S&P Futures Tick Higher Ahead of FOMC Meeting, Microsoft and Alphabet Earnings on Tap

September S&P 500 futures (ESU23) are trending up +0.09% this morning as market participants braced for interest rate decisions from major central banks, including the U.S. Federal Reserve, and a deluge of quarterly reports from heavyweight names.

In Monday’s trading session, Wall Street’s major indexes ended higher, with the blue-chip Dow rising to a 1-1/4 year high. Chevron Corp (CVX) climbed about +2% and was among the top percentage gainers on the Dow after the oil giant reported better-than-expected preliminary Q2 earnings. Also, Mattel Inc (MAT) gained more than +1% after the “Barbie” movie recorded an impressive $155M at the U.S. box office, making it the largest domestic debut of the year. In addition, energy stocks advanced as the price of WTI crude rose over +2% to a 3-month high. On the bearish side, Gilead Sciences Inc (GILD) fell more than -3% after the company decided to discontinue a Phase 3 study of magrolimab for higher-risk myelodysplastic syndromes due to futility.

Data on Monday showed S&P Global U.S. Composite PMI fell to a 5-month low of 52.0 in July, weaker than expectations of 53.1. Also, U.S. July Services PMI came in at 52.4, weaker than expectations of 54.0. At the same time, U.S. Manufacturing PMI unexpectedly rose to 49.0 in July, stronger than expectations of 46.4.

Meanwhile, second-quarter corporate earnings season is gathering pace, with high-profile mega-caps like Microsoft (MSFT), Alphabet (GOOGL), and Visa (V) set to report their quarterly figures today. Analysts expect aggregate S&P 500 earnings to notch a 7.9% year-over-year decline for the quarter, compared with an expected drop of 5.7% at the start of July.

The Federal Reserve kicks off its two-day meeting later in the day, with investors widely expecting the U.S. central bank to raise rates by 25 basis points on Wednesday. Also, a majority of economists anticipate that this would be the final hike in the Federal Reserve’s most aggressive monetary policy tightening cycle in decades, given recent inflation data indicating a moderation.

“The last couple of weeks have seen some very positive news on global inflation. That’s raised hopes that a soft landing might be possible after all, despite the most aggressive cycle of rate hikes in decades. But we’re not out of the woods yet, and growing complacency on inflation risks creating surprises down the tracks,” said Henry Allen, a macro strategist at Deutsche Bank.

Today, all eyes are focused on U.S. CB Consumer Confidence data in a couple of hours. Economists, on average, forecast that July CB Consumer Confidence will come in at 111.8, compared to the previous value of 109.7.

Also, investors will likely focus on the U.S. S&P/CS HPI Composite - 20 n.s.a., which stood at -1.7% y/y in April. Economists foresee the May figure to be -2.2% y/y.

U.S. Richmond Manufacturing Index will be reported today as well. Economists expect July’s figure to be -10, compared to the previous number of -7.

In the bond markets, United States 10-Year rates are at 3.892%, up +0.91%.

The Euro Stoxx 50 futures are up +0.16% this morning as investors digested major corporate earnings reports and awaited crucial central bank meetings scheduled for later in the week. Healthcare stocks underperformed on Tuesday, while mining and luxury stocks gained ground following China’s latest stimulus pledge. In corporate news, shares of Unilever Plc (ULVR.L.EB) climbed over +5% after the consumer giant reported better-than-expected underlying sales growth in Q2. Also, Adidas Ag (ADS.D.DX) gained about +5% after the German sportswear maker improved its full-year guidance.

Germany’s Ifo Business Climate Index, Germany’s Business Expectations, and Germany’s Current Assessment data were released today.

The German July Ifo Business Climate Index has been reported at 87.3, weaker than expectations of 88.0.

The German July Business Expectations stood at 83.5, stronger than expectations of 83.4.

The German July Current Assessment came in at 91.3, weaker than expectations of 93.0. 

Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +2.13%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.06%.

China’s Shanghai Composite today closed sharply higher and snapped a six-day losing streak following the commitment of the country’s top leaders to step up policy support and strengthen the post-COVID economic recovery. China’s Politburo, the country’s top decision-making body, held a meeting on Monday and pledged additional policy measures to bolster economic growth, which has been experiencing a slowdown in recent months. The Communist Party’s top decision-making body indicated increased support for the struggling real estate sector and committed to boosting consumption and addressing local government debt issues. On the ground of this, property developers’ stocks surged in both the Hong Kong and mainland markets, with Longfor Properties and Country Garden Services climbing more than +25%. Hong Kong-listed tech stocks also gained ground, with the Hang Seng TECH Index soaring about +6%. 

