Stock Index Futures Climb as Investors Look to Fed’s Jackson Hole Meeting, Retail Earnings in Focus

Oleksandr Pylypenko - Barchart - Tue Aug 22, 2023

September S&P 500 futures (ESU23) are up +0.36%, and September Nasdaq 100 E-Mini futures (NQU23) are up +0.47% this morning after three major U.S. benchmark indices ended the regular session mixed as investors braced for earnings reports from major retailers ahead of a speech by Federal Reserve Chair Jerome Powell later in the week.

In Monday’s trading session, the tech-heavy Nasdaq 100 outperformed major benchmarks, underpinned by an over +8% surge in NVIDIA Corporation (NVDA) after KeyBanc raised its price target on the stock to $620 from $550. Also, Tesla Inc (TSLA) climbed more than +7% after brokerage Baird Equity Research added the stock to its “best ideas” list. In addition, Palo Alto Networks Inc (PANW) surged over +14% after the cybersecurity company provided a strong FY24 billings forecast. On the bearish side, Johnson & Johnson (JNJ) fell more than -2% after the company said it was expecting to retain a stake of about 9.5% in its recently separated consumer health unit, Kenvue, following the completion of a share exchange offer.

Meanwhile, S&P Global Ratings lowered the credit ratings of five regional U.S. banks on Tuesday, citing tough operating conditions. Comerica (CMA) and KeyCorp (KEY) had their credit ratings downgraded from ‘BBB+’ to ‘BBB’ due to significant deposit outflows and higher for longer rates.

“Amid higher for longer interest rates, we expect further asset quality deterioration. Banks with material exposures to commercial real estate, especially in office loans, could see some of the greatest strains on asset quality,” S&P warned.

Market participants are already anticipating the upcoming Jackson Hole Symposium later this week, during which Federal Reserve Chair Jerome Powell will deliver a speech that could provide additional insights into the central bank’s future monetary policy actions.

“With the market broadly on board with at least one additional rate hike by year-end, Powell is likely to emphasize the need to remain at a sufficiently restrictive level for some time with still ‘significant’ upside risks to inflation,” Stifel said in a note.

U.S. rate futures have priced in a 15.5% probability of a 25 basis point rate increase at September’s monetary policy meeting and a 39.8% chance of a 25 basis point rate hike at November’s monetary policy meeting.

In other news, SoftBank Group Corp.’s semiconductor unit Arm filed for a Nasdaq listing that is anticipated to be the biggest of the year.

On the earnings front, notable companies like Lowe’s (LOW), Dick’s Sporting Goods (DKS), Baidu (BIDU), Medtronic (MDT), and Toll Brothers (TOL) are set to report their quarterly figures today.

Today, all eyes are focused on U.S. Existing Home Sales data in a couple of hours. Economists, on average, forecast that July Existing Home Sales will stand at 4.15M, compared to the previous value of 4.16M.

U.S. Richmond Manufacturing Index will be reported today as well. Economists foresee this figure to stand at -7 in August, compared to the previous number of -9.

In addition, investors will likely focus on speeches from Richmond Fed President Thomas Barkin, Chicago Fed President Austan Goolsbee, and Fed Governor Michelle Bowman.

In the bond markets, United States 10-Year rates are at 4.318%, down -0.55%.

The Euro Stoxx 50 futures are up +1.23% this morning as a tech-led surge on Wall Street overnight boosted investor sentiment. Gains in technology stocks are leading the overall market higher, driven by positive sentiment surrounding Nvidia, the world’s most valuable chipmaker, ahead of its quarterly earnings report on Wednesday. In corporate news, Ubisoft Entertain (UBI.FP) climbed over +6% following Microsoft’s announcement that its acquisition target Activision would sell its non-European streaming rights to the French video game producer. Also, Prysmian Spa (PRY.M.DX) rose more than +4% after the Italian cable manufacturer was chosen as the ‘preferred bidder’ for three projects in Germany worth 4.5 billion euros.

The European economic data slate is mainly empty on Tuesday.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.88%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.92%.

China’s Shanghai Composite Index staged a sudden rally late on Tuesday, buoyed by gains in technology stocks. The rebound was attributed by several traders to technical reasons, given the absence of any fresh triggers. Also, the offshore yuan steadied following the People’s Bank of China’s implementation of the strongest currency fixing on record. Meanwhile, Hong Kong-listed technology stocks advanced on Tuesday, with Alibaba Group Holding Ltd and JD.com Inc rising more than +1%. However, the outlook remains uncertain due to a deceleration in China’s economic activity over the past months following an initial post-reopening surge. Moreover, the authorities’ commitments to support the recovery have not met market anticipations, exemplified by a lending benchmark reduction on Monday that was smaller than expected.

“There is certainly a lack of confidence in China’s policies and outlook,” said Lorraine Tan, director of equity research at Morningstar.

Japan’s Nikkei 225 Stock Index closed higher today, primarily driven by advancements in banking and chip-related stocks. Bank stocks outperformed on Tuesday as higher long-term yields improved the profit outlook from lending. As a result, Resona Holdings, Mitsubishi UFJ Financial Group, and Sumitomo Mitsui Financial Group soared over +3%. Chip stocks also gained ground, with chip-testing equipment maker and Nvidia supplier Advantest climbing more than +4%. In other news, an analysis by the Japanese news agency Nikkei revealed that top listed companies in Japan were on track to achieve a third consecutive year of record profits, attributed to higher prices and the ongoing monetary stimulus from the Bank of Japan. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.15% to 19.94.

Pre-Market U.S. Stock Movers

Zoom Video Communications Inc (ZM) climbed over +4% in pre-market trading after the company reported upbeat Q2 results and raised its FY24 guidance.

Tingo Group Inc (TIO) plunged more than -33% in pre-market trading after the company further postponed its Q2 results, conference call, and 10-Q filing in the wake of Hindenburg Research’s short report.

Jefferies Financial Group Inc (JEF) rose about +1% in pre-market trading after Goldman Sachs upgraded the stock to Buy from Neutral.

NVIDIA Corporation (NVDA) gained over +1% in pre-market trading, extending yesterday’s gains amid optimism about its upcoming earnings.

Applovin Corp (APP) soared over +4% in pre-market trading after Jefferies upgraded the stock to Buy from Hold.

Fabrinet (FN) surged more than +18% in pre-market trading after the company posted upbeat Q4 results.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Tuesday - August 22nd

Lowe’s (LOW), Medtronic (MDT), Dick’s Sporting Goods (DKS), Coty Inc (COTY), BJs Wholesale Club (BJ), Toll Brothers (TOL), Miniso (MNSO), iQIYI (IQ), Macy’s Inc (M), Urban Outfitters (URBN), Premier Inc (PINC), Canadian Solar Inc (CSIQ), Fidelis Insurance Holdings (FIHL), La-Z-Boy (LZB), Kingsoft Cloud (KC), ScanSource (SCSC), Yatsen (YSG).

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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.