Get all your news in one place.
100’s of premium titles.
One app.
Start reading
Barchart
Barchart
Oleksandr Pylypenko

Stocks Rise Before the Open as Investors Await U.S. Economic Data and Fed Speak, Netflix Earnings on Tap

September S&P 500 E-Mini futures (ESU24) are up +0.18%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.41% this morning, signaling a partial rebound from yesterday’s slump, while investors awaited a new round of U.S. economic data, remarks from Federal Reserve officials, as well as corporate earnings reports, with the spotlight on results from streaming giant Netflix.

In yesterday’s trading session, Wall Street’s major indices closed mixed. Spirit Airlines (SAVE) plunged over -10% after the carrier lowered its Q2 revenue guidance. Also, chip stocks declined due to concerns about tighter U.S. restrictions on chip sales to China, with ASML Holding NV (ASML) slumping more than -12% to lead losers in the Nasdaq 100, Advanced Micro Devices (AMD) sliding over -10%, and Nvidia (NVDA) falling more than -6%. In addition, Five Below (FIVE) tumbled over -25% after the discount retailer provided downbeat Q2 guidance and announced the resignation of Joel Anderson from his roles as President and CEO. On the bullish side, Johnson & Johnson (JNJ) rose more than +3% after the pharmaceutical giant reported better-than-expected Q2 results.

Economic data on Wednesday showed that U.S. industrial production climbed +0.6% m/m in June, stronger than expectations of +0.3% m/m. Also, U.S. June housing starts rose +3.0% m/m to 1.353M, stronger than expectations of 1.300M, while U.S. building permits rose +3.4% m/m to 1.446M in June, stronger than expectations of 1.400M. In addition, U.S. June manufacturing production rose +0.4% m/m, stronger than expectations of +0.2% m/m.

Meanwhile, the Federal Reserve said Wednesday in its Beige Book survey of regional business contacts that the U.S. economy expanded at a modest pace heading into the third quarter, with several regions reporting flat or declining activity. The report also highlighted modest overall price increases, alongside slight growth in employment. Consumer spending was little changed. Nearly every district “mentioned retailers discounting items or price-sensitive consumers only purchasing essentials, trading down in quality, buying fewer items, or shopping around for the best deals,” the report said. Looking forward, businesses anticipated the slowing to persist. “Expectations for the future of the economy were for slower growth over the next six months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation,” according to the Beige Book.

Fed Governor Christopher Waller said on Wednesday that the economy is nearing a point where the central bank can cut interest rates but noted he’d like to see a “bit more evidence” that inflation is on a sustained downward path. “While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted,” Waller said. Also, New York Fed President John Williams remarked that inflation data in recent months has been encouraging, but he requires more evidence in the upcoming months to gain the confidence needed to reduce borrowing costs. In addition, Richmond Fed President Thomas Barkin stated that the Fed requires more evidence that the disinflation process is sustained before cutting interest rates.

U.S. rate futures have priced in a 4.7% chance of a 25 basis point rate cut at July’s monetary policy meeting and a 91.7% chance of a 25 basis point rate cut at the September meeting.

Second-quarter earnings season gathers steam, and investors await new reports from notable companies today, including Netflix (NFLX), Abbott Laboratories (ABT), Blackstone (BX), Intuitive Surgical (ISRG), Marsh & McLennan Companies (MMC), Cintas (CTAS), DR Horton (DHI), Domino’s Pizza (DPZ), and KeyCorp (KEY).

On the economic data front, all eyes are focused on the U.S. Philadelphia Fed manufacturing index, set to be released in a couple of hours. Economists, on average, forecast that the July Philadelphia Fed manufacturing index will arrive at 2.7, compared to last month’s value of 1.3.

Also, investors will focus on U.S. Initial Jobless Claims data. Economists estimate this figure to stand at 229K, compared to last week’s number of 222K.

The U.S. Conference Board Leading Index will be reported today as well. Economists expect June’s figure to be -0.3% m/m, compared to the previous number of -0.5% m/m.

In addition, market participants will be anticipating speeches from Dallas Fed President Lorie Logan, San Francisco Fed President Mary Daly, and Fed Governor Michelle Bowman.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.187%, up +1.07%.

The Euro Stoxx 50 futures are up +0.16% this morning, ending a three-day losing streak, with investors awaiting the European Central Bank’s monetary policy decision later in the day. Automobile and energy stocks gained ground on Thursday, while technology stocks underperformed. Data from the Office for National Statistics published Thursday indicated that wage growth in the U.K. slowed in the three months to May, following months of significant rises, maintaining the possibility of an August interest-rate cut by the Bank of England. Meanwhile, attention now turns to the interest rate decision from the ECB, due later in the session. While the ECB is anticipated to maintain interest rates unchanged, market participants will be monitoring President Christine Lagarde’s press conference for indications of potential further easing in the autumn following the initial cut in June. Most analysts foresee two additional quarter-point rate cuts this year, expected in September and December. In corporate news, Nokia Oyj (NOKIA.H.DX) slumped over -6% after the Finnish telecom equipment maker reported a 32% year-over-year decline in Q2 operating profit due to subdued demand for its 5G equipment. At the same time, Volvo Ab (VOLVB.S.DX) rose about +5% after reporting a record Q2 core operating profit.

