September S&P 500 futures (ESU23) are up +0.46%, and September Nasdaq 100 E-Mini futures (NQU23) are up +0.63% this morning as market participants looked ahead to Federal Reserve Chair Jerome Powell’s speech later in the week, while also gearing up for a fresh batch of economic data.
In Friday’s trading session, Wall Street’s major averages closed mixed, with the benchmark S&P 500 dropping to a 1-1/2 month low and the tech-heavy Nasdaq 100 falling to a 2-month low. Keysight Technologies Inc (KEYS) plunged over -13% after the company posted weaker-than-expected Q4 guidance. Also, megacap technology-related growth stocks retreated, with Alphabet (GOOGL) and Tesla Inc (TSLA) slumping more than -1%. In addition, Estee Lauder Companies Inc (EL) dropped over -3% after the cosmetics maker provided below-consensus FY24 guidance. On the bullish side, Ross Stores Inc (ROST) soared about +5% and was the top percentage gainer on the S&P 500 after the off-price retailer reported upbeat Q2 results and set favorable Q3 comparable sales and EPS guidance. Also, Applied Materials Inc (AMAT) rose over +3% after reporting better-than-expected Q3 results and issuing strong Q4 guidance.
“We’ve long been overdue for a correction in equities, and it's clear that higher rates have now become the catalyst for that. When the opportunity cost for capital becomes more competitive, valuations should correct on risk-bearing assets, especially large-cap equities, which have been trading at significant premiums this year,” said Michael Reynolds, vice president of investment strategy at Glenmede.
In the coming week, investors will be eyeing a spate of economic data, including the U.S. Existing Home Sales, Richmond Manufacturing Index, Building Permits, S&P Global U.S. Manufacturing PMI, S&P Global Composite PMI, S&P Global U.S. Services PMI, New Home Sales, Crude Oil Inventories, Core Durable Goods Orders, Durable Goods Orders, Initial Jobless Claims, and Michigan Consumer Sentiment.
In addition, investors will be closely monitoring a speech by Federal Reserve Chair Jerome Powell at the Jackson Hole economic symposium on Friday, seeking insights into the economic outlook and the future trajectory of interest rates.
Meanwhile, U.S. rate futures have priced in an 11.5% probability of a 25 basis point rate increase at September’s monetary policy meeting and a 32.3% chance of a 25 basis point rate hike at the November FOMC meeting.
On the earnings front, notable tech players like Zoom (ZM), NVIDIA (NVDA), Baidu (BIDU), and Snowflake (SNOW), along with retailers including Lowe’s (LOW), Macy’s (M), Dick’s Sporting Goods (DKS), and Gap Inc (GPS), are scheduled to release their quarterly results this week.
The U.S. economic data slate is empty on Monday.
In the bond markets, United States 10-Year rates are at 4.290%, up +0.94%.
The Euro Stoxx 50 futures are up +0.95% this morning as investors digested a hefty drop in German producer prices while also awaiting a speech by Federal Reserve Chair Jerome Powell later in the week. Gains in energy and healthcare stocks are leading the overall market higher. Data on Monday showed that German producer prices in July fell more than expected. Meanwhile, investor focus shifts to the Kansas City Fed’s annual symposium in Jackson Hole on Friday, with Powell’s speech holding significant importance for insights into the central bank’s policy outlook. In corporate news, Novo Nordisk A/S (NOVOB.C.DX) rose about +2% after Morgan Stanley raised its price target on the drugmaker. Also, Saipem Spa (SPM.M.DX) climbed more than +4% after JPMorgan assumed coverage on the stock with an Overweight rating.
Germany’s PPI data was released today.
The German July PPI has been reported at -1.1% m/m and -6.0% y/y, weaker than expectations of -0.2% m/m and -5.1% y/y.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed down -1.24%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.37%.
China’s Shanghai Composite today closed lower after the central bank cut its key lending rates by a smaller-than-expected margin, while the country’s sluggish economic recovery and property woes continued to weigh on sentiment. The People’s Bank of China cut the one-year loan prime rate by 10 basis points and kept the five-year prime loan rate unchanged. Analysts had expected a 15-basis-point cut on both rates. Meanwhile, Goldman Sachs Group Inc. cut its full-year earnings-per-share growth estimate for MSCI China to 11% from 14% amid renewed property contagion concerns. It also revised its 12-month index target downward from 70 to 67. On the positive side, China’s securities regulator introduced a package of measures on Friday aimed at reviving a sinking stock market, which encompassed reducing trading costs, backing share buybacks, and promoting long-term investment.
“The government’s policy support has arguably been less than was indicated earlier in the year. Largely due to a weaker property sector with little additional offset, but also foreseeing softer external demand, we downgrade China’s GDP growth forecasts to 4.8% for 2023 and 4.2% for 2024,” said UBS economists led by Tao Wang.
At the same time, Japan’s Nikkei 225 Stock Index closed slightly higher today, snapping a three-day losing streak as investors proceeded cautiously following significant losses last week and shrugged off disappointment regarding a modest rate cut in China. The Nikkei had briefly dipped into negative territory following China’s central bank decision to reduce its one-year lending rate by 10 basis points while keeping its five-year rate unchanged. Meanwhile, utilities and energy stocks outperformed on Monday, with Tokyo Electric Power Co climbing over +4%. In other news, BofA Global Research strategists anticipate that Japanese companies will raise their full-year forecasts when reporting interim results, potentially leading to a surge in the market in the October to December period based on their analysis of April-June earnings. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +2.15% to 19.94.
Pre-Market U.S. Stock Movers
Palo Alto Networks Inc (PANW) surged over +12% in pre-market trading after the cybersecurity company posted mixed Q4 results but provided a strong FY24 billings forecast.
NAPCO Security Technologies Inc (NSSC) tumbled about -30% in pre-market trading following the company’s revelation of errors in its previous financial statements that resulted in overstated figures for the first three quarters of fiscal 2023.
Cogent Communications Holdings Inc (CCOI) rose more than +1% in pre-market trading after Goldman Sachs upgraded the stock to Neutral from Sell.
NVIDIA Corporation (NVDA) gained over +1% in pre-market trading after HSBC raised its price target on the stock to $780 from $600.
Xpeng Inc (XPEV) climbed more than +5% in pre-market trading after BofA upgraded the stock to Buy from Neutral.
Medical Properties Trust Inc (MPW) fell over -4% in pre-market trading after JPMorgan downgraded the stock to Underweight from Neutral.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - August 21st
Zoom Video (ZM), Nordson (NDSN), Fabrinet (FN), Lufax (LU), GDS Holdings (GDS), Nano Dimension (NNDM), Faraday Future Intelligent Electric (FFIE), Jiayin (JFIN).
More Stock Market News from Barchart
- Jackson Hole Meeting, Earnings and Other Key Themes to Watch This Week
- Chevron Stock Still Looks Cheap To Value Investors and Short-Put Traders
- Unveiling a Bullish Seasonal Pattern: Can it Save the Stock Market?
- Stocks Settle Mixed on Lower Bond Yields
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.
/AI%20(artificial%20intelligence)/AI%20technology%20concept%20by%20NMStudio789%20via%20Shutterstock.jpg)
