Five things you need to know before the market opens on Friday August 4:
1. -- Stock Futures Nudge Higher As Bond Market Sell-Off Accelerates
U.S. equity futures nudged higher Friday, while the dollar held gains against its global peers amid the ongoing surge in Treasury bond yields, as investors looked to close out a volatile week with a crucial reading of July jobs growth prior to the opening bell.
A host of issues this week, including Fitch Ratings' decision to cut its triple-A credit grade on U.S. debt, a boost in the Treasury's quarterly refunding total to $103 billion, stronger-than-expected private sector jobs growth and the Bank of Japan's move to allow its government bond yields to rise sharply, helped trigger one of the biggest Treasury sell-offs in month.
Benchmark 10-year note yields have risen 21 basis points since the start of the week, hitting a November 2022 high of 4.192% in overnight trading, while 2-year paper bumped to 4.925% in what markets define as a 'bear steepener', a move that describers longer-term term rates rising faster than shorter-term ones.
Yields are likely to rise further in the coming weeks, as well, as following the Treasury's decision to increase the size of its quarterly refunding schedule by 7.3%, to $103 billion, leading to largely monthly auctions of its various coupon-bearing bonds.
Near-term direction for both stocks and bonds, however, is likely to come from today's July jobs report, which is expected to show weakening, but still solid, overall employment gains.
In other markets, crude prices look set to extend their recent rally to a sixth consecutive week, with WTI futures for September delivery rising 52 cents to $82.07 per barrel, following a move by Saudi Arabia to extend its voluntary output cuts, which are taking 1 million barrels from the market each day, through to the end of September.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating a 12 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 35 point advance. Futures tied to the tech-focused Nasdaq futures were up 75 points.
In Europe, the region-wide Stoxx 600 was marked 0.26% higher in early Frankfurt trading while Britain's FTSE 100 nudged 0.03% higher in London.
Overnight in Asia, the MSCI ex-Japan index was marked 0.11% higher into the close of the session while the Nikkei 225 snapped a two-day run of declines with a modest 0.1% gain to close out the week at 32,192.75 points.
2. -- Jobs Data On Deck As Traders Seek Soft Landing Confirmation
The Labor Department will publish its July employment report prior to the start of trading Friday, with analysts looking for the slowest rate of job gains since the end of the pandemic.
Employers likely added 200,000 new jobs to the economy last month, according to Street forecasts, with average hours wages likely rising 4.2% from last year in a sign that the labor market, while weakening, remains tight by historic standards. The overall tally would be the weakest since December of 2020 and down from last month's estimate of a 209,000 gain.
Earlier this week, payroll processing group ADP estimated 324,000 new private sector jobs were created last month, while Challenger Gray & Christmas' monthly report of layoffs said job cuts slowed to the lowest levels in eleven months.
The data is likely to support the Fed's concern that inflationary pressures remain acute heading into the autumn months, and may require at least one more rate hike in order to bring levels back to the central bank's preferred 2% target.
"A still tight labor market and broader resilience in the economy may be an indication that the neutral rate of interest has risen in recent years, meaning the Fed may have more hikes or a longer hold at their terminal level in store," said Andrew Patterson, senior economist at Vanguard.
"Still high wage growth is another reason we believe the Fed has more work to do in their fight against inflation," he added. "We do not want to see them repeat mistakes of the past in the 1960s and 1970s when easing policy too quickly meant the need to tighten more later."
3. -- Apple Shares Slide As Softer Revenues, Outlook Cloud Earnings Beat
Apple (AAPL) -) shares moved lower in pre-market trading after the tech giant posted its third straight quarterly sales decline and indicated slumping iPhone revenues would continue ahead of its September product launch.
Apple said earnings for the fiscal third quarter rose 5% from last year to $1.26 per share, topping Street forecasts, but revenues were down 1.4% to $81.8 billion as iPhone sales fell 2.5% to $39.67 billion, missing analysts' estimates, and China sales only nudged 1.1% higher to $15.76 billion.
Revenues from Apple's key services business -- which includes Apple Pay, iCloud and Apple TV --- rose 8.2% to $21.21 billion bit CFO Luca Maestri said overall Apple sales would likely decline again into the September quarter.
We expect our September quarter year-over-year revenue performance to be similar to the June quarter, assuming that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter," Maestri told investors on a conference call late Thursday.
"We expect iPhone and Services year-over-year performance to accelerate from the June quarter. Also, we expect the revenue for both Mac and iPad to decline by double digits year-over-year due to difficult compares, particularly on the Mac," he added.
Apple shares were marked 1.75% lower in pre-market trading to indicate an opening bell price of $187.83 each.
4. -- Amazon Shares Surge After Solid Q2 Earnings, Robust Revenue Outlook
Amazon (AMZN) -) shares surged higher in pre-market trading following a second quarter earnings blowout for the retail and cloud giant that included a better-than-expected near-term outlook.
Amazon said operating income more than doubled to $7.68 billion over the three months ending in June, smashing the Street forecast of $4.72 billion, as margins improved to 5.7% and revenues rose 11% from last year to a Street-beating $134.4 billion.
A big jump in online ad sales, which rose 22% to $10.68 billion, helped offset moderating growth rates in Amazon Web Services, although the division still contributed $21.1 billion to Amazon's overall top line.
Looking into the current quarter, Amazon said it sees operating income of between $5.5 billion and $8.5 billion on revenues in the range of $138 billion to $143 billion, compared to the Refinitiv forecast of around $138.3 billion.
Amazon shares were marked 8.53% higher in pre-market trading to indicate an opening bell price of $139.90 each.
5. -- DraftKings Soars As Sports Betting Group Sees Further Gains
DraftKings (DKNG) -) shares soared higher in pre-market trading after the sports betting and media group posted stronger-than-expected second quarter earnings and boosted its full-year revenue outlook.
DraftKings said earnings for the three months ending in June rose to 17 cents per share, up from a loss of 50 cents last year, as revenues surged 88% to $875 million as it continues to grab market share in online sports wagering as more states around the country allow for legalized gambling.
Looking into the back half of the year, DraftKings said it sees 2023 revenues in the region of $3.5 billion with a narrower-than-expected adjusted loss of $205 million.
"We are well on our way to achieving positive Adjusted EBITDA again in the fourth quarter of 2023 and for fiscal year 2024 and beyond," said CEO Jason Robins. "We are excited by the additional product features and functionality that we are introducing leading into football season and also look forward to another successful online sportsbook launch in Kentucky this fall pending licensure and regulatory approvals.”
DraftKings shares were marked 14.2% higher in pre-market trading to indicate an opening bell price of $34.25 each.
