September S&P 500 futures (ESU23) are up +0.26%, and September Nasdaq 100 E-Mini futures (NQU23) are up +0.43% this morning as market participants looked ahead to the latest U.S. inflation data and more corporate earnings.
In Friday’s trading session, Wall Street’s major averages ended lower, with the benchmark S&P 500 and tech-heavy Nasdaq 100 dropping to 3-week lows and the blue-chip Dow notching a 2-week low. Apple Inc (AAPL) plunged over -4% after the U.S. tech giant reported its third consecutive quarter of declining sales and projected a similar performance in Q4. Cybersecurity stocks also tumbled, weighed down by an about -25% drop in shares of Fortinet Inc (FTNT) after the company reported mixed Q2 results and cut its annual sales guidance. In addition, Microchip Technology Inc (MCHP) slid over -6% after reporting in-line Q1 results and issuing a tepid Q2 outlook. On the bullish side, Amazon.com Inc (AMZN) soared more than +8% after the e-commerce giant posted stronger-than-expected Q2 results and delivered upbeat Q3 guidance.
The U.S. Labor Department’s report on Friday showed that the U.S. economy added 187K jobs last month, lower than the expected 200K, pointing to a continued slowdown in job gains. At the same time, U.S. July average hourly earnings came in at +0.4% m/m and +4.4% y/y, stronger than expectations of +0.3% m/m and +4.2% y/y. In addition, the U.S. unemployment rate unexpectedly fell to 3.5% in July from 3.6% in June.
“This is still not the picture of the labor market we would expect to see if the economy were in danger of decelerating dramatically in the short term, although without question there are signs of moderation,” said Rick Rieder, chief investment officer of Global Fixed Income at BlackRock.
Atlanta Fed President Raphael Bostic stated on Friday that U.S. employment gains are decelerating in an orderly manner, and he believes there is no necessity to increase interest rates further to bring inflation down. Also, Chicago Fed President Austan Goolsbee expressed the need for policymakers to exercise patience during the disinflation process, hoping the central bank can achieve its 2% inflation target without triggering a recession. At the same time, Fed Governor Michelle Bowman stated on Saturday that the U.S. central bank might need to increase rates further to completely restore price stability.
Meanwhile, U.S. rate futures have priced in an 84.5% probability of no hike and a 15.5% chance of a 25 basis point rate increase at the next central bank meeting in September.
Second-quarter earnings season rolls on, and investors await new reports from major global companies this week, including Eli Lilly (LLY), United Parcel Service (UPS), and Walt Disney (DIS).
In the coming week, U.S. CPI data for July will be the main highlight. Also, investors will be eyeing a spate of economic data, including U.S. Trade Balance, Exports, Imports, Wholesale Inventories, Wholesale Trade Sales, Crude Oil Inventories, Core CPI, Initial Jobless Claims, PPI, Core PPI, and Michigan Consumer Sentiment (preliminary).
The U.S. economic data slate is mainly empty on Monday. However, investors will likely focus on speeches from Philadelphia Fed President Patrick Harker, Atlanta Fed President Raphael Bostic, and Fed Governor Michelle Bowman.
In the bond markets, United States 10-Year rates are at 4.101%, up +0.96%.
The Euro Stoxx 50 futures are down -0.48% this morning as investors weighed the implications of a mixed U.S. jobs report on the Federal Reserve’s future policy decisions while anticipating inflation data from China and the United States later in the week. Data on Monday showed that German industrial production experienced a more significant decline than expected in June. Meanwhile, German short-term bonds rose after the Bundesbank announced its decision to cease paying interest on domestic government deposits from October 1st. In corporate news, shares of Postnl (PNL.NA) climbed over +6% after the Dutch postal firm raised its 2023 operating profit guidance. Also, Ohb Se (OHB.D.DX) soared more than +32% after announcing a voluntary public tender offer by U.S. investment company KKR for its outstanding shares.
U.K.’s Halifax House Price Index, Germany’s Industrial Production, and Eurozone’s Sentix Investor Confidence data were released today.
U.K. July Halifax House Price Index has been reported at -0.3% m/m and -2.4% y/y, compared to expectations of 0.0% m/m and -3.8% y/y.
The German June Industrial Production stood at -1.5% m/m, weaker than expectations of -0.5% m/m.
Eurozone August Sentix Investor Confidence came in at -18.9, stronger than expectations of -23.4.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.59%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.19%.