U.K.’s Average Earnings ex Bonus, U.K.’s Claimant Count Change, U.K.’s Employment Change 3M/3M, and U.K.’s Unemployment Rate data were released today.

U.K. May Average Earnings ex Bonus has been reported at 5.7%, in line with expectations.

U.K. June Claimant Count Change stood at 32.3K, weaker than expectations of 23.4K.

U.K. May Employment Change 3M/3M came in at 19K, stronger than expectations of 18K.

U.K. May Unemployment Rate was at 4.4%, in line with expectations.

Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.48%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.36%. 

China’s Shanghai Composite Index reversed opening losses and closed higher today as investors eagerly anticipated the official readout of the Third Plenum meeting, which is set to conclude later today. Telecommunication and consumer stocks outperformed on Thursday. At the same time, semiconductor stocks lost ground following a Bloomberg News report that the U.S. was considering stricter restrictions on exports of advanced semiconductor technology to China. Market participants are also concerned that China will play a significant role in Donald Trump’s foreign policy if he wins the U.S. presidential election. Meanwhile, investors are awaiting the results of China’s Third Plenum, the highly anticipated four-day closed-door meeting of its Communist Party’s Central Committee. Investors are optimistic about the high-level meeting, seeing it as a pivotal opportunity to tackle recent economic challenges. In a note, Everbright Securities’ analysts said they are anticipating the inclusion of “market-oriented reforms” of state-owned enterprises, which might involve divesting non-core businesses and enhancing dividend payouts, according to a South China Morning report. In corporate news, Hoymiles Power Electronics surged about +9% after securing Hunan Yingke Energy Storage Technology’s centralized procurement bid for a 241.5-megawatt integrated energy storage boost and converter.

Japan’s Nikkei 225 Stock Index closed sharply lower today. Chip-related stocks led the declines on Thursday, extending yesterday’s global sector sell-off following a Bloomberg News report that the Biden administration has informed allies it is contemplating using the most severe trade restrictions available if companies like Tokyo Electron and ASML Holding persist in providing China with access to advanced semiconductor technology. Ministry of Finance data released on Thursday indicated that Japan’s exports rose for a seventh consecutive month in June, supported by strong demand for chip-making machines, nonferrous metals, and plastics. At the same time, exports increased at the slowest pace in seven months. Also, data showed that Japan’s imports rose less than expected in June, marking the weakest rise in purchases since March. Meanwhile, Japan’s 10-year government bond yield climbed on Thursday, rebounding from a three-week low after Digital Minister Kono Taro told Bloomberg that he believes the Bank of Japan should raise interest rates again in July to bolster the yen. However, investors speculated that a sharp rally in the yen could provide the BOJ with enough room to postpone its second rate hike this year. The yen steadied following a recent surge, widely attributed to a round of purchasing by Japanese authorities. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +4.72% to 18.85.

The Japanese June Trade Balance has been reported at 224.0B yen, stronger than expectations of -240.0B yen.

The Japanese June Exports came in at +5.4% y/y, weaker than expectations of +6.4% y/y.

The Japanese June Imports arrived at +3.2% y/y, weaker than expectations of +9.3% y/y.

Pre-Market U.S. Stock Movers

Chip stocks are moving higher in pre-market trading after the world’s largest contract chipmaker Taiwan Semiconductor Manufacturing reported strong Q2 results and raised its full-year revenue growth forecast. As a result, Advanced Micro Devices (AMD) is up more than +2%. Also, Applied Materials (AMAT) is up over +1%, and Marvell Technology Inc (MRVL) is up more than +2%.

Chuy’s Holdings (CHUY) surged about +47% in pre-market trading after Darden Restaurants agreed to acquire the company for $37.50 per share in an all-cash deal with an enterprise value of about $605 million.

Doximity (DOCS) slid over -3% in pre-market trading after Wells Fargo downgraded the stock to Underweight from Equal Weight with a price target of $19.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - July 18th

Netflix (NFLX), Abbott Labs (ABT), Blackstone (BX), Intuitive Surgical (ISRG), Marsh McLennan (MMC), Cintas (CTAS), DR Horton (DHI), PPG Industries (PPG), M&T Bank (MTB), Textron (TXT), Domino’s Pizza Inc (DPZ), KeyCorp (KEY), Snap-On (SNA), Western Alliance (WAL), Commerce Bancshares (CBSH), Hexcel (HXL), Alaska Air (ALK), Glacier (GBCI), Virtu Financial Inc (VIRT), ManpowerGroup (MAN), Texas Capital (TCBI), AAR (AIR), BankUnited (BKU), WNS Holdings (WNS), OFG Bancorp (OFG), Forestar (FOR), S&T Bancorp (STBA), Berkshire Hills Bancorp (BHLB), OceanFirst (OCFC), Scholastic (SCHL), Karooooo (KARO), Insteel Industries (IIIN), Metropolitan Bank (MCB), South Plains Financial (SPFI), Resources Connection (RGP), Alpine Income (PINE).

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.
Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.