September S&P 500 futures (ESU23) are down -0.45%, and September Nasdaq 100 E-Mini futures (NQU23) are down -0.49% this morning as fresh worries about China’s economic rebound and the state of U.S. banks weighed on sentiment.
Moody’s Investors Service lowered credit ratings by one notch for 10 small and midsize U.S. banks late Monday and indicated the possibility of downgrading major lenders, including U.S. Bancorp, Bank of New York Mellon Corp., State Street Corp., and Truist Financial Corp. The agency cautioned that the credit strength of the sector might face challenges due to funding risks and weaker profitability. “Many banks’ second-quarter results showed growing profitability pressures that will reduce their ability to generate internal capital,” Moody’s said in a note.
In Monday’s trading session, Berkshire Hathaway Cl A (BRK.A) climbed over +3% after the Warren Buffett-led conglomerate reported stronger-than-expected Q2 operating profit. Also, Sovos Brands Inc (SOVO) surged more than +25% after Campbell Soup agreed to acquire the food company for $23 per share in cash in a deal valued at $2.7B. On the bearish side, Tyson Foods Inc (TSN) slid over -3% after the meat packer posted downbeat Q3 results and said it would shut down four additional chicken facilities. In addition, Tesla Inc (TSLA) fell about -1% after saying its chief financial officer Zachary Kirkhorn stepped down.
Fed Governor Michelle Bowman on Monday restated her belief that the Federal Reserve may need to raise rates further to completely restore price stability. “I supported raising the federal funds rate at our July meeting, and I expect that additional increases will likely be needed to lower inflation to the FOMC’s goal,” she said. Also, in an interview published on Monday, New York Fed President John Williams expressed his view on the need to maintain a restrictive U.S. monetary policy for some time. He also stated that interest-rate cuts may be warranted next year if inflation slows.
Meanwhile, U.S. rate futures have priced in an 85.5% probability of no hike and a 14.5% chance of a 25 basis point rate increase at September’s monetary policy meeting.
On the earnings front, major companies like Eli Lilly (LLY), United Parcel Service (UPS), Zoetis Inc (ZTS), and Duke Energy (DUK) are slated to release their quarterly results today.
Today, investors are likely to focus on U.S. Trade Balance data. Economists foresee this figure to stand at -65.00B in June, compared to the previous number of -69.00B.
U.S. Wholesale Inventories data will be reported today as well. Economists expect June’s figure to be -0.3% m/m, compared to 0.0% m/m in May.
In addition, market participants will be looking toward speeches from Philadelphia Fed President Patrick Harker and Richmond Fed President Thomas Barkin.
In the bond markets, United States 10-Year rates are at 4.010%, down -1.64%.
The Euro Stoxx 50 futures are down -0.69% this morning as investors digested the credit rating downgrade by Moody’s for 10 small and midsize U.S. banks as well as weaker-than-anticipated Chinese trade data that further dented risk sentiment. Losses in mining and automobile stocks are leading the overall market lower after data showed China’s imports and exports dropped much faster than anticipated in July. Bank stocks are also under pressure today following Moody’s decision to lower credit ratings for 10 small and midsize U.S. banks. Meanwhile, Italy unexpectedly announced a new 40% tax on the “extra profits” of its banks this year. Data on Tuesday showed that German inflation eased in July, confirming preliminary estimates. In corporate news, Glencore Plc (GLEN.LN) plunged over -4% after the global miner said its earnings had halved in the first half.
Germany’s CPI data was released today.
The German July CPI has been reported at +0.3% m/m and +6.2% y/y, in line with expectations.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed down -0.25%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.38%.
China’s Shanghai Composite today closed lower as investors assessed trade data that underscored the decelerating momentum in the world’s second-largest economy. Customs data showed on Tuesday that China’s exports experienced a third consecutive monthly decline in July due to a slump in global demand, while imports saw a sharp drop due to domestic pressures, further impacting the country’s economic recovery. The data heightened worries as indications of deflationary pressures continue to hit Chinese businesses in the face of weakening growth. Meanwhile, shares of mainland property developers listed in Hong Kong plunged on Tuesday, with Longfor Group Holdings Ltd dropping over -4% and Country Garden Holdings Co Ltd tumbling more than -14%. Focus is now squarely on Chinese inflation data due on Wednesday.
The Chinese July Trade Balance has been reported at $80.60B, stronger than expectations of $70.60B.
The Chinese July Exports stood at -14.5% y/y, weaker than expectations of -12.5% y/y.
The Chinese July Imports came in at -12.4% y/y, weaker than expectations of -5.0% y/y.
At the same time, Japan’s Nikkei 225 Stock Index closed slightly higher today, tracking overnight gains on Wall Street, although caution prevailed due to the impending peak of the domestic earnings season this week. The labor ministry said Tuesday that the growth in wages for Japanese workers unexpectedly decelerated in June, suggesting a potential slowdown in the labor market. Also, government data showed on Tuesday that Japan’s current account balance maintained a surplus for the fifth consecutive month in June as the trade balance swung to a surplus. Meanwhile, a weaker yen boosted export-oriented stocks. In corporate news, Comsys Holdings Corp climbed about +9% after the engineering company posted favorable earnings. On the negative side, chip-related stocks underperformed, with Advantest falling more than -4%. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -1.18% to 20.13.
The Japanese June Average Cash Earnings arrived at +2.3% y/y, stronger than expectations of +1.6% y/y.
