazy in the last 36 hours after Nvidia’s stunning results,” Deutsche’s Jim Reid wrote. “Interestingly, this continued tech frenzy has caused the narrowest rally of the century.”

— Fred Imbert, Michael Bloom

JPMorgan Chase cut 500 jobs this week, people familiar with the move told CNBC’s Hugh Son.

The cuts were primarily in the company’s technology and operations group, the people said.

The 500 jobs amount to less than 1% of JPMorgan’s total workforce as of the end of March.

—Jesse Pound

JPMorgan said U.S. metropolitan office vacancy rates rose to 19% in the first quarter — that’s the highest level on record and significantly higher than vacancies seen during the financial crisis. The report attributed the trend to remote work and companies needing less space for workers.

With empty offices weighing on office values, delinquency rates have pushed higher. The big concern has been what happens with loans that are maturing this year and next.

JPMorgan said 50% of Bank of America’s office portfolio, and 59% of Regions’ non-owner occupied commercial real estate matures by 2024, according to company reports. Still, both companies have a high percentage of more desirable class A properties in their portfolios.

—Christina Cheddar Berk

A week’s worth of economic data has pushed down the outlook for second-quarter growth by a full percentage point, according to the Atlanta Fed’s GDPNow tracker.

The gauge now points to just a 1.9% annualized growth rate for Q2, down from 2.9% in the last reading on May 17.

According to the accompanying narrative, decreases in net exports and gross private domestic investment outweighed gains in consumer and government spending. It was a relatively quiet period for major economic announcements, but it had a substantial impact on the economic outlook.

—Jeff Cox

IBM’s recently-announced subscription-based AI enterprise service, Watsonx, is an exciting near-term boom, according to Credit Suisse.

The bank believes Watsonx could be a “significant revenue contributor” in the long term. Watsonx offers over 20 foundation models, helping customers train models with proprietary data. 

“Subscriptions related to the foundation models could prove to be a significant revenue contributor as we believe IBM is well positioned to be a leading AI platform with transparency and audit capabilities needed to gain trust in enterprise environments,” the firm said in a Friday note. 

— Hakyung Kim

Here are some of the names making moves during midday trading:

• Ford — Shares jumped 7.6% after the announcement by Ford and Tesla late Thursday giving Ford owners access to more than 12,000 Tesla Superchargers in the U.S. and Canada. Tesla was up 5.4%.
• Marvell Technology — The stock surged 29% after the semiconductor company’s earnings beat analyst expectations after the bell Thursday. Marvell Technology also expects revenue growth to accelerate in the second half of the fiscal year, with CEO Matt Murphy citing AI as a “key growth driver.”
• Workday — Shares popped nearly 11% after an earnings and revenue beat after Thursday’s close. The company also raised the low end of its full-year subscription revenue guidance and named a new chief financial officer, Zane Rowe.

Click here to see more stocks moving in midday trading.

— Michelle Fox

Cleveland Federal Reserve President Loretta Mester told CNBC on Friday that she expects more interest rate increases will be needed as inflation stays elevated.

“When I look at the data and I look at what’s happening with the inflation numbers, I do think we’re going to have to tighten a bit more,” Mester said on “Squawk on the Street.” “We’ve made progress. Now it’s this calibration exercise, and that’s what’s difficult.”

Mester is a nonvoting member this year on the rate-setting Federal Open Market Committee.

—Jeff Cox

The Fed’s favorite inflation gauge stayed high in April. But, on the ground at Costco, executives said they are seeing the pace of price increases “abate somewhat.”

On an earnings conference call, executives said they are seeing improvements in pricing for some food items, including nuts, eggs and meat. Product components like steel and resin prices are also easing.

Still, the situation has Costco focused very firmly on offering its members a good value, and that means an expected membership fee increase could be delayed. The retailer hikes the cost of its membership fees every five to six years. It last raised its fee in June 2017, so it’s due for another.

CFO Richard Galanti said “… at some point we will. But our view right now is that we’ve got enough levers out there to drive business.”

Costco shares were basically flat on Friday, despite its results falling short of expectations.

