September S&P 500 E-Mini futures (ESU24) are down -2.48%, and September Nasdaq 100 E-Mini futures (NQU24) are down -4.10% this morning, extending last week’s losses as concerns intensified that the Federal Reserve is lagging in providing policy support for a slowing U.S. economy.
The market turmoil is increasing expectations for an emergency policy response from the Fed. Traders are now assigning a 30% probability to a 25 basis point interest rate cut within a week.
Sentiment was also dampened by news that Berkshire Hathaway Inc. had reduced its stake in Apple by nearly 50% as part of a significant selling spree in the second quarter. As a result, shares of Apple (AAPL) slumped over -7% in pre-market trading.
In Friday’s trading session, Wall Street’s major averages ended in the red, with the benchmark S&P 500 plunging to an 8-week low, the tech-heavy Nasdaq 100 sliding to a 2-month low, and the blue-chip Dow dropping to a 3-week low. Intel (INTC) crashed over -26% and was the top percentage loser on all three major Wall Street averages after the semiconductor giant reported downbeat Q2 results, offered below-consensus Q3 guidance, and said it would cut over 15% of its workforce as well as suspend its dividend. Also, Amazon.com (AMZN) slumped more than -8% after the e-commerce and cloud giant reported weaker-than-expected Q2 revenue and issued disappointing Q3 guidance. In addition, Snap (SNAP) plummeted nearly -27% after the company reported weaker-than-anticipated Q2 revenue and provided gloomy Q3 adjusted EBITDA guidance. On the bullish side, Clorox (CLX) climbed over +7% and was the top percentage gainer on the S&P 500 after reporting better-than-expected Q4 adjusted EPS and offering a strong FY25 adjusted EPS forecast.
The U.S. Labor Department’s report on Friday showed that nonfarm payrolls rose by 114K jobs last month, significantly below the consensus estimate of 176K. Also, the U.S. July unemployment rate unexpectedly climbed to a 2-3/4 year high of 4.3%, weaker than expectations of no change at 4.1%. In addition, U.S. average hourly earnings came in at +0.2% m/m and +3.6% y/y in July, weaker than expectations of +0.3% m/m and +3.7% y/y. Finally, U.S. June factory orders fell -3.3% m/m, weaker than expectations of -2.7% m/m and the biggest decline in 4 years.
“Bad news is no longer good news for stocks,” said John Lynch at Comerica Wealth Management. “Of course, we’re in a period of seasonal weakness, but sentiment is fragile given economic, political, and geopolitical developments. Pressure will escalate on the Federal Reserve.”
Chicago Fed President Austan Goolsbee emphasized on Friday that the central bank will not overreact to any single report, noting that policymakers will receive a lot of data before the Fed’s next meeting. Goolsbee, speaking after the release of the weaker-than-expected employment report, stated that it is the Fed’s job to discern the “through line” of the data and proceed in a “steady” manner. However, “if unemployment is going to go up higher than the neutral rate, that is exactly the kind of pinching on the other side of the mandate that the law says the Fed has to think about and respond to,” Goolsbee said in an interview with Bloomberg Television’s Michael McKee and Sonali Basak.
Meanwhile, U.S. rate futures have priced in a 4.5% probability of a 25 basis point rate cut and a 95.5% chance of a 50 basis point rate cut at the conclusion of the Fed’s September meeting.
Second-quarter earnings season continues, and investors await new reports from notable companies this week, including The Walt Disney Company (DIS), Caterpillar (CAT), Eli Lilly (LLY), Palantir Technologies (PLTR), Gilead Sciences (GILD), CVS Health (CVS), Duke Energy (DUK), Occidental Petroleum (OXY), Realty Income (O), Shopify (SHOP), Uber Technologies (UBER), Paramount Global (PARA), Lucid Group (LCID), Warner Bros. Discovery (WBD), Rivian Automotive (RIVN) and Beyond Meat (BYND).
