Here are five things you must know for Wednesday, July 20:
1. -- Stock Futures Edge Higher On Fading Recession Bets
U.S. equity futures nudged higher Wednesday, while the dollar extended its recent pullback and oil prices fell, as markets reacted to a solid set of corporate earnings that suggest underlying resilience in the world's biggest economy.
With the dollar falling to multi-week lows against its global peers amid fading bets on a jumbo rate hike from the Federal Reserve next week, investors appear willing to moderate their expectations for near-term inflation and its impact on growth.
Falling gas prices and a robust jobs market are also adding some cautious optimism to the broader economic picture, with data from the AAA motor club showing average prices have slumped to $4.467 per gallon, down more than 12.5% from their all-time highs last month.
Those dynamics, coupled with a series of stronger-than-expected second quarter earnings, have given both U.S. and world stocks a boost this week, with the S&P 500 holding at the highest levels since June 9 and world stocks holding at a three week peak.
Reports that Russia's key European gas pipeline, Nord Stream 1, is set to go back online later this week following extensive repairs, also added to the session's optimistic tone, given its importance to that region's energy supply story heading into the autumn months.
All that said, the Atlanta Fed's GDPNow forecasting tool shows the U.S. economy is shrinking at a 1.6% clip, following contractions in both the first and second quarter, and the CME Group's FedWatch suggests there's still a 35.6% chance of a 100 basis point rate hike when the central bank meets next week in Washington.
Benchmark 2-year Treasury note yields traded at 3.19% overnight, against a 2.986% rate for 10-year notes, holding the so-called 'inversion' of the yield curve -- an accurate predictor of recession -- near the steepest since December of 2000.
For the moment, however, stocks are set for a modestly firmer open, with contracts tied to the S&P 500 indicating an 6 point opening gain while those liked to the Dow Jones Industrial Average are priced for a 40 point move to the upside. Futures linked to the tech-focused Nasdaq are indicating a 45 point bump.
2. -- Netflix Surges On Smaller Subscriber Exodus, Q2 Earnings Beat
Netflix (NFLX) shares surged higher in pre-market trading after the streaming entertainment service topped second quarter earnings forecasts and posted a smaller-than-expected paid subscriber exodus.
Netflix lost 970,000 paid subscribers over the quarter, the company said, less than half of the anticipated 2 million exodus, helping revenues rise 8.6% from last year to $7.97 billion.
Profits for the three months ending in June were pegged at $3.12 per share, a figure that was 5% higher than the same period last year and firmly ahead of the Street consensus forecast of $2.97 per share.
:Looking at the quarter, we're executing really well on the content side," CEO Reed Hastings told investors on a conference call late Tuesday. "We're improving everything we do around marketing, improving the service, the merchandising, and all of that pays off."
"But again, we're talking about losing 1 million instead of losing 2 million," he added. "So our excitement is tempered by the less bad results."
Netflix shares, which closed 5.6% higher on the Tuesday session, were marked 7.29% higher in pre-market trading to indicate an opening bell price of $217.00 each.
3. -- Tesla Q2 Earnings In Focus Following Delivery Slump, Bitcoin Collapse
Tesla (TSLA) shares moved higher in pre-market trading ahead of the carmaker's hotly-anticipated second quarter earnings after today's closing bell.
Tesla, which suffered through supply chain disruptions, chip shortages and a 22-day shutdown at its gigafactory in Shanghai over the three months ending in June, saw second quarter deliveries fall 17.7% from the previous period to a a weaker-than-expected 254,695 new units.
Still, the group is expected to post a 43% year-on-year gain in group revenues, at $17.2 billion, with a bottom line of $1.86 per share. Key to the update, however, will be Tesla's expectations for the second half of the year, and whether the "gigantic money furnaces", as Elon Musk has described his new gigafactories, can ramp-up output over the September quarter.
The group is also facing a significant writedown on its $1.5 billion holding in bitcoin, which has fallen some 60% since the end of March.
Estimates of Tesla's bitcoin carrying costs vary, but the timing of the purchase suggests a level of around $32,600. That value, of course, surged in the latter half of 2021, when bitcoin hit an all-time high of around $67,000, but now looks far more fragile after crashing below the $20,000 level last month.
Tesla shares were marked 1.84% higher in pre-market trading to indicate an opening bell price of $750.11 each.
4. -- ASML Outlook Clouds Chip Sector As Demand Remains Uncertain
ASML Holding NV (ASML) shares traded lower in Europe after the semiconductor equipment maker cautioned that supply chain disruptions, and uncertain demand, would cloud its near-term revenue forecasts.
The outlook tainted an otherwise solid quarter for the group, which saw record bookings of €8.6 billion euros and better-than-expected group revenues of €5.43 billion. ASML now sees full-year revenue growth of around 10%, half of its prior forecast, and plans to defer delivery of at least 15 of its extreme ultraviolet lithography systems, or EUV machines, until next year.
That outlook is crucial for the tech sector, as ASML's €100 million EUV systems, which design complex chips, are used by sector titans such as Samsung Electronics, Intel (INTC) and Taiwan Semiconductor (TSM).
"Some customers are indicating signs of slowing demand in certain consumer-driven market segments, yet we still see strong demand for our systems," said CEO Peter Wennink. "While we are still planning to ship a record number of systems this year, increasing supply-chain constraints cause delayed starts"
ASML shares were marked 0.41% lower in Amsterdam trading to change hands at €482.60 each, extending their year-to-date decline to around 32%.
5. -- Gas Prices Fall Below $4.5 Per Gallon, Lowest Since Early May
U.S. gas prices extended their recent declines into a fifth consecutive week Wednesday, pulling the average cost per gallon below $4.50, as oil prices continue to struggle against recession concerns.
Data from the AAA motor club showing average prices have slumped to $4.467 per gallon, down more than 12.5% from their all-time highs last month and the lowest since May 9.
"So far, we’ve seen the national average drop for 34 straight days, with over 25,000 stations now back at $3.99 per gallon or less, and thousands more stations will join this week," said Patrick De Haan, head of petroleum analysis at consumer advocate GasBuddy. "In addition, we will see several states fall back under an average of $4, the majority being in the south, but that could spread to more states in the weeks ahead.”
WTI crude futures for September delivery, the most closely related contract to domestic gas prices, traded $1.09 lower on the session at $99.65 per barrel ahead of Energy Department data on domestic stockpiles later in the day.