The Japanese June Household Spending stood at +0.9% m/m and -4.2% y/y, compared to expectations of +0.3% m/m and -4.1% y/y.
The Japanese June Current Account n.s.a. came in at 1.509T, stronger than expectations of 1.395T.
Pre-Market U.S. Stock Movers
Chegg Inc (CHGG) surged over +24% in pre-market trading after the company reported stronger-than-expected Q2 revenue and highlighted its utilization of AI capabilities.
Alteryx Inc (AYX) plunged more than -26% in pre-market trading after the company issued a weaker-than-expected Q3 forecast.
Maravai Lifesciences Holdings Inc (MRVI) slid over -15% in pre-market trading after the company reported downbeat Q2 results and cut its annual guidance.
Beyond Meat Inc (BYND) fell about -16% in pre-market trading after the company reported mixed Q2 results and warned it would miss its cash flow target.
Lucid Group Inc (LCID) rose over +2% in pre-market trading after the EV maker posted weaker-than-expected Q2 results but said it’s on track to produce more than 10,000 vehicles this year.
Home Depot Inc (HD) dropped more than -1% in pre-market trading after Telsey Advisory downgraded the stock to Market Perform from Outperform.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - August 8th
Eli Lilly (LLY), United Parcel Service (UPS), Zoetis Inc (ZTS), Duke Energy (DUK), Transdigm (TDG), Li Auto (LI), Datadog (DDOG), Restaurant Brands Int (QSR), Globalfoundries (GFS), Coupang LLC (CPNG), Sun Life Financial (SLF), Barrick Gold (GOLD), Chunghwa Telecom (CHT), Franco-Nevada (FNV), Take-Two (TTWO), Rivian Automotive (RIVN), Horizon Therapeutics (HZNP), Broadridge (BR), Expeditors Washington (EXPD), Royalty Pharma (RPRX), Super Micro Computer (SMCI), Insulet (PODD), FleetCor (FLT), Brazilian Electric Power DRC (EBR), Fox Corp A (FOXA), Jacobs Engineering (J), Bentley (BSY), Warner Music (WMG), Akamai (AKAM), Axon Enterprise (AXON), Bio-Techne (TECH), Twilio (TWLO), Endeavor Group (EDR), Darling Ingredients (DAR), Fidelity Financial (FNF), Celsius (CELH), Western Midstream Partners (WES), Toast (TOST), Qiagen (QGEN), Aramark Holdings (ARMK), TPG Inc (TPG), NRG (NRG), Liberty Latin America (LILA), AMC Entertainment (AMC), Healthcare RT (HR), Ingredion (INGR), NewYork Times (NYT), GlobalE Online (GLBE), Nexstar (NXST), Light Wonder (LNW), Choice Hotels (CHH), Masimo (MASI), Sealed Air (SEE), Novanta (NOVT), Medical Properties (MPW), New Fortress Energy (NFE), ADT (ADT), Duolingo (DUOL), Halozyme (HALO), Atkore Intl (ATKR), Organon Co (OGN), Quidel (QDEL), Dutch Bros (BROS), Upstart (UPST), Clearway Energy C (CWEN), Perrigo (PRGO), Inter Parfums (IPAR), Azek Company (AZEK), Haemonetics (HAE), Squarespace (SQSP), Capri Holdings (CPRI), Howard Hughes (HHC), LYFT (LYFT), Playtika (PLTK), Diodes (DIOD), Braskem A (BAK), Assured Guaranty (AGO), Flywire (FLYW), Brighthouse Financial (BHF), Amicus (FOLD), Callaway Golf (MODG), F G Annuities Life (FG), SeaWorld Entertainment (SEAS), LCI Industries (LCII), Bumble (BMBL), Revolution Med (RVMD), Blackline (BL), Grocery Outlet (GO), Allete (ALE), Hostess Brands (TWNK), Hecla Mining (HL), Rocket Lab USA (RKLB), Azenta (AZTA), Amphastar P (AMPH), Genworth (GNW), LegalZoom.com (LZ), Enpro Industries (NPO), Macerich (MAC), Hagerty (HGTY), Marqeta (MQ), Jackson Financial (JXN), Innospec (IOSP), Array (ARRY), ESCO Technologies (ESE), Knife River (KNF), Triple Flag Precious Metals (TFPM), Energizer (ENR), Marathon Digital (MARA), Rapid7 Inc (RPD), Luminar Tech (LAZR), Jamf (JAMF), Sciplay (SCPL), Tricon Capital Group Inc (TCN), Consol Energy (CEIX), National Health Investors (NHI), Veritiv Cor (VRTV), Masonite Int (DOOR), Olaplex Holdings (OLPX), Eve Holding (EVEX), Thoughtworks Holding (TWKS), Agiliti (AGTI), RadNet (RDNT), Cricut (CRCT), Tecnoglass (TGLS), JBG SMITH Properties (JBGS), Talos Energy (TALO), NeoGenomics (NEO), Hillman Solutions (HLMN), ANGI Homeservices (ANGI), Revance The (RVNC), Adapthealth (AHCO), Iovance Biotherapeutics (IOVA), Veracyte Inc (VCYT), Payoneer Global Inc (PAYO), Supernus (SUPN), Ironwood (IRWD), US Physicalrapy (USPH), Stagwell (STGW), Ziprecruiter (ZIP), Establishment Labs (ESTA), Custom Truck One Source (CTOS).
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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.
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