Here are five things you must know for Tuesday, August 23:
1. -- Stock Futures Nudge Higher In Cautious Trade
U.S. equity futures nudged higher Tuesday, following on from the worst single-day decline on Wall Street in two months, as investors continue to favor defensive stocks and risk-free assets amid increasing concerns for a global recession.
With economic activity slowing in Europe as the cost of living crisis escalates, and China struggling to rekindle growth amid its desire to completely erase Covid infections from the world's biggest economy, investors are starting to worry that a second half recovery is likely to remain elusive.
PMI data from Europe underscored that worry, with a key reading of economic activity in August falling to 49.2 points and firmly below the 50-point mark that separates growth from contraction for the second consecutive month.
It was a similar story in Britain, where warnings of hyper-inflation heading into the winter months were compounded by a slump in August activity that threatens recession in the world's fifth-largest economy.
The readings, as well as surging energy prices linked to Russia's ongoing war in Ukraine have pushed investors into the safe-haven U.S. dollar, lifting the greenback to fresh 20-year highs against the euro and a basket of the dollar's global currency peers.
Curiously, the relative outperformance of the U.S. economy has investors at home more concerned over the pace of inflation, and the Fed's near-term response, than the chances of and 2022 recession.
Benchmark 10-year Treasury note yields hit a five-week high of 3.04% yesterday, before easing to 3.004% in overnight trading, as investors continue to tinker with bets on a 75 basis point rate hike from the Fed next month in Washington.
The CME Group's FedWatch tool pegs that chance at 54.5%, up from around 49.5% yesterday, but much will be made clear when Fed Chairman Jerome Powell speaks at the Jackson Hole symposium later this week.
In the meantime, however, the market's key volatility gauge, the VIX index, is rising sharply and trading at a multi-week high of 23.6 points heading into the Tuesday session.
In overseas markets, Europe's Stoxx 600 was little-changed in early Frankfurt trading, with investors betting the grim reading on economic activity may tame some of the European Central Bank's recent hawkish tone. Overnight in Asia, the region-wide MSCI fell 0.63% heading into the close of trading following last night's sell-off on Wall Street.
Here at home, futures tied to the S&P 500 are indicating an 8 point opening bell bump while those liked to the Dow Jones Industrial Average are priced for a 60 point gain. Futures linked to the tech-focused Nasdaq are indicating a 35 point advance.
2. -- King Dollar Returns As Greenback Hits New Two-Decade Highs
The U.S. dollar hit a fresh 20-year high against its global peers Tuesday, extending the greenback's year-to-date to around 13.5% and adding to a collective set of pressures that could both blunt domestic earnings growth and tip the global economy into recession.
The dollar index, which tracks the greenback against a basket of six global currency peers, traded at a two-decade high of 109.002 in overnight trading as the euro slipped below parity with the buck for only the second time since 2002.
The dollar strength looks to add another layer of cost onto struggling European and Asian economies heading into the cooler months as the cost of purchasing energy supplies -- which are priced in U.S. dollars -- continues to escalate.
At the same time, the greenback's 2022 surge has added a significant headwind to U.S. corporate earnings growth, as the repatriation of overseas profits -- crucial for the tech sector -- gets more expensive. Morgan Stanley analysts, in fact, recently calculated that a percentage point gain for the greenback shaves around 0.5 percentage points from S&P 500 earnings.
3. -- Elon Musk Subpoenas Jack Dorsey In Latest Twitter Twist
Lawyers for Elon Musk issued a subpoena to former Twitter (TWTR) CEO Jack Dorsey late Monday seeking documents related to the Tesla (TSLA) CEO's efforts in scrapping his $44 billion takeover of the social media platform.
Dorsey, who left Twitter last November but served on the board until May -- departing just weeks after Musk first revealed his $54.40 per share bid for the group -- is being ask to supply documents and communications linked to the now-disputed takeover.
Musk has been locked in public dispute with Twitter since early July over the amount of so-called "fake" or "bot" accounts on the social media platform, which he says constitute a material change to the merger terms he agreed in the spring.
Twitter, for its part, is suing Musk to force him to purchase the group for $44 billion, or $54.20 per share, arguing in court papers published last week that the idea of a "billionaire founder of multiple companies, advised by Wall Street bankers and lawyers" was "hoodwinked into signing a $44 billion merger agreement" is "as implausible and contrary to fact as it sounds".
Tesla shares were marked 0.8% higher in pre-market trading to indicate an opening bell price of $876.72 each. Twitter shares edged 0.56% to $43.25 each.
4. -- Zoom Shares Slide As Revenue Growth Slumps, Profit Guidance Cut
Zoom Video Communications (ZM) shares moved sharply lower in pre-market trading after the video conferencing specialists cut their full-year sales and profit guidance following softer-than-expected second quarter sales.
Zoom said adjusted profits for the three months ending in July were pegged at $1.05 per share, down 22.8% from last year but firmly ahead of the Street forecast of 94 cents. Revenues rose 8% to 1.1 billion but missed Street forecasts of a $1.12 billion tally.
Looking ahead, Zoom said it sees adjusted profits in the region of $3.66 to $3.69 per share, down from a prior forecast of $3.70 to $3.77 per share with revenues of around $4.395 billion.
Zoom shares were marked 9.3% lower in pre-market trading to indicate an opening bell price of $88.40 each.
5. -- Palo Alto Networks Shares Leapt On Q4 Earnings Beat, Cybersecurity Outlook
Palo Alto Networks (PANW) shares surged in pre-market trading after the cloud-focused cybersecurity group's stronger-than-expected fourth quarter earnings
Palo Alto posted a 49.4% jump in non-GAAP earnings for the three months ending in July, its fiscal fourth quarter, with a bottom line of $2.39 per share on revenues of just over $1.6 billion as demand for its cloud-focused security products amid a spate of hacking attacks on U.S. companies and government agencies and health care providers over the first half of the year.
Looking into its coming fiscal year, Palo Alto Networks said it sees revenues of between $6.85 billion and $6.9 billion and non-GAAP earnings in the region of $9.40 to $9.50 per share.
Palo Alto shares were marked 8.3% higher in pre-market trading to indicate an opening bell price of $550.10 each.