China’s Shanghai Composite closed lower today as investors expressed concerns about the absence of significant stimulus measures from Beijing, raising worries that deflationary pressures could continue to weaken the struggling economy. The latest official data showed a sharp decline in foreign direct investment during the second quarter, alongside a decrease in outbound tourism spending, highlighting the difficulties confronting China’s economy. Meanwhile, Chinese pharmaceutical stocks plunged on Monday amid reports of an expanding anti-bribery campaign within the health sector. Chinese property stocks listed in Hong Kong also retreated, with Country Garden Holdings Co Ltd tumbling over -7% after rating agency Moody’s further downgraded the company into junk territory amid a brewing real estate crisis in China. Investor focus is now squarely on Chinese inflation and trade data due later in the week.
“Weakening external demand will continue to be a net drag in the third quarter. Deflationary pressures will likely prevail. We believe that most of this downside will be traced back to weaker domestic demand and spillovers from contractionary upstream prices,” said Carlos Casanova, a senior economist at UBP.
Japan’s Nikkei 225 Stock Index closed higher today as upbeat corporate earnings results and stabling domestic bond yields outweighed the headwinds caused by a decline on Wall Street. According to a summary of opinions from the Bank of Japan’s July meeting, one member suggested that the central bank should consider allowing greater flexibility in yield curve control. Meanwhile, Astellas Pharma climbed about +10% and was the top percentage gainer on the Nikkei after the U.S. Food and Drug Administration approved the drugmaker’s Izervay for the treatment of age-related macular degeneration. On the bearish side, heavyweight technology stocks retreated, with Tokyo Electron falling about -1% and Advantest dropping more than -1%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.35% to 20.37.
Pre-Market U.S. Stock Movers
Yellow Corp (YELL) plunged about -26% in pre-market trading after the trucking company filed for Chapter 11 bankruptcy protection.
Cloudflare Inc (NET) fell more than -3% in pre-market trading after Guggenheim downgraded the stock to Sell from Neutral.
Rocket Companies Inc (RKT) rose over +1% in pre-market trading after Keefe Bruyette upgraded the stock to Market Perform from Underperform.
DraftKings Inc (DKNG) gained about +2% in pre-market trading after Wells Fargo upgraded the stock to Overweight from Equal Weight.
Monster Beverage Corp (MNST) climbed over +2% in pre-market trading after Piper Sandler upgraded the stock to Overweight from Neutral.
United Airlines Holdings Inc (UAL) rose more than +1% in pre-market trading after Redburn upgraded the stock to Buy from Neutral.
Wayfair Inc (W) soared about +3% in pre-market trading after UBS upgraded the stock to Buy from Neutral.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - August 7th
Itau Unibanco (ITUB), KKR & Co (KKR), Palantir (PLTR), ONEOK (OKE), BioNTech (BNTX), Coterra Energy (CTRA), IFF (IFF), Tyson Foods (TSN), Skyworks (SWKS), Lucid Group (LCID), Celanese (CE), Viatris (VTRS), Aecom Technology (ACM), Essential Utilities (WTRG), Henry Schein (HSIC), Shockwave Medical (SWAV), Primerica (PRI), Elanco Animal Health (ELAN), Five9 (FIVN), FS KKR Capital (FSK), Teradata (TDC), Spirit Realty (SRC), Kinetik Holdings (KNTK), Bellring (BRBR), Powerschool Holdings (PWSC), American Equity Inv. Life (AEL), National Storage Affiliates Trust (NSA), Cactus (WHD), ICU Medical (ICUI), Hawaiian Electric Industries (HE), Cabot Corp (CBT), Ringcentral Inc (RNG), Nelnet (NNI), Transportadora Gas ADR (TGS), Freshpet Inc (FRPT), Arrowhead Pharma (ARWR), Kosmos Energy (KOS), Kemper (KMPR), Tidewater (TDW), Crane NXT (CXT), Axsome Therapeutics Inc (AXSM), American States Water (AWR), Sabra (SBRA), Treehouse Foods (THS), Maravai Lifesciences (MRVI), Alteryx (AYX), Zai Lab (ZLAB), ACV Auctions (ACVA), Golub (GBDC), Helios Tech (HLIO), EverCommerce (EVCM), Gogo Inc (GOGO), Par Pacific Holdings (PARR), Ready Capital (RC), Sterling Construction (STRL), Compass (COMP), Highpeak Energy Acquisition (HPK), Delek US Energy (DK), Delek Logistics Partners LP (DKL), Apollo Medical (AMEH), Hims Hers Health (HIMS), Primoris (PRIM), Diamond Offshore Drilling (DO), ePlus (PLUS), Jeld-Wen Holding (JELD), Genius Sports (GENI), Bridge Investment Group Holdings (BRDG), Veeco (VECO), Arcus Biosciences (RCUS), Danaos (DAC), Service Properties (SVC), Paymentus (PAY), Apartment Invest (AIV), Chegg Inc (CHGG), MannKind (MNKD).
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