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S&P Futures Tick Higher as Investors Brace for U.S. Inflation Data, Disney Earnings on Tap

Barchart - Wed Aug 9, 2023

September S&P 500 futures (ESU23) are trending up +0.27% this morning as market participants exercised caution and refrained from big positions in anticipation of Thursday’s U.S. inflation report.

In Tuesday’s trading session, the benchmark S&P 500 fell to a 3-1/2 week low, the blue-chip Dow dropped to a 2-1/2 week low, and the tech-heavy Nasdaq 100 notched a 4-week low. Financial stocks slumped after Moody’s Investors Service downgraded 10 small and midsize American banks and adopted a “negative” outlook for 11 other lenders. Also, Datadog Inc (DDOG) plunged more than -17% after the company reduced its FY23 revenue outlook. On the bullish side, Eli Lilly and Company (LLY) surged over +14% and was the top percentage gainer on the S&P 500 after the company reported upbeat Q2 results and raised its FY23 EPS guidance.

“Anytime you see the backbone of the U.S. financial system being under watch, that gives people a lot to pause. Markets are slowly digesting that maybe the U.S. financial system is not absolutely perfect, and maybe we are going to have higher rates for a much longer period of time,” said Brandon Pizzurro, a director of public investments at Guidestone Capital Management.

Philadelphia Fed President Patrick Harker said Tuesday that the central bank could potentially halt rate increases unless there are unexpected developments in the economy, but he emphasized that rates would need to remain at their current elevated levels for a considerable period. Harker also noted that “sometime probably next year, we’ll start to bring the interest rates down.”

Meanwhile, U.S. rate futures have priced in an 86.5% probability of no hike and a 13.5% chance of a 25 basis point rate increase at the conclusion of the Fed’s September meeting.

Second-quarter earnings season continues, and investors anticipate new reports from major global companies today, including Walt Disney (DIS), The Trade Desk (TTD), and Manulife Financial (MFC).

On the economic front, investors are likely to focus on U.S. Crude Oil Inventories data due later in the day. Economists estimate this figure to be +0.567M, compared to last week’s value of -17.049M.

In the bond markets, United States 10-Year rates are at 4.012%, down -0.25%.

The Euro Stoxx 50 futures are up +1.21% this morning as investors assessed a clarification from Italy regarding its recently introduced tax on lenders’ windfall profits while also digesting more corporate earnings results. Italian bank stocks jumped on Wednesday after Italy said the impact of the tax might be limited for some banks and the levy would not surpass 0.1% of a company’s assets. On the ground of this, Unicredit Spa (UCG.M.DX) gained over +4%, and Intesa Sanpaolo Spa (ISP.M.DX) climbed more than +3%. In corporate news, Coca-Cola Hbc Ag (CCH.L.EB) rose more than +2% after the company lifted its annual organic revenue growth forecast. Also, Delivery Hero Se (DHER.D.DX) surged over +9% after the German online takeaway food company boosted its full-year revenue guidance.

The European economic data slate is mainly empty on Wednesday.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.49%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.53%.

China’s Shanghai Composite today closed lower as investors digested data indicating that the world’s second-largest economy had fallen into deflation. Data showed on Wednesday that China’s consumer prices dropped for the first time in more than two years in July, while the country’s factory-gate price index fell for the 10th consecutive month. Weak Chinese inflation data follows disappointing figures on imports and exports for July, posing further economic challenges for China as its post-COVID recovery loses momentum. Meanwhile, Reuters reported that China’s major state-owned banks were observed engaging in the sale of U.S. dollars to buy yuan in the onshore spot foreign exchange market on Wednesday, aiming to slow the pace of yuan declines. In corporate news, top homebuilder Country Garden Holdings Co Ltd fell more than -1% following a significant -14% decline on Tuesday, primarily driven by the company’s failure to meet two dollar bond coupon payments.

“China is in deflation, for sure, the question is for how long. It’s up to the policymakers how they react,” said Robin Xing, a chief China economist at Morgan Stanley. 

The Chinese July CPI stood at +0.2% m/m and -0.3% y/y, stronger than expectations of -0.1% m/m and -0.4% y/y.

The Chinese July PPI came in at -4.4% y/y, weaker than expectations of -4.1% y/y.

Japan’s Nikkei 225 Stock Index closed lower, tracking Wall Street’s losses, while a batch of weak earnings also weighed on sentiment. In corporate news, Nikon Corp plunged over -11% after the camera maker reported a drop in its Q1 net profit and lowered its half-year guidance. Also, Daikin Industries tumbled more than -11% and was the top percentage loser on the Nikkei even after the air-conditioning maker reported a 13.8% increase in its Q1 net profit. In addition, SoftBank Group fell over -3% after the Japanese tech conglomerate unexpectedly reported its third straight quarterly loss but posted a rare investment gain from its massive tech-focused Vision Fund. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -0.50% to 20.03.

“The Japanese market was affected by the weakness of U.S. equities, but losses were limited as investors had appetite to buy shares on dips. Investors were also cautious ahead of the release of U.S. inflation data,” said Chiaki Hirokane, a strategist at Resona Holdings.

Pre-Market U.S. Stock Movers

PENN Entertainment Inc (PENN) climbed over +10% in pre-market trading after the company announced that it had entered into an exclusive U.S. online sports betting agreement with ESPN.

Doximity Inc (DOCS) plunged more than -26% in pre-market trading after providing weaker-than-expected FY24 revenue guidance.

Upstart Holdings Inc (UPST) slid about -20% in pre-market trading after the lending platform for banks issued soft Q3 guidance.

Marqeta Inc (MQ) soared over +14% in pre-market trading after the card-issuing platform posted stronger-than-expected Q2 revenue.

WeWork Inc (WE) tumbled more than -18% in pre-market trading after the company said “substantial doubt” existed about its ability to continue as a going concern.

United States Cellular Corporation (USM) rose over +2% in pre-market trading after Wells Fargo upgraded the stock to Equal Weight from Underweight.

You can see more pre-market stock movershere

Today’s U.S. Earnings Spotlight: Wednesday - August 9th

Walt Disney (DIS), The Trade Desk (TTD), Manulife Financial (MFC), Illumina (ILMN), Roblox (RBLX), Wynn Resorts (WYNN), U-Haul Holding (UHAL), Charles River Laboratories (CRL), Applovin (APP), UWM Holdings (UWMC), Tetra Tech (TTEK), Jazz Pharma (JAZZ), ICL Israel Chemicals (ICL), CACI (CACI), Stantec (STN), Berry Global (BERY), CAE Inc. (CAE), OGE Energy (OGE), Genpact (G), Plug Power (PLUG), Valvoline (VVV), Reynolds (REYN), Ionis Pharma (IONS), Owl Rock Capital (OBDC), Fluence Energy (FLNC), Blackstone Secured Lending Fund (BXSL), The Wendy’s Co (WEN), Southwest Gas Hold (SWX), Syneos Health (SYNH), Nuvei (NVEI), Ultrapar Participacoes (UGP), Copa (CPA), Ginkgo Bioworks (DNA), Enersys (ENS), PENN Entertainment (PENN), Vishay Intertechnology (VSH), ViaSat (VSAT), Enerplus (ERF), Brinks (BCO), Goodrx (GDRX), Lifestance Health Group (LFST), Riot Platforms (RIOT), Nomad Foods (NOMD), Verra Mobility (VRRM), Certara (CERT), Brp Gr (BRP), Vertex (VERX), Holdings (ALRM), NexGen Energy (NXE), Excelerate Energy (EE), Xenon Pharmaceuticals (XENE), CarGurus (CARG), International Seaways (INSW), Enlight Energy (ENLT), First Advantage (FA), Sylvamo (SLVM), Crescent Energy (CRGY), Sonos (SONO), Magnite (MGNI), Liveramp (RAMP), Atmus Filtration Tech (ATMU), ODP (ODP), Warby Parker (WRBY), Purecycle Technologies Holdings (PCT), NV5 Global (NVEE), Arhaus (ARHS), Nuscale Power (SMR), Cannae (CNNE), Catalyst Pharmaceuticals (CPRX), Kornit Digital Ltd (KRNT), Ballard (BLDP), Opal Fuels (OPAL), Target Hospitality (TH), Everi Holdings (EVRI), Bionano Genomics (BNGO), Montauk Renewables (MNTK), Taskus (TASK), Avid (AVID), Taboola (TBLA), European Wax Center (EWCZ), Stratasys Ltd (SSYS), Heritage-Crystal Clean (HCCI), Avepoint (AVPT), Avanos Medical (AVNS), 3D Systems (DDD), ANI Pharma (ANIP), Avadel Pharma (AVDL), Deciphera Pharma (DCPH), PAR Technology (PAR), Clean Energy (CLNE).

More Stock Market News from Barchart

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.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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