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Stocks Slightly Lower as U.S. Q2 GDP Unexpectedly Falls

Barchart - Thu Jul 28, 8:13AM CDT
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Morning Markets

September S&P 500 futures (ESU22) this morning are down -0.02%.  Weaker-than-expected quarterly earnings results from technology companies today weighed on the overall market, with Qualcomm down more than -4% in pre-market trading after forecasting a slowdown in revenue next quarter. Also, Meta Platforms is down more than -6% in pre-market trading after reporting its first-ever quarterly sales decline. 

Stock indexes recovered from their worst levels this morning after the 10-yeat T-note yield dropped -6.4 bp on news that U.S. Q2 GDP unexpectedly contracted, which may push the Fed to slow its pace of interest rate increases.  Stocks will look to quarterly earnings reports today for further direction.  Today is the busiest day for earnings reports, with U.S. and European companies worth more than $9.4 trillion reporting their results today.

U.S Q2 GDP fell -0.9% (q/q annualized), weaker than expectations of a +0.4% increase.  The GDP decline in Q2 was the second consecutive quarter of contraction, which some consider a definition of a recession.  Q2 personal consumption rose +1.0%, weaker than expectations of +1.2%.

U.S. Q2 core PCE slowed to +4.4% q/q from +5.2% q/q in Q1, right on expectations.  The lower inflation figure was positive for the stock and bond markets.

U.S. weekly initial unemployment claims fell -5,000 to 256,000, showing a weaker labor market than expectations of 250,000.

The Euro Stoxx 50 rose to a 1-1/2 month high today and is up +0.18%.  Speculation the Fed will slow the pace of interest rate hikes is giving European shares a boost today.  Also, energy stocks are climbing after Shell Plc reported record quarterly profits and said it would accelerate its share buyback program.  Strength in European wind and solar stocks also supported gains in the overall market after a deal by U.S. senators to advance a bill that will spend billions of dollars on energy security and climate change.  European stocks fell back from their best levels after today’s data showed Eurozone July economic confidence fell more than expected to a 17-month low, and German July CPI rose more than expected. 

Eurozone July economic confidence fell -3.5 to a 17-month low of 99.0, weaker than expectations of 102.0.

German July CPI (EU harmonized) rose +8.5% y/y,  stronger than expectations of +8.1% y/y.

China’s Shanghai Composite Index today climbed to a 1-week high and closed up by +0.21%.  Strength in Chinese property stocks today led the overall market higher after the Financial Times reported that Chinese banks might provide as much as 1 trillion yuan ($148 billion) of loans to help builders complete stalled projects.  Stocks also found support today after the Xinhua News Agency reported that leaders convening at a Politburo meeting today vowed to strive for the “best outcome” for economic growth. 

Japan’s Nikkei Stock Index today rallied to a 1-1/2 month high and closed up by +0.36%.  Japanese stocks moved higher today on positive carry-over from Wednesday’s rally in U.S. stocks after Fed Chair Powell said the Fed would slow the pace of interest rate increases at some point.  Japanese stocks fell back from their best levels on weakness in technology stocks after bellwether Samsung Electronics provided a weak demand forecast. 

Pre-Market U.S. Stock Movers

Qualcomm (QCOM) fell more than -4% in pre-market trading after forecasting Q4 revenue of $11.0 billion to $11.8 billion, below the consensus of $11.92 billion. 

Meta Platforms (META) tumbled nearly -6% in pre-market trading after reporting Q2 revenue of $28.82 billion, weaker than the consensus of $28.93 billion, and forecast Q3 revenue of $$26.0 billion to$28.5 billion, below the consensus of $30.32 billion. 

ServiceNow (NOW) dropped more than -7% in pre-market trading after reporting Q2 subscription revenue of $1.66 billion, below the consensus of $1.67 billion, and forecast full-year subscription revenue of $6.92 billion-$6.93 billion, weaker than the consensus of $7.09 billion.