“For the property sector, the country’s top policymakers did not reiterate the previously-repeated message of housing is for living in but not for speculation,” Jizhou Dong, a head of China property research at Nomura Holdings Inc., wrote in a note.

At the same time, Japan’s Nikkei 225 Stock Index closed slightly lower today as investors exercised caution and locked in some profits in anticipation of interest rate decisions from major central banks. The Bank of Japan is scheduled to hold a two-day policy meeting starting on Thursday, and it is widely anticipated that the bank will maintain its ultra-low rate policy. Meanwhile, Japanese heavyweight technology stocks underperformed on Tuesday. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +0.25% to 19.86.

“The market consensus is that the BOJ will keep its monetary policy unchanged, but the outcome may be the opposite. It is hard to make a move also during the earnings season,” said Takehiko Masuzawa, a trading head at Phillip Securities Japan.

Pre-Market U.S. Stock Movers

F5 Networks Inc (FFIV) climbed over +11% in pre-market trading after the company posted upbeat Q3 results and provided solid Q4 guidance.

Datadog Inc (DDOG) rose more than +3% in pre-market trading after Wolfe Research upgraded the stock to Outperform from Peer Perform.

Walmart Inc (WMT) gained about +1% in pre-market trading after Piper Sandler upgraded the stock to Overweight from Neutral.

NXP Semiconductors NV (NXPI) rose over +2% in pre-market trading after the company reported upbeat Q2 results and issued a strong Q3 forecast. 

Zevia Pbc (ZVIA) tumbled more than -23% in pre-market trading after the company cut its Q2 and FY23 net sales outlook. Also, Goldman Sachs downgraded the stock to Neutral from Buy.

Walt Disney Company (DIS) fell about -0.8% in pre-market trading after Atlantic Equities downgraded the stock to Underweight from Neutral.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - July 25th

Microsoft (MSFT), Alphabet (GOOGL), Visa A (V), Danaher (DHR), Texas Instruments (TXN), NextEra Energy (NEE), Verizon (VZ), Rtx Corp (RTX), General Electric (GE), Chubb (CB), Canadian National Railway (CNI), Waste Management (WM), Sherwin-Williams (SHW), Moody’s (MCO), UBS Group (UBS), 3M (MMM), General Motors (GM), Kimberly-Clark (KMB), Archer-Daniels-Midland (ADM), Nucor (NUE), MSCI (MSCI), Biogen (BIIB), Dow (DOW), CoStar (CSGP), Spotify Tech (SPOT), Corning (GLW), Dover (DOV), Snap (SNAP), Hubbell (HUBB), PulteGroup (PHM), TransUnion (TRU), EQT (EQT), Avery Dennison (AVY), Albertsons (ACI), Manhattan Associates (MANH), Ares Capital (ARCC), Universal Health Services (UHS), Renaissancere (RNR), Logitech (LOGI), Robert Half (RHI), Invesco (IVZ), EastGroup Properties (EGP), Polaris Industries (PII), Sensata Tech (ST), Alaska Air (ALK), Matador (MTDR), Weatherford (WFRD), Nextera Energy Partners LP (NEP), Crane (CR), Asbury Automotive (ABG), Tenable (TENB), Franklin Electric (FELE), Ashland Global (ASH), GATX (GATX), Merit (MMSI), Old National Bancorp (ONB), Life Time Holdings (LTH), Teladoc Inc (TDOC), Herc Holdings (HRI), Armstrong World Industries (AWI), PJT Partners Inc (PJT), Site Centers (SITC), Encore Wire (WIRE), Highwoods Properties (HIW), Vicor (VICR), Nextier Oilfield Solutions (NEX), Simmons First National (SFNC), AtriCure (ATRC), Xerox (XRX), Atlantic Union (AUB), Cal-Maine (CALM), BankUnited (BKU), First Merchants (FRME), Retail Opportunity (ROIC), Enova International Inc (ENVA), American Assets (AAT), Renasant (RNST), WesBanco (WSBC), PROS (PRO), Trustmark (TRMK), First Commonwealth Financial (FCF), Live Oak Bancshares Inc (LOB), CTS Corp (CTS), Kaiser (KALU), USANA Health Sciences (USNA), Nexpoint Residential Trust Inc (NXRT), PacWest (PACW), Nabors Industries (NBR), Sandy Spring (SASR), Veritex Holdings Inc (VBTX), Kiniksa Pharma (KNSA).

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