—Christina Cheddar Berk

The final reading on May consumer sentiment was slightly above expectations. The University of Michigan’s consumer sentiment index came in at 59.2, while economists polled by Dow Jones had forecast a reading of 57.7.

To be sure, that level is well below April’s 63.5.

“Consumer sentiment slid 7% amid worries about the path of the economy, erasing nearly half of the gains achieved after the all-time historic low from last June. This decline mirrors the 2011 debt ceiling crisis, during which sentiment also plunged,” Surveys of Consumers director Joanne Hsu wrote.

— Fred Imbert

Eli Lilly’s stock performance has been solid. Shares are up nearly 17% year to date on the back of 2022’s 32% gain. Wells Fargo thinks the stock could rise another 17% from its current level as the firm bumps its price target to $500.

A study that examines whether Novo Nordisk’s Wegovy weight loss medication has benefits for cardiovascular health could be a catalyst, said analyst Mohit Bansal. Known as the Select trial, the results are expected in mid-2023.

“We think successful trial could move LLY up 5%, while failure could mean 10% downside,” he said. “However, our analysis indicates success is likely based on the multiple benefits GLP-1 mechanism provides.”

Lilly has its own GLP-1 medication, Mounjaro, which is currently approved for type 2 diabetes. Approval as a weight loss treatment could come later this year. Another factor behind the higher price target is been recent news on donanemab, Lilly’s Alzheimer’s treatment, Bansal said.

—Christina Cheddar Berk

As shares of chipmaker Nvidia surge, Bank of America is also bullish on semiconductor equipment maker ASML Holding.

The firm reiterated its buy rating on Dutch-based semiconductor equipment company. Analyst Didier Scemama raised his price target on U.S.-traded ASML shares to $855 from $837, implying a 20.6% rally from Thursday’s close. The stock has surged almost 30% in 2023.

“We continue to view [semiconductor capital equipment] as the best way to invest in [the AI] thematic in Europe and raise POs, as sector multiples expand reflecting the scarcity of options in Europe to invest in the generative AI thematic,” Scemama said in a Friday note. 

Shares gained 2% on Friday , hitting a new 52-week high.

To read more about the call, click here.

Paramount shares jumped more than 5% on Friday after National Amusements, Paramount’s majority voting shareholder, announced that it has entered into an agreement for a $125 million preferred equity investment by BDT Capital Partners.

Some Warren Buffett watchers noticed an interesting link with this announcement. BDT Capital’s chairman and co-CEO is Byron Trott, who has long been known as Warren Buffett’s favorite banker. It was Trott who suggested that Buffett invest $5 billion in Goldman Sachs during the 2008 financial crisis.

Buffett’s Berkshire Hathaway is now Paramount’s biggest institutional investor with a stake of 15.37%, according to FactSet. Berkshire put the value at $2 billion as of the end of March, although FactSet pegs it now at $1.32 billion after Paramount’s 33.5% slump since the start of the second quarter. It was unclear if it was Buffett who bought the Paramount position or his investing lieutenants, Ted Weschler and Todd Combs, each of whom oversees $15 billion at Berkshire.

Loop Capital on Friday upgraded Paramount to a hold rating from a sell in light of the BDT investment. The Wall Street firm said the bull case is that the financial pressure will force Paramount to find a buyer and shareholders will achieve private market value.

— Yun Li

The Dow rose more than 60 points in early trading, while the S&P 500 and Nasdaq advanced more than 0.2% each.

— Fred Imbert

Markets raised their bets for a June rate hike from the Federal Reserve following hotter-than-expected inflation data Friday morning.

Odds for a quarter percentage point increase jumped to 56%, according to CME Group data. That followed a report showing that personal consumption expenditures prices rose 0.4% in April and 4.7% from a year ago.

The chances of an increase were just 17% a week ago. The probability of a hike by no later than July rose to 75%.

—Jeff Cox

Data company Snowflake was downgraded to peer perform from outperform by Wolfe Research.

