Stock Index Futures Rebound as U.S. Recession Fears Ease

September S&P 500 E-Mini futures (ESU24) are up +0.55%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.56% this morning, signaling a partial rebound from yesterday’s dramatic selloff as a hotter-than-expected ISM services report and comments from Federal Reserve officials eased fears of a recession, while investors looked ahead to a fresh batch of corporate earnings reports.

In yesterday’s trading session, Wall Street’s main stock indexes closed lower, with the benchmark S&P 500 and tech-heavy Nasdaq 100 falling to 3-month lows and the blue-chip Dow dropping to a 7-week low. Nvidia (NVDA) slumped over -6% after The Information reported that the company’s upcoming artificial intelligence chips will be delayed by three months or more due to design flaws. Also, megacap technology stocks lost ground, with Amazon.com (AMZN) sliding more than -4% and Microsoft (MSFT) falling over -3%. In addition, Apple (AAPL) dropped more than -4% after Berkshire Hathaway reduced its stake in the iPhone maker by nearly 50% in the second quarter. On the bullish side, Kellanova (K) surged over +16% and was the top percentage gainer on the S&P 500 after Reuters reported that candy giant Mars was exploring an acquisition of the company.

Economic data on Monday showed that the U.S. ISM services index rose to 51.4 in July, stronger than expectations of 51.0. At the same time, the U.S. S&P Global services PMI unexpectedly fell to 55.0 in July’s final estimate from the mid-month reading of 56.0 and 55.3 in June.

Chicago Fed President Austan Goolsbee reiterated on Monday that the central bank’s role is not to react to one month of weaker labor data, adding that markets are much more volatile than Fed actions. Goolsbee noted that there are cautionary signs, such as the increase in consumer delinquencies, but economic growth continues at a “fairly steady level.” “As you see jobs numbers come in weaker than expected but not looking yet like recession, I do think you want to be forward-looking of where the economy is headed for making the decisions,” Goolsbee said. Separately, San Francisco Fed President Mary Daly stated that the labor market is softening and indicated the Fed should start reducing interest rates in the upcoming quarters, yet she refrained from concluding that the labor market has begun to weaken significantly. “We have now confirmed that the labor market is slowing, and it is extremely important that we not let it slow so much that it tips itself into a downturn,” she said. Daly stressed that the timing and magnitude of rate cuts will “depend a lot on the incoming information.”

Meanwhile, U.S. rate futures have priced in a 22.5% chance of a 25 basis point rate cut and a 77.5% chance of a 50 basis point rate cut at the next FOMC meeting in September.

In other news, the Federal Reserve’s Senior Loan Officer Opinion Survey, released on Monday, showed that a smaller share of U.S. banks reported tighter credit standards in the second quarter. The net share of U.S. banks that tightened standards on commercial and industrial loans for mid-sized and large businesses dropped to 7.9%, the lowest since 2022, down from 15.6% in the previous report. Banks generally tightened lending standards for consumers, particularly for subprime credit card and subprime auto loans, the Fed said.

Second-quarter earnings season continues in full flow, with investors awaiting fresh reports from notable companies today, including Amgen (AMGN), Caterpillar (CAT), Uber Technologies (UBER), Airbnb (ABNB), Duke Energy (DUK), and Super Micro Computer (SMCI).

On the economic data front, investors will likely focus on U.S. Trade Balance data, set to be released in a couple of hours. Economists foresee this figure to stand at -$72.50B in June, compared to the previous figure of -$75.10B.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.833%, up +1.41%.

The Euro Stoxx 50 futures are up +0.31% this morning, supported by a recovery in Asian markets, while positive corporate earnings reports also boosted sentiment. Travel and leisure stocks led the gains on Tuesday, while bank and technology stocks also advanced. The Federal Statistical Office reported on Tuesday that German monthly factory orders rose for the first time in six months in June, driven by strong orders for aircraft, ships, trains, and the automotive industry. Separately, data from the EU statistics agency released on Tuesday indicated that Eurozone retail sales unexpectedly fell in June. In corporate news, Zalando Se (ZAL.D.DX) rose over +3% after the online fashion marketplace posted an 18.5% year-over-year increase in its Q2 operating profit. Also, Intercontinental Hotels Group Plc (IHG.LN) gained more than +1% after the Holiday Inn owner reported better-than-expected Q2 results.

Germany’s Factory Orders and Eurozone’s Retail Sales data were released today.

The German June Factory Orders came in at +3.9% m/m, stronger than expectations of +0.4% m/m.

Eurozone June Retail Sales arrived at -0.3% m/m and -0.3% y/y, weaker than expectations of 0.0% m/m and +0.1% y/y.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.23%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +10.23%.

China’s Shanghai Composite Index closed slightly higher today, tracking a rebound in regional markets, though gains were limited as investors cautiously awaited a series of economic data from the country later in the week. Consumer services and property stocks outperformed on Tuesday, while insurance stocks lost ground. Meanwhile, China’s yuan retreated on Tuesday from a seven-month high against the dollar as traders sold their yuan holdings to secure profits ahead of key economic data releases from China. In other news, Reuters reported on Tuesday that Chinese tech giants, including Huawei and Baidu, along with startups, are stockpiling high bandwidth memory semiconductors from Samsung Electronics in anticipation of U.S. restrictions on chip exports to China. In corporate news, Youcare Pharmaceutical Group climbed over +4% after gaining approval from the U.S. Food and Drug Administration to conduct trials on YKYY015 injection, developed by its unit Hangzhou Tianlong Pharmaceutical, as a treatment for primary hypercholesterolemia or mixed hyperlipidemia. Investor attention is now on Chinese trade data for July, due on Wednesday, and Chinese inflation data for July, scheduled for Friday. The figures are anticipated to offer valuable insights into China’s economic health.

Meanwhile, the Reserve Bank of Australia held its cash rate steady at 4.35% on Tuesday, aligning with market expectations and keeping borrowing costs unchanged for the sixth consecutive meeting.

Japan’s Nikkei 225 Stock Index closed sharply higher today, posting its largest daily percentage gain since October 2008, after Monday’s 12% decline sparked bargain hunting and the yen relinquished some of its recent gains. Electronics and heavy-industry stocks led the gains on Tuesday. Government data revealed on Tuesday that household spending in Japan declined in real terms in June despite a nominal increase, while worker households experienced a significant rise in income. Separately, data indicated that Japan’s inflation-adjusted real wages increased in June for the first time in over two years as nominal wages rose at the quickest rate in nearly three decades, supporting the Bank of Japan’s view that wage increases are becoming more widespread. Meanwhile, Japanese government bond yields rebounded on Tuesday after an auction of 10-year sovereign notes saw the weakest investor demand since 2003 by one measure as expectations of additional rate hikes deterred investors. The Japanese yen edged toward 145 per dollar, pulling back from a seven-month high as the significant unwinding of popular carry trades decelerated while investors continued to evaluate the diverging monetary policies between Japan and the U.S. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -27.59% to 51.19.

Japanese Prime Minister Fumio Kishida stated, “It is important to judge the situation calmly,” and cited the first monthly increase in real wages in Japan in over two years as a reason for optimism.

The Japanese June Household Spending came in at +0.1% m/m and -1.4% y/y, weaker than expectations of +0.2% m/m and -0.9% y/y.

Pre-Market U.S. Stock Movers

Lucid Group (LCID) surged more than +13% in pre-market trading after reporting better-than-expected Q2 revenue growth and disclosing a new slug of funding.

Palantir Technologies (PