Five things you need to know before the market opens on Friday, July 14:
1. -- Stocks Edge Lower With Bank Earnings In Focus
U.S. equity futures edged lower Friday, while the dollar extended declines against its global peers and Treasury bond yields steadied, as investors looked to a series of financial sector earnings before the opening bell to consolidate Wall Street's recent rally.
Softer-than-expected inflation data, both at the consumer price and factory gate level, have pushed the U.S. dollar to its biggest weekly decline since November as traders re-price interest rate forecasts in the world's biggest economy.
The CME Group's FedWatch continues to indicate a 95% chance the Federal Reserve will raise its benchmark Fed Funds rate by another quarter point next week, to a range of between 5.25% and 5.5%, but bets on a follow-on move in September and November have slumped to 11% and 27% respectively.
The U.S. dollar index continued its decline in overnight trading, falling another 0.05% to a near fifteen-month low of 99.729, while benchmark 2-year Treasury note yields held at 4.675%.
Pared with the easing inflation picture, as well, has been better-than-expected earnings from snacks and drinks group PepsiCO (PEP) -) and Delta Air Lines (DAL) -), both of which topped Street forecasts and lifted their near-term profit outlooks on the back of solid consumer spending prospects.
That, alongside a still-resilient job market and improving conditions seen in the Fed's June 'Beige Book' report, have taken stocks 2.5% higher so far this week, with the S&P 500 now just 6% from the all-time high it reached in early January.
"The US June inflation report was a gift that continued to give for equities, with the major US indices rocketing higher still as US treasury yields continued to drop," Saxo Bank strategists wrote. "PepsiCo’s earnings report after hours suggests the US consumer remains resilient, but the heart of earnings season lies ahead, with the big banks beginning to report today and a rather high bar of expectations set for this quarter’s earnings."
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 were indicating a 5 point opening bell decline while those linked to the Dow Jones Industrial Average were priced for a 35 point move to the downside. Nasdaq futures were down 14 points.
In overnight trading, the MSCI ex-Japan index rose 0.9% into the close of trading, while Japan's Nikkei 225 slipped 0.87% as the yen hit a two-month high of 137.9 against the beaten-down dollar.
The Europe-wide Stoxx 600 was marked 0.02% higher in early Frankfurt trading, and on pace for its best week in three months, although gains were capped by a slumping telecoms sector following a profit warning from Nokia and weaker-than-expected second quarter earnings from Ericsson. Britain's FTSE 100 gained 0.05% in London.
2. -- JPMorgan Bumps Higher As Investors Eye Financial Sector Outlook
JPMorgan (JPM) -) shares edged higher in pre-market trading as investors prepare for the biggest U.S. bank to lead a trio of lenders reporting second quarter earnings prior to the opening bell.
JPMorgan, Citigroup (C) -) and Wells Fargo (WFC) -) are all slated to publish second quarter updates Friday, with investors looking to gauge the impact of the March regional banking crisis, a modest pick-up in dealmaking and the amount of cash lenders are likely to set aside to cover potential bad loans in a slowing economy.
JPMorgan is likely to see earnings rise nearly 45% from last year, to $4 per share, on revenues of around $39 billion. Wells Fargo is also likely to see earnings improve from last year to around $1.15 per share while Citigroup, which was asked by the Federal Reserve to improve its capital base following stress tests late last month, will likely see earnings fall 44% to $1.30 per share.
JPMorgan shares were marked 1.22% higher in pre-market trading to indicate an opening bell price of $150.69 each while Wells Fargo slipped 0.21% to $43.80 each. Citigroup was marked 0.595% lower at $47.23 each.
3. -- AT&T Shares Slump After JPMorgan Downgrade, Price Target Cut
AT&T (T) -) shares slumped lower in pre-market trading after analysts at JPMorgan lowered their rating and price target on the group, citing increased pressure from rivals and weakness in its wireline business.
JPMorgan analyst Philip Cusick lowered his price target on AT&T by $5, to $17 a share, while cutting his weighting on the stock to 'neutral' from "overweight' following a series of comments from management that indicated weaker profit estimates from its wireless and broadband divisions over the months of May and June.
"AT&T shares are trading at a record-low valuation of 5.6x 2023 EBITDA, with a 7.3% dividend yield, but we worry that the repeated downward revisions for its key wireless and fiber growth businesses, the high interest rate environment and new uncertainty regarding lead sheathed cables will limit any substantial rebound." Cusick wrote.
AT&T shares were marked 2.05% lower in pre-market trading to indicate an opening bell price of $14.81 each.
4. -- FTC Opens Probe Into Microsoft-Backed OpenAI
The U.S. Federal Trade Commission said late Thursday that it plans to investigate Microsoft (MSFT) -)-backed OpenAI over allegations linked to the use of personal data in its ChatGPT platform, according to multiple media reports.
The FTC said it is concerned that ChatGPT, a large-language model search engine launched by OpenAI earlier this year, is generating "statements about real individuals that are false, misleading, or disparaging."
CEO Sam Altman said OpenAI built its latest version of the chatbot, GPT-4, "On top of years of safety research and spent 6+ months after we finished initial training making it safer and more aligned before releasing it."
"We protect user privacy and design our systems to learn about the world, not private individuals," he added in a series of posts on the Twitter micro-blogging website.
5. -- SpaceX Nears $150 Billion Valuation After Share Sale
SpaceX, the space tourism and launching group founded by Tesla (TSLA) -) CEO Elon Musk, agreed a new round of funding that would value the Hawthorne, California-based startup at around $150 billion.
CNBC reported late Thursday that SpaceX sold around $750 million in new common stock at $81 per share, a 5% increase from the last capital raising in December of last year.
Musk owns around 42% of the group, which was founded in 2002, but has a much larger stake of voting shares, giving him effective control of the company.
Beyond space tourism, SpaceX also launches a host of commercial and government satellites on its reusable rockets, providing a revenue stream that has supported the deveopment of its Starship rocket, which exploded minutes after it was launched from a station in Texas on April 20.