“When we launched coverage in April 2022. …  we were upbeat on SNOW having the best management team in software, best product, and best growth rate (potential ~50% revenue growth in CY24). While we still see all the above as possible, the current valuation does not leave much room for error, all while the macro has worsened, the competitive landscape has changed, and the growth outlook is very different,” analyst Alex Zukin wrote in a note on Thursday. 

Zukin also removed his price target, which was previously at $160. Shares were down 0.3% Friday during premarket trading.

To read more about the downgrade, click here.

Piper Sandler initiated coverage on UnitedHealth with an overweight rating and a price target of $580. 

“UNH is a behemoth in healthcare contributing 7.7% of U.S. healthcare spending today from their UnitedHealthcare and Optum segments. We expect UNH to deliver $28.19 in FY24 adjusted EPS, representing 13.7% y/y growth,” analyst Jessica Tassan wrote in a Thursday note. 

CNBC Pro subscribers can read about the call here.

The core personal consumption expenditures index, the Fed’s preferred gauge of inflation, rose 0.4% in April. That’s more than economists polled by Dow Jones expected. Year over year, core PCE rose 4.7%, also more than expected.

— Fred Imbert

Check out the companies making headlines before the bell:

• Marvell Technology — Marvell Technology surged 17% in premarket trading after reporting a top-and-bottom beat in its first quarter. Marvell posted adjusted earnings of 31 cents per share, topping estimates for 29 cents, according to Refinitiv. It reported $1.32 billion in revenue, while analysts polled by Refinitiv expected $1.3 billion. It expects revenue growth will accelerate in the second half of the fiscal year.
• Gap — Shares of the apparel retailer jumped more than 11% premarket despite the company posting net losses and declining sales Thursday for its most recent quarter, as investors cheered Gap’s big improvement in its margins thanks to reduced promotions and lower air freight expenses.
• Workday — Workday jumped 9% after topping first-quarter expectations on the top and bottom lines. The financial management software firm also named a new chief financial officer, Zane Rowe, and raised the low end of its full year subscription revenue guidance. 

Read the full list here.

— Sarah Min

Flows into U.S. stocks this year have been flat, Bank of America said in a Thursday note, as recession fears and uncertainty around monetary policy persist.

The bank noted that investors sold nearly $4 billion in stocks last week, bringing flows to flat. Meanwhile, cash funds saw inflows of $23.1 billion last week, bringing year-to-date flows to $756 billion.

— Fred Imbert, Michael Bloom

European stock markets regained some positive momentum early Friday, with the benchmark Stoxx 600 index up 0.4% at 8:30 a.m. London time.

The U.K.’s FTSE 100 climbed 0.4%, while Germany’s DAX and France’s CAC were up 0.1% and 0.2%, respectively.

Singapore’s manufacturing output fell 6.9% year-on-year in April, a sharper drop compared to 4.4% expected by economists polled by Reuters.

Output, excluding biomedical manufacturing, fell by 6.1% compared to the same period last year.

In April, the transport engineering cluster recorded the largest jump, with output surging 14.5% year-on-year. In contrast, the biomedical manufacturing cluster recorded the biggest fall, with output down by 11.1%.

Singapore’s manufacturing sector, which makes up over 20% of Singapore’s economy, contracted by 5.6% in terms of GDP in the first quarter, and is projected to see a deeper downturn, its trade and industry ministry said on Thursday.

— Lim Hui Jie

U.S. Secretary of Commerce Gina Raimondo discussed concerns on recent actions taken on American companies operating in China in a meeting with her Chinese counterpart Wang Wentao, the Commerce Department said in a readout.

“Secretary Raimondo also raised concerns about the recent spate of PRC [People’s Republic of China] actions taken against U.S. companies operating in the PRC,” the readout said.

“The two had candid and substantive discussions on issues relating to the U.S.-China commercial relationship, including the overall environment in both countries for trade and investment and areas for potential cooperation,” it said.

The meeting comes as China reportedly conducted inspections on U.S. audit firms in China for national security breaches.

— Jihye Lee

Tokyo’s headline inflation numbers would support Japan’s central bank to continue to maintain its current monetary policy, Fujitsu’s chief policy economist Martin Schulz told CNBC.

Japan’s capital saw its overall consumer price index rise at a slower pace of 3.2% in May from the 3.5% seen in April.

“It’s a good indicator for the rest of the country [and it] will probably convince the Bank of Japan to do even less than they might have been talking about,” Schulz told CNBC’s “Squawk Box Asia.”

The Bank of Japan’s governor Kazuo Ueda made no changes to the central bank’s monetary policy in his first meeting in April.

— Jihye Lee

Australia’s retail sales have remained flat month-on-month in April, lower than the 0.2% rise expected by economists polled by Reuters and the 0.4% increase recorded in March.

However, on a year-on-year basis, retail sales climbed 4.2%, government data showed.

AMP deputy chief economist Diana Mousina said the slowing in retail spending reflects the lift in interest rates and also high inflation leading to lower consumer spending.

The latest reading “gives the RBA room to keep interest rates steady (and at an elevated level) and assess the impacts from previous rate hikes,” Mousina wrote in a Friday note.

She added there is “no urgency” for the RBA to lift the cash rate at the next meeting in June, and that she does not expect any further hikes in this cycle.

Mousina noted that while retail sales figures mostly reflects spending on goods, spending on consumer services has also been strong, although both metrics are expected to slow in Australia over 2023.

She also pointed out that employment growth, housing lending, building approvals, retail spending and consumer and business confidence indicators are all weakening in Australia, and inflation is declining without signs of a wages breakout.

— Lim Hui Jie

Nvidia’s huge 24.4% rally on Thursday helped carry the VanEck Semiconductor ETF (SMH) to its best day since November 2022.

The semiconductor ETF closed 8.6% higher. It’s on track for a 5.4% gain to end the week, and it’s up 13.6% in May.

Though Nvidia was the standout performer among the ETF’s constituents, other chip giants contributed to the fund’s rally. Taiwan Semiconductor added 12% Thursday, and is on pace to wrap the week with a 9% gain. Advanced Micro Devices, which advanced 11% during regular trading, is on track for a 13.7% gain this week.

–Darla Mercado, Chris Hayes

The central bank’s preferred measurement of inflation, the personal consumption expenditures index, is slated for release on Friday morning.

Though the consumer price index is the metric that people are most familiar with to measure inflation, the Fed prefers the PCE when it draws up economic projections. For starters, the PCE reflects consumers’ substitutions for goods and services. It also features more comprehensive coverage of goods and services, and historical data can be revised, according to James Bullard, president of the Federal Reserve Bank of St. Louis.

Economists polled by Dow Jones predict that core PCE, which excludes volatile food and energy prices, to have climbed 0.3% in April. They are also calling for a year-over-year gain of 4.6%.

–Darla Mercado

With just one trading day left, the Dow and S&P 500 are slated to finish the week lower.

The Dow and S&P 500 are on pace to end down 2% and 1%, respectively.

Meanwhile, the Nasdaq Composite has been able to avoid the slide, up 0.3% week to date. Still, that week-to-date advance is dwarfed by the approximately 3% gain seen in the prior week.

— Alex Harring

These are some of the stocks making the biggest moves in extended trading:

• Gap — Shares surged 15% in the postmarket following the retailer’s earnings report, which showed a major improvement in margins. Revenue, meanwhile, came in slightly below expectations.
• Costco — Shares slipped 0.2% after the retailer posted a miss on revenue, recording $53.65 billion for its fiscal third quarter while analysts forecast $54.57 billion, per Refinitiv. Costco saw $3.43 in adjusted earnings per share, higher than the $3.29 anticipated by analysts.
• Ulta Beauty — Shares of Ulta fell 8% in extended trading after the cosmetics retailer reaffirmed guidance for earnings and comparable sales for the full year. Ulta slightly raised its outlook for revenue for the year.

See the full list here.

— Alex Harring

Stock futures were little changed shortly after 6 p.m. ET.

Futures tied to the Dow, S&P 500 and Nasdaq 100 were all near flat.

— Alex Harring