Here are five things you must know for Friday, July 15:
1. -- Stock Futures Edge Higher As Jumbo Rate Hike Bets Fade
U.S. equity futures edged higher Friday as stocks looked to snap a five-day losing streak amid easing bets on a jumbo Fed rate hike later this month and some potentially positive news for the tech sector.
Recession concerns remain at the forefront, however, following a much weaker-than-expected reading of second quarter GDP out of China, which showed the world's largest economy narrowly avoiding contraction with growth of just 0.4%.
That's the slowest -- apart from the direct Covid hit in the first quarter of 2020 -- in at least thirty years and raises big question about the impact of its broader health policies heading into the second half of the year.
The data kept a lid on global oil prices in overnight trading, as investors pared bets on any near-term rebound in demand from the world's biggest energy importer, and kept stocks in the region firmly in the red.
U.S. markets, however, are looking cautiously positive ahead of a key reading of June retail sales prior to the start of trading and some soothing remarks from Fed Governor Christopher Waller and St. Louis Fed President James Bullard, who both indicated their preference for a 75 basis point rate hike when the Fed meets next starting on July 26.
The CME Group's FedWatch, which put the odds of a 100 basis point hike at nearly 90% following the shocking June inflation print of 9.1%, is now indicating just a 46.4% chance.
Still, Fed rate hikes are expected to be significant and ongoing as the central bank steps-up its fight against the fastest inflation in four decades, and bond markets are betting the cost of controlling it will tip the domestic economy into recession.
Benchmark 2-year Treasury note yields traded at 3.118% overnight, against a 2.926% rate for 10-year notes, holding the so-called 'inversion' of the yield curve -- an accurate predictor of recesion -- at the steepest since December of 2000.
On Wall Street, futures tied to the S&P 500 are indicating an 8 point opening gain while those liked to the Dow Jones Industrial Average are priced for a 90 point move to the upside. Futures linked to the tech-focused Nasdaq are indicating a 27 point bump.
2. -- Retail Sales In Focus Amid Gas Price, Inflation Surge
Record high gas prices, which reached an all-time of $5.107 per gallon last month, are likely to have boosted the headline reading for June retail sales, but their impact on core spending will be closely-tracked as investors assess the broader strength of the American consumer heading into the summer months.
Overall retail sales are expected to rise 0.8% from the previous month, the the headline flattered by gasoline sales and the ongoing surge in inflation, which hit a 41-year high of 9.1% last month. The impact of both headwinds, however, will be crucial to understanding consumer strength -- and the economy's resilience to recession -- following a much stronger-than-expected June jobs report.
"The consumer right now is in great shape," JPMorgan CEO Jamie Dimon told investors yesterday after his bank's muted second quarter earnings report. "So even we go in a recession, they're entering that recession with less leverage in far better shape than they've been -- did in '08 and '09 and far better shape than they did even in 2020. And jobs are plentiful."
"Things happen. But they're in very good shape."
3. -- Citigroup, Wells Fargo Earnings On Deck After JPMorgan Miss
Citigroup C and Wells Fargo (WFC) will continue the march of second quarter bank earnings Friday following a disappointing report from larger rival JPMorgan.
JPMorgan (JPM), which set aside more than $1.1 billion to cover potential bad loans as the economy flirts with recession, also saw a sharp decline in investment banking revenues and a 27% fall in its overall profits.
Citigroup analysts are looking for a bottom line of $1.70 per share on revenues of $18.22 billion, with a focus on its loan loss reserves and its global capital markets business. Wells Fargo is expected to earn 80 cents per share on revenues of $17.51 billion.
The financial sector collectively, however, is expected to be a drag on the S&P 500 earnings season, will profits falling 20.8% from last year to a share-weighted $66.4 billion.
Citigroup shares were marked 0.27% lower in pre-market trading at $44.02 each while Wells Fargo slipped 0.34% to $39.61 each.
4. -- Pinterest Shares Surge On Report of Activist Elliott Stake
Pinterest (PINS) shares surged higher in pre-market trading after the Wall Street Journal reported that activist investors Elliott Management have amassed a more than 9% stake in the social media group.
The Journal said Elliot, which is now the company's biggest shareholder, is engaged in talks with its new management, although details of the overall aim were not immediately know.
Last month, longtime CEO and co-founder Ben Silbermann -- who still controls a 37% voting share -- said he would transition to the role of executive chairman, while keeping a seat on the board, to make way for former Google GOOGL executive Bill Ready.
Ready, who marshalled significant changes at Google in terms of shopping and search, is expected to bring similar improvements to Pinterest as it looks to better monetize its 433 million active users.
Pinterest shares were marked 13.6% higher in pre-market trading to indicate an opening bell price of $19.95 each.
5. -- Biden Kicks-Off Controversial Saudi Visit Amid Oil Market Retreat
President Joe Biden will meet with Saudi Arabia's King, Salman bin Abdulaziz, as well as Crown Prince Mohammed bin Salman Friday as part of his broader Middle East visit arranged, in part, to talk energy policy with the world's biggest oil producer.
Biden is expected to push the Kingdom -- which he called a "pariah state" during his 2019 election campaign -- to use its influence with the OPEC cartel to boost production and offset the impact of sanctions placed on Russian crude exports. He is not, however, expected to raise the issue of Jamal Khashoggi, a Washington Post journalist who was murdered by agents of the Saudi Crown Price in 2018.
“My views on Khashoggi have been absolutely, positively clear and I have never been quiet about talking about human rights,” Biden told reporters Thursday in Israel. “The reason I’m going to Saudi Arabia is to promote U.S. interests in a way that I think we have an opportunity to reassert our influence in the Middle East.”
U.S. gas prices have fallen for more than a month, extending their longest streak of declines in two years, amid a broader pullback in global crude prices and mounting recession concerns.
Data from the AAA motor club indicated that U.S. gas prices eased around 3 cents from yesterday to a national average of around $4.577 per gallon Friday, the lowest since mid-May and some 10.4% south of the all-time high of $5.107 recorded last month.
OPEC, however, has stuck to its guns in terms of production rates and the Saudi energy minister has long-maintained that its industry is running at full capacity.
