Five things you need to know before the market opens on Tuesday August 1:
1. -- Stock Futures Lower As Global Factory Activity Slumps, Earnings Loom
U.S. equity futures moved lower Tuesday, while the dollar added to recent gains against its global peers and Treasury bond yields steadied, as investors looked to a busy earnings slate while tracking weakening growth prospects in major economies around the world.
Factory activity from China, published late Monday, showed the manufacturing sector contacted over the month of July as the country's uneven post-Covid recovery continues to threaten growth in the world's second largest economy.
In Europe, meanwhile, a benchmark factory activity gauge slumped to the lowest levels since May of 2020 as demand fades and financing becomes more challenging amid the European Central Bank's aggressive rate hikes.
U.S. growth, however, remains surprisingly resilient, with the Atlanta Fed's GDPNow forecasting tool indicating the economy is advancing at a 3.5% clip, following on from the 2.4% gain estimated for the second quarter.
S&P Global will publish its PMI reading for the manufacturing sector at 9:45 am Eastern time, with the Institute For Supply Management reporting separate figures at 10:00 am.
Prior to that, the earnings season will continue to dictate trading on Wall Street this week with 169 companies reporting June quarter profits, including Merck (MRK) -), Pfizer (PFE) -), Caterpillar and Uber (UBER) -) prior to the opening bell.
With just over half of the S&P 500 reporting June quater earnings so far, corporate earnings have surprised to the upside with 78.7% of companies topping Wall Street forecasts compared to the four-quarter average of 73.4%.
Collective S&P 500 profits however, are still forecast to fall 6.4% from last year to a share-weighted $437.1 billion, before rebounding modestly with a 1.1% gain over the three months ending in September.
Heading into the start of trading on Wall Street, futures contracts tied to the S&P 500 are indicating a 13.5 point opening bell decline while those linked to the Dow Jones Industrial Average were priced for a 105 point pullback. Nasdaq futures were down 60 points.
Bond yields remained elevated, but slipped modestly lower compared to Monday's levels following the weaker run of manufacturing PMI data, with 2-year notes trading at 4.873% in overnight dealing and 10-year paper pegged at 3.975%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.28% higher at 102.144.
In Europe, the region-wide Stoxx 600 fell 0.62% in early trading while Britain's FTSE 100 was marked 0.06% lower in London.
In overnight trading, the MSCI ex-Japan index was marked 0.33% lower heading into the close of trading while Japan's Nikkei 225 rose 0.92% to close at 33,476.58 points.
2. -- Caterpillar Order Book, China Demand In Focus For Q2 Earnings
Caterpillar (CAT) -) shares moved lower in pre-market trading ahead of the industrial group's second quarter earnings prior to the opening bell.
Caterpillar is expected to post a bottom line of $4.58 per share, up 44% from last year, with revenues rising 16% to $16.5 billion, thanks in part to boost in demand for construction equipment linked to President Joe Biden's $1 trillion "once in a generation" infrastructure bill passed in late 2021.
An uneven recovery post-Covid recovery in China, as well as softening growth prospects in major economies around the world, could pressure the group's farm equipment sales, while investors will also be looking for gains in Caterpillar's overall order backlog, which flattened at around $30 billion over the three months ending in March.
Caterpillar shares, which have risen nearly 23% since the group's first quarter earnings in late April, were marked 0.4% lower in pre-market trading to indicate an opening bell price of $264.10 each.
3. -- AMD Earnings To Higher AI Potential As Market Awaits New Chips
Advanced Micro Devices (AMD) -) shares edged lower in pre-market trading ahead of the chipmaker's second quarter earnings after the closing bell.
AMD, which revealed its latest AI chip in move it hopes will challenge the market leadership or its trillion-dollar rival Nvidia NVDA early last month, is forecast to see earnings fall 45% from last year to 57 cents per share on revenues of $5.31 billion amid a slump in gaming chip and client segment sales.
The group's AI potential, however, as well as its leadership in data center chips is likely to drive a solid second half outlook, with CEO Lisa Su forecasting the overall market to grow to around $150 billion by 2027.
The new chips are expected to ship in volumed by the fourth quarter of this year, with reports suggesting Amazon (AMZN) -) and Microsoft (MSFT) -) could be potential customers.
Advanced Micro Devices shares were marked 0.1% lower in pre-market trading to indicate an opening bell price of $114.29 each.
4. -- Starbucks Reports After The Bell With China, Labor Relations, Outlook In Focus
Starbucks (SBUX) -) shares edged higher in pre-market trading as the world's biggest coffee chain prepares to publish its third quarter earnings after the close of the session.
Starbucks is expected to post a bottom line of 95 cents per share, up 13.1% from last year, on revenues of $9.3 billion, helped in part by a consumer recovery in China and normalizing 'work from office' trends in the United States.
Beyond the business mechanics, however, CEO Laxman Narasimhan, who took over from interim boss and Starbucks founder Howard Schultz on March 20, will need to address the group's labor practices amid the unionization of hundreds of U.S. cafes and numerous complaints filed by the National Labor Relations Board.
Shareholders voted in late March, in fact, to approve a proposal that would compel Starbucks to conduct an independent, third-part assessment of its labor practices.
Starbucks shares were marked 0.18% higher in pre-market trading to indicate an opening bell price of $101.75 each.
5. -- Fed Loan Officers' Survey Shows Tighter Credit Conditions, Easing Demand
U.S. banks are demanding stricter standards before handing out new loans, while demand for credit continues to fade into the summer months, according to a benchmark survey published late Monday by the Federal Reserve.
The Fed's Senior Loan Officers' Survey, published each quarter, appeared to indicate that the fallout from the collapse of Silicon Valley Bank in early March, as well as stresses across the regional banking system, continue to echo throughout the U.S. financial system.
Recession risks, as well as the impact of the Fed's aggressive rate hikes, which took the Fed Funds rate to the highest levels in 22 years last week, were also noted in the report.
Just over half of the banks polled said they're tightened credit conditions when compared to the first quarter for commercial and industrial loans for small-and-medium sized business, up from 46% over the three months ending in March.
"The most cited reasons for expecting to tighten lending standards were a less favorable or more uncertain economic outlook, an expected deterioration in collateral values, and an expected deterioration in credit quality of (commercial real estate) and other loans," the survey said.