Market participants will also be monitoring several economic data releases in the coming week, including the U.S. Trade Balance, Exports, Imports, Crude Oil Inventories, Consumer Credit, Initial Jobless Claims, Wholesale Inventories, and Wholesale Trade Sales.
In addition, San Francisco Fed President Mary Daly and Richmond Fed President Thomas Barkin will be making appearances this week.
Today, all eyes are focused on the U.S. ISM Non-Manufacturing PMI, set to be released in a couple of hours. Economists, on average, forecast that the July ISM Non-Manufacturing PMI will come in at 51.4, compared to the previous month’s figure of 48.8.
Also, investors will likely focus on the U.S. S&P Global Services PMI, which stood at 55.3 in June. Economists foresee the July figure to be 56.0.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.750%, down -0.98%.
The Euro Stoxx 50 futures are down -2.26% this morning, tracking a selloff in equity markets worldwide amid escalating fears of a U.S. recession. Energy and financial stocks led the declines on Monday. A survey released on Monday revealed that growth in Eurozone business activity came to a halt last month as a faltering expansion in the bloc’s dominant services industry was exacerbated by a deeper decline in the manufacturing sector. Separately, a survey revealed on Monday that investor morale in the Eurozone declined for a second straight month in August, reaching its lowest level since January. In corporate news, Oci N.V. (OCI.NA) soared more than +10% after Woodside Energy announced it would purchase the Dutch chemicals maker’s clean ammonia project in Texas for $2.35 billion. Also, Galderma Group Ag (GALD.Z.EB) climbed over +7% after L’Oreal announced it would acquire a 10% stake in the company from a group of major shareholders.
Spain’s Services PMI, Italy’s Services PMI, France’s Services PMI, Germany’s Services PMI, Eurozone’s Composite PMI, Eurozone’s Services PMI, Eurozone’s Sentix Investor Confidence Index, and Eurozone’s PPI were released today.
The Spanish July Services PMI arrived at 53.9, weaker than expectations of 56.2.
The Italian July Services PMI came in at 51.7, weaker than expectations of 53.0.
The French July Services PMI stood at 50.1, weaker than expectations of 50.7.
The German July Services PMI was at 52.5, stronger than expectations of 52.0.
Eurozone July Composite PMI arrived at 50.2, stronger than expectations of 50.1.
Eurozone July Services PMI came in at 51.9, in line with expectations.
Eurozone August Sentix Investor Confidence Index stood at -13.9, weaker than expectations of -5.5.
Eurozone June PPI has been reported at +0.5% m/m and -3.2% y/y, stronger than expectations of +0.1% m/m and -3.3% y/y.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -1.54% and Japan’s Nikkei 225 Stock Index (NIK) closed down -12.40%.
China’s Shanghai Composite Index closed lower today, tracking a global sell-off, though losses were limited after a private survey indicated a pickup in the nation’s services sector. China’s state council guidelines aimed at stimulating local consumption briefly bolstered mainland Chinese shares, although the gains were not sustained. Semiconductor stocks lost ground on Monday, while airline stocks outperformed. A private-sector survey revealed on Monday that growth in China’s services activity picked up in July, aided by new orders, although momentum in overseas demand slowed to its weakest pace in 11 months. Meanwhile, China’s yuan soared to a 7-month high against the dollar on Monday, propelled by a stronger Japanese yen and investors scrambling to unwind their emerging market carry trades. In other news, China Evergrande New Energy Vehicle announced on Monday that a local court ruled two of its units would enter bankruptcy and reorganization, one week after individual creditors of those units filed for such proceedings. Investor attention this week is on Chinese trade data for July, due on Wednesday, and Chinese inflation data for July, scheduled for Friday.
The Chinese July Caixin Services PMI came in at 52.1, stronger than expectations of 51.4.
