September S&P 500 futures (ESU23) are trending down -0.22% this morning after three major U.S. benchmark indices closed in the red on Thursday as market participants digested another round of resilient economic data that heightened concerns about the possibility of interest rates remaining higher for longer, while worries about China also weighed on sentiment.
In Thursday’s trading session, the benchmark S&P 500 fell to a 7-week low, the blue-chip Dow posted a 1-month low, and the tech-heavy Nasdaq 100 notched a 1-1/2 month low. CVS Health Corp (CVS) plunged over -8% and was the top percentage loser on the S&P 500 after non-profit health insurer Blue Shield of California said it would drop CVS Health’s Caremark as its primary pharmacy benefit manager. Also, Paramount Global (PARA) fell more than -2% after the Wall Street Journal reported that the company had abandoned a plan to sell a majority stake in its BET Media Group. In addition, Wolfspeed Inc (WOLF) tumbled about -17% after the company reported mixed Q4 results and issued a soft Q1 outlook. On the bullish side, Cisco Systems Inc (CSCO) climbed more than +3% after the networking and cloud giant posted upbeat Q4 results, and its CEO highlighted the promising prospects of artificial intelligence. Energy stocks also gained ground as the price of WTI crude rose over +1%.
The Labor Department’s report on Thursday showed claims for state unemployment benefits fell -11K to 239K, stronger than expectations of 240K, indicating resilience in the labor market. Also, the U.S. Philadelphia Fed business outlook survey rose to a 16-month high of 12.0 in August, stronger than expectations of -10.0.
“This week’s data hasn’t given them any reason to let their guard down. With housing starts, retail sales, and jobless claims all reinforcing the picture of a robust economy, another rate hike can’t be ruled out, even if the Fed remains on hold next month,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
Meanwhile, U.S. rate futures have priced in an 11.5% probability of a 25 basis point rate increase at September’s monetary policy meeting and a 33.2% chance of a 25 basis point rate hike at the November FOMC meeting.
On the earnings front, major companies like Deere & Company (DE), Palo Alto Networks (PANW), and Estee Lauder (EL) are set to report their quarterly figures today.
The U.S. economic data slate is mainly empty on Friday.
In the bond markets, United States 10-Year rates are at 4.240%, down -1.61%.
The Euro Stoxx 50 futures are down -0.54% this morning as worries about sustained elevated interest rates worldwide and diminishing growth prospects in China dampened risk sentiment. Retail stocks led the declines on Friday on the back of weak U.K. retail sales data, while telecom stocks outperformed. The Office for National Statistics said Friday that retail sales in the U.K. experienced a worse-than-expected decline on a yearly and monthly basis last month, attributed to consumers dealing with wet weather and the intensifying cost-of-living crisis. Also, Eurostat data showed on Friday that Eurozone headline inflation continued to decelerate in July, and indications suggest that underlying price pressures may have peaked. In corporate news, Suse Sa (SUSE.D.DX) surged about +59% following the announcement that the software solutions provider will be taken private by its majority shareholder EQT AB at an offer price of 16 euros per share.
U.K.’s Retail Sales, U.K.’s Core Retail Sales, Eurozone’s CPI, and Eurozone’s Core CPI data were released today.
U.K. July Retail Sales stood at -1.2% m/m and -3.2% y/y, weaker than expectations of -0.5% m/m and -2.1% y/y.
U.K. July Core Retail Sales came in at -1.4% m/m and -3.4% y/y, weaker than expectations of -0.7% m/m and -2.2% y/y.
Eurozone July CPI has been reported at -0.1% m/m and +5.3% y/y, in line with expectations.
Eurozone July Core CPI arrived at -0.1% m/m and +5.5% y/y, in line with expectations.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -1.00%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.55%.
China’s Shanghai Composite today closed lower as investor sentiment continued to be subdued due to the absence of concrete stimulus measures to boost consumption and shore up the troubled real estate sector. China’s state-owned property developers warned of widespread losses, contributing to growing apprehensions that the housing crisis is broadening its impact from the private sector to government-backed companies. Meanwhile, Nomura Holdings cut its growth forecast for China this year to 4.6% due to weaker-than-expected data in July and an ongoing “downward spiral” in the economy. In other news, embattled developer China Evergrande Group filed for Chapter 15 protection in a U.S. bankruptcy court on Thursday as part of its debt restructuring process. Hong Kong-listed technology stocks slumped on Friday, with Li Auto Inc and JD.com Inc plunging over -5%. China is expected to reduce lending benchmarks at a monthly fixing on Monday, with numerous analysts forecasting a significant reduction in the mortgage reference rate to revive credit demand and provide support to the struggling property sector.
Japan’s Nikkei 225 Stock Index closed lower today amid apprehensions regarding China’s economic outlook and anxieties surrounding rising global yields. Data on Friday indicated that Japan’s core consumer inflation decelerated in July but remained above the Bank of Japan’s price target for the 16th consecutive month. Meanwhile, the yen strengthened on Friday following Japan’s consumer inflation data, putting pressure on export-oriented stocks. On the positive side, heavyweight chip-related stocks outperformed, with Advantest rising over +1% and Tokyo Electron gaining about +0.7%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -0.20% to 19.52.
“The Japanese market slipped for the same reasons in the past few sessions - concerns about the economy in China and rising global yields. Japanese equities were easily affected by overseas cues as there were no market-moving catalysts in Japan at the moment,” said Shuji Hosoi, senior strategist at Daiwa Securities.
The Japanese July National Core CPI stood at +3.1% y/y, in line with expectations.
Pre-Market U.S. Stock Movers
Ross Stores Inc (ROST) climbed over +5% in pre-market trading after the off-price retailer reported upbeat Q2 results and set favorable Q3 comparable sales and EPS guidance.
Farfetch Ltd (FTCH) tumbled more than -37% in pre-market trading after the company posted weaker-than-expected Q2 revenue and provided a weak FY23 revenue outlook.
Applied Materials Inc (AMAT) rose over +3% in pre-market trading after the semiconductor capital equipment maker reported upbeat Q3 results and issued strong Q4 guidance.
Sea Ltd (SE) fell more than -2% in pre-market trading after JPMorgan downgraded the stock to Neutral from Overweight.
IPG Photonics Corporation (IPGP) dropped over -1% in pre-market trading after Citi downgraded the stock to Neutral from Buy.
Marvell Technology Group Ltd (MRVL) gained more than +1% in pre-market trading after B. Riley upgraded the stock to Buy from Neutral.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - August 18th
Deere&Company (DE), Palo Alto Networks (PANW), Estee Lauder (EL), Xpeng (XPEV), Vipshop (VIPS), StealthGas (GASS).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
