September S&P 500 futures (ESU23) are trending up +0.26% this morning as market participants awaited Federal Reserve Chair Jerome Powell’s speech for further clues on the outlook for interest rates.
In Thursday’s trading session, Wall Street’s major indexes closed in the red, with the blue-chip Dow dropping to a 6-week low. Dollar Tree Inc (DLTR) tumbled over -12% and was the top percentage loser on the benchmark S&P 500 after the retailer’s full-year earnings forecast fell short of analyst estimates. Chip stocks also retreated, with Advanced Micro Devices Inc (AMD) falling about -7% and Marvell Technology Inc (MRVL) dropping over -6%. In addition, Boeing Co (BA) slid more than -4% following a warning from the U.S. aircraft manufacturer about delays in near-term deliveries of 737 MAX jets due to a new quality problem involving its biggest supplier, Spirit AeroSystems. On the bullish side, Guess? Inc (GES) climbed +26% after the company posted upbeat Q2 results and raised its FY24 guidance.
The Labor Department’s report on Thursday showed claims for state unemployment benefits unexpectedly fell -10K to 230K last week, stronger than expectations of 240K, indicating continued resilience in the labor market. At the same time, U.S. Durable Goods Orders came in at -5.2% m/m in July, weaker than expectations of -4.0% m/m.
Boston Fed President Susan Collins said Thursday that the central bank might raise interest rates further and would likely need to keep rates elevated for a prolonged duration, even if it chooses not to implement another increase in the upcoming months. “We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time,” Collins said. Also, former St. Louis Fed President James Bullard suggested that a pickup in economic activity during the summer might potentially lead to a postponement of the Federal Reserve’s intentions to conclude its interest-rate increases. At the same time, Philadelphia Fed President Patrick Harker reiterated his stance that the Fed has “probably done enough” on tightening policy and should keep interest rates on hold for the rest of this year.
Meanwhile, U.S. rate futures have priced in a 19.5% probability of a 25 basis point rate increase at September’s monetary policy meeting and a 41.7% chance of a 25 basis point rate hike at the November FOMC meeting.
Today, market participants will be closely monitoring Federal Reserve Chair Jerome Powell’s speech at an annual central bank summit in Jackson Hole, seeking further clarity on the direction of U.S. interest rates. According to a survey conducted by 22V Research, 78% of investors anticipate that Powell will focus on data dependency.
Also, investors will likely focus on the U.S. Michigan Consumer Sentiment index, which stood at 71.6 in July. Economists foresee the August figure to be 71.2.
In the bond markets, United States 10-year rates are at 4.250%, up +0.42%.
The Euro Stoxx 50 futures are up +0.42% this morning, with investors shifting their attention to Jackson Hole, where the heads of the Federal Reserve and the European Central Bank are scheduled to deliver speeches later in the day. Gains in mining and energy stocks are leading the overall market higher. Data from the statistics office showed on Friday that the German economy stagnated in the second quarter compared to the previous three months, following a winter recession. Meanwhile, ECB Governing Council member Joachim Nagel expressed skepticism about inflation being sufficiently contained to warrant a pause in interest rate hikes. Also, the speech by ECB President Christine Lagarde at the annual gathering of top central bankers in Jackson Hole will be closely monitored for clues on the outlook for monetary policy. In corporate news, Watches of Switzerland Group Plc (WOSG.LN) tumbled over -24% after one of its rivals, Bucherer AG, agreed to sell itself to watchmaker Rolex SA.
Germany’s GDP, Germany’s Ifo Business Climate Index, Germany’s Business Expectations, and Germany’s Current Assessment data were released today.
The German GDP has been reported at 0.0% q/q and -0.2% y/y in the second quarter, in line with expectations.
The German August Ifo Business Climate Index came in at 85.7, weaker than expectations of 86.7.
The German August Business Expectations stood at 82.6, weaker than expectations of 83.8.
The German August Current Assessment arrived at 89.0, weaker than expectations of 90.0.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.59%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.05%.
China’s Shanghai Composite closed lower today as investors prepared for the potential of a more hawkish stance in U.S. monetary policy, while persistent worries about China’s economic weakness continued to weigh on sentiment. China’s securities watchdog said it had met the country’s social security fund as well as big banks and insurers to encourage the inflow of long-term capital into the stock market. Also, Chinese authorities have eased mortgage requirements, extending favorable mortgage conditions previously available only to first-time homebuyers to a wider range of home purchasers, the state-run Xinhua News Agency said on Friday. Meanwhile, Morgan Stanley lowered its price targets for major Chinese and Hong Kong stock indexes for the second time in three months. The bank reduced its base-case June 2024 target for the MSCI China index to 60, a 14% decrease from its previous estimate, as stated in a research note on Thursday. Morgan Stanley also revised down its base-case June 2024 targets for the Hang Seng Index, Hang Seng China Enterprises Index, and CSI 300 indexes to 18,500, 6,450, and 4,000, respectively. In corporate news, Meituan plunged over -5% after the company issued a caution about a deceleration in growth for its core meal delivery business.
Japan’s Nikkei 225 Stock Index closed sharply lower today due to steep losses in tech stocks, while concerns over worsening trade ties with China also weighed on sentiment. Government data showed on Friday that core inflation in Japan’s capital decelerated in August but remained well above the central bank’s 2% target. Meanwhile, chip-testing equipment maker Advantest tumbled about -10%, while chipmaking equipment maker Tokyo Electron plunged more than -5%. Also, technology investor SoftBank Group slid over -3%. In other news, China banned the import of seafood from Japan, expressing apprehensions about radioactive pollution, as Japan began the discharge of contaminated water from the Fukushima plant into the Pacific Ocean. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +5.53% to 18.88.
The Japanese August Tokyo Core CPI stood at +2.8% y/y, weaker than expectations of +2.9% y/y.
Pre-Market U.S. Stock Movers
Affirm Holdings Inc (AFRM) climbed over +9% in pre-market trading after the provider of buy now, pay later financing posted upbeat Q4 results and provided above-consensus Q1 revenue guidance.
Marvell Technology Inc (MRVL) slid more than -4% in pre-market trading after the semiconductor company posted Q2 results and Q3 guidance that was largely in-line with expectations.
Hawaiian Electric Industries Inc (HE) tumbled over -18% in pre-market trading following the announcement that the company would suspend its quarterly cash dividend starting from the Q3 payout period. Also, Maui County filed a lawsuit Thursday against the company, alleging the utility’s power lines caused the recent wildfires on the island.
Domo Inc (DOMO) plunged more than -26% in pre-market trading after the company issued downbeat FY24 guidance.
Ardelyx Inc (ARDX) rose over +2% in pre-market trading after Cantor Fitzgerald upgraded the stock to Overweight from Neutral.
Olaplex Holdings Inc (OLPX) fell more than -5% in pre-market trading after Piper Sandler downgraded the stock to Underweight from Neutral.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - August 25th
Dell Tech (DELL), Tsingtao Brewery Co (TSGTY), Ubiquiti (UI), Elastic (ESTC), Domo (DOMO), Hibbett Sports (HIBB), Akebia Ther (AKBA).
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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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