Japan’s Nikkei 225 Stock Index closed sharply lower today, posting its biggest one-day percentage drop since October 1987, pushed down by disappointing U.S. jobs data and a further rise in the yen. Financial and export-oriented stocks led the declines on Monday. S&P Global reported on Monday that Japan’s service sector expanded in July, following a slight drop in June, as new orders saw the largest increase in three months and employment growth accelerated. Meanwhile, Japanese government bond yields tumbled on Monday, tracking a slump in U.S. yields amid recession fears, while investors reconsidered bets on the Bank of Japan raising interest rates again this year. Japan’s benchmark 10-year bond yield dropped to its lowest level since April, while the yen rallied over 3.1% against the dollar. In other news, minutes from the BOJ’s June 13-14 policy meeting released on Monday showed that some policymakers cautioned that rising import prices due to a weak yen were harming consumer sentiment and increasing the risk of inflation overshooting. In corporate news, Mitsubishi UFJ Financial Group Inc. tumbled more than -17%, marking its largest intraday drop on record, as falling bond yields threatened to erode loan margins. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +140.12% to 70.69.
The Japanese July au Jibun Bank Japan Services PMI stood at 53.7, weaker than expectations of 53.9.
Pre-Market U.S. Stock Movers
Cryptocurrency-exposed stocks are moving lower in pre-market trading, with the price of Bitcoin falling to its lowest level since mid-February. As a result, Marathon Digital (MARA) is down more than -12%. Also, Hut 8 Mining (HUT) is down about -13%, and Riot Blockchain (RIOT) is down over -9%.
Apple (AAPL) slumped more than -7% in pre-market trading after Berkshire Hathaway Inc. reduced its stake in the company by nearly 50% as part of a significant selling spree in the second quarter.
Kellanova (K) soared over +19% in pre-market trading after Reuters reported that candy giant Mars, the maker of ubiquitous confections such as Snickers and M&M’s, was exploring the acquisition of the company.
Nvidia (NVDA) plunged more than -10% in pre-market trading after The Information reported that the company’s upcoming artificial intelligence chips will be delayed by three months or more due to design flaws.
Lennar (LEN) slid over -4% in pre-market trading after Seaport Research downgraded the stock to Neutral from Buy.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - August 5th
CSX (CSX), Palantir (PLTR), Realty Income (O), Williams (WMB), Simon Property (SPG), ONEOK (OKE), Diamondback (FANG), Tyson Foods (TSN), BioNTech (BNTX), Biomarin Pharma (BMRN), Carlyle Group (CG), Fidelity Financial (FNF), Aecom Technology (ACM), Yum China Holdings (YUMC), Essential Utilities (WTRG), Encompass Health (EHC), BWX Tech (BWXT), Summit Materials Inc (SUM), Bellring (BRBR), Freshpet Inc (FRPT), Krystal Biotech (KRYS), Vornado (VNO), Boise Cascad Llc (BCC), Cabot Corp (CBT), F G Annuities Life (FG), Kemper (KMPR), Axsome Therapeutics Inc (AXSM), Spirit Aerosystems (SPR), Otter Tail (OTTR), One Gas Inc (OGS), ZoomInfo (ZI), Huntsman (HUN), Golub (GBDC), Hims Hers Health (HIMS), Sotera Health (SHC), Alpha Metallurgical Resources (AMR), Innovative Industrial Properties (IIPR), Sterling Construction (STRL), J & J Snack Foods (JJSF), National Storage Affiliates Trust (NSA), Quaker Chemical (KWR), Mueller Water Products (MWA), Black Stone Minerals (BSM), Avis (CAR), Teradata (TDC), Primoris (PRIM), Palomar (PLMR), Materion (MTRN), Addus (ADUS), Federal Agricultural Mortgage (AGM), Atlas Energy Solutions (AESI), Treehouse Foods (THS), Semrush Holdings (SEMR), Sonic Automotive (SAH), Highpeak Energy Acquisition (HPK), Crescent Energy (CRGY), Rxsight (RXST), Danaos (DAC), Skyward Specialty Insurance (SKWD), BioCryst (BCRX), Ameresco (AMRC), Helios Tech (HLIO), Jeld-Wen Holding (JELD), Claros Mortgage Trust (CMTG), Alexanders (ALX), Capital Southwest (CSWC), Playa Hotels & Resorts (PLYA).
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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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