Best Buy (BBY) fell more than -4% in pre-market trading after cutting guidance on its full-year comparable sales estimate to down -11% versus a prior view of a decline of -3% to -6%.

Southwest Airlines (LUV) fell -5% in pre-market trading after saying it expects inflationary pressures and headwinds from operating at suboptimal levels will continue in the second half of 2022.

Teladoc Health (TDOC) plunged -25% in pre-market trading after forecasting Q3 adjusted Ebitda of $35 million-$45 million, well below the consensus of $64.6 million. 

Community Health Systems (CYH) sank more than -50% in pre-market trading after reporting an unexpected loss per share of -$2.52 versus expectations of a +6 cent per share profit. 

Comcast (CMCSA) dropped -6% in pre-market trading after reporting no new net customers in Q2, weaker than expectations of +83,000, and the first quarter no new customers were added since 2005. 

Renewable energy stocks jumped in pre-market trading after Senator Manchin and Senate Majority Leader Schumer struck a deal on a tax and energy bill that could provide $369 billion for "energy and climate change."    First Solar (FSLR) is up more than +6%.  Also, SolarEdge Technologies (SEDG) and SunPower (SPWR) are up more than +4%, and Enphase Energy (ENPH) is up more than +3%.

Mastercard (MA) gained more than +2% in pre-market trading after reporting Q2 adjusted EPS of $2.56, above the consensus of $2.37, and raised its full-year adjusted revenue estimate to the low twenties from an earlier estimate of the high teens. 

Harley-Davidson (HOG) jumped nearly +5% in pre-market trading after reporting Q2 revenue of $1.47 billion, stronger than the consensus of $1.19 billion. 

Ford Motor (F) climbed +6% in pre-market trading after reporting Q2 adjusted EPS up +68 cents, above the consensus of +45 cents increase, and said it expects Q3 adjusted operating loss to materially increase over Q2.

Today’s U.S. Earnings Reports (7/28/2022)

A O Smith Corp (AOS), Allegion plc (ALLE), Altria Group Inc (MO), Amazon.com Inc (AMZN), American Tower Corp (AMT), Apple Inc (AAPL), Arthur J Gallagher & Co (AJG), Baxter International Inc (BAX), Bio-Rad Laboratories Inc (BIO), Camden Property Trust (CPT), Carrier Global Corp (CARR), Celanese Corp (CE), CMS Energy Corp (CMS), Comcast Corp (CMCSA), Dexcom Inc (DXCM), Digital Realty Trust Inc (DLR), DTE Energy Co (DTE), Eastman Chemical Co (EMN), Edison International (EIX), Edwards Lifesciences Corp (EW), Eversource Energy (ES), Fortive Corp (FTV), Franklin Resources Inc (BEN), Hartford Financial Services Gr (HIG), Hershey Co/The (HSY), Honeywell International Inc (HON), Intel Corp (INTC), International Paper Co (IP), Keurig Dr Pepper Inc (KDP), Kimco Realty Corp (KIM), KLA Corp (KLAC), L3Harris Technologies Inc (LHX), Laboratory Corp of America Hol (LH), Linde PLC (LIN), LKQ Corp (LKQ), Martin Marietta Materials Inc (MLM), Masco Corp (MAS), Mastercard Inc (MA), Merck & Co Inc (MRK), Mohawk Industries Inc (MHK), Northrop Grumman Corp (NOC), Pfizer Inc (PFE), Royal Caribbean Cruises Ltd (RCL), Southern Co/The (SO), Southwest Airlines Co (LUV), Stanley Black & Decker Inc (SWK), T Rowe Price Group Inc (TROW), Teleflex Inc (TFX), Textron Inc (TXT), Thermo Fisher Scientific Inc (TMO), Valero Energy Corp (VLO), VeriSign Inc (VRSN), VF Corp (VFC), West Pharmaceutical Services I (WST), Willis Towers Watson PLC (WTW), Xcel Energy Inc (XEL).



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