Five things you need to know before the market opens on Thursday August 3:
1. -- Stock Futures Slip, Treasury Yields Extend Surge From Fitch Fallout
Wall Street futures extended declines Thursday, while the dollar traded at the highest levels in month against its global peers, as investors continue to react to the fallout from Fitch's decision to lower its triple-A credit rating on U.S. debt.
Bond markets are selling-off sharply for a second consecutive session, with benchmark 10-year Treasury note yields rising to 4.17% in overnight trading, the highest in nine months, following both the Fitch decision and a stronger-than-expected reading from ADP's National Employment report on Wednesday, which showed 324,000 new private sector jobs added to the economy last month.
Yields were also pressured by the Treasury's decision to boost the size of its quarterly refunding schedule by 7.3%, to $103 billion, leading to largely monthly auctions of its various coupon-bearing bonds.
Benchmark 2-year notes were marked at 4.901% in overnight dealing, while safe-haven trading amid the global market selloff lifted the U.S. dollar index to a four-week high of 102.790 in Asia dealing.
Labor market data will likely be a market focus again today with Challenger Gray posting its monthly tally of job cuts at 7:00 am Eastern time and the Labor Department publishing its weekly jobless claims figures at 8:30 am Eastern time.
The Bank of England is also expected to deliver its 14th consecutive rate increase prior to the start of trading on Wall Street, raising by a quarter point in a move that would take its key Bank Rate to 5.25%, the highest in 15 years, as it continues to fight against the fastest inflation rates in the developed world.
The decision is expected at 7:00 am Eastern time, with Governor Andrew Bailey's press conference expected 30 minutes later.
Heading into the start of the trading session, futures contracts tied to the S&P 500, which suffered its first loss of more than 1% in 47 sessions last night, are indicating a 10 point opening bell decline.
Contracts linked to the Dow Jones Industrial Average were priced for a 65 point pullback while futures for the tech-focused Nasdaq futures were down 45 points.
In Europe, the region-wide Stoxx 600 fell 0.94% in early Frankfurt trading, putting the benchmark on pace for its worst three-day decline since March, while Britain's FTSE 100 fell 1.16% in London ahead of the BoE rate decision.
Overnight in Asia, stocks were mixed, with solid data from China's services sector offsetting the risk-off sentiment linked to the Fitch downgrade. The MSCI ex-Japan index was marked 0.56% lower into the close of the session while the Nikkei 225 fell 1.68% in Tokyo.
2. -- Apple Earnings In Focus As Smartphone Demand Weakens
Apple (AAPL) -) shares slipped in pre-market trading ahead of the tech giant's highly-anticipated third quarter earnings slated for after the closing bell.
Apple is likely to post a bottom line of $1.19 per share, just a penny shy of last year's tally, with group revenues down 1.5% to $81.69 billion.
Analysts expect iPhone sales to fall around 2% from last year to $39.9 billion, lead by declines in North America and partly offset by improving demand in post-Covid China and emerging markets such as India.
Services revenues may end up being on of Apple's bright spots, with cloud, music, pay and television revenues likely to rise 6.1% to $20.8 billion. Looking ahead, however, investors will be keen to hear management's view on the impact of the Hollywood writers' strike, which is supported by the actors' union, on its AppleTV content lineup heading into the autumn.
Apple's AI ambitions will also be in focus following reports that the tech giant is developing generative AI tools to challenge Google's Bard and OpenAI's ChaptGPT.
Apple shares were marked 0.6% lower in pre-market trading to indicate an opening bell price of $191.42 each.
3. -- Amazon Earnings To Highlight Consumer Spending, AI Trends
Amazon (AMZN) -) shares were little-changed in pre-market trading ahead of the online retail and web services giant's second quarter earnings after the closing bell.
Amazon, the fifth of the co-called 'Magnificent Seven' mega-cap tech companies to report June quarter earnings this far, is expected to post net income of 35 cents per share, up from last year's loss of 20 cents per share, on revenues of $131.7 billion.
Amazon itself forecast operating income of between $2 billion $5 billion on revenues in the range of $127 billion to $133 billion for the three months ending in June following stronger-than-expected first quarter earnings earlier this year.
Amazon Web Services is likely to see growth of around 9.8% over the second quarter, the lowest on record, amid a pullback in enterprise spending. AWS contributed $21.4 billion to the group's overall sales last quarter, a 16% increase from last year, but slowing growth rates and narrowing margins have raised concerns for the division's profitability heading into the second half of 2023.
Amazon shares were marked 0.03% lower in pre-market trading to indicate an opening bell price of $128.17 each.
4. -- PayPal Slumps As Margin Pressures Cloud Earnings, Outlook
PayPal (PYPL) -) shares tumbled in pre-market trading after the online payments group posted in-line second quarter earnings that were clouded by ongoing pressures on its profit margins.
PayPal said adjusted earnings for the three months ending in June rose 24% from last year to $1.16 per share, matching Street forecasts, as revenues climbed 7.4% to $7.3 billion, a tally the group sees edging higher, to $7.4 billion, over the current quarter.
However, PayPal's operating margins -- which expanding 2.2% from last year to 21.4% -- were still light of Street forecasts of around 22%, with CFO Gabrielle Rabinovitch noting further pressures in the September quarter before improving into the final months of the year.
"That said, the overall strength of our business and the momentum we're seeing is allowing us to maintain our operating margin and EPS guidance for the year while we're absorbing this credit pressure," Rabinovitch told analysts on a conference call late Wednesday.
PayPal shares were marked 8% lower in pre-market trading to indicate an opening bell price of $67.30 each.
4. -- Qualcomm Tumbles On Muted Smartphone Chip Forecast
Qualcomm (QCOM) -) shares slumped lower in pre-market trading after the chipmaker forecast weaker near-term sales amid a pullback in smartphone demand following a mixed third quarter earnings update.
Qualcomm posted an adjusted bottom line of $1.87 per share for the three months ending in June, its fiscal third quarter, down 37% from last year but topping Street forecasts. Group revenues were down 23% at $8.45 billion, but narrowly missed analysts' estimates of an $8.5 billion tally.
Looking into the currency quarter, Qualcomm said it sees revenues in the region of $8.1 billion to $8.9 billion with an earnings mid-point of $1.90 per share.
"We continue to estimate that calendar '23 handset units will be down at least a high single-digit percentage relative to calendar '22, reflecting the macro environment and a slower recovery in China," said CFO Akash Palkhiwala. "This forecast contemplates growth in handset units going into the holiday season."
Qualcomm shares were marked 8.5% lower in pre-market trading to indicate an opening bell price of $73.97 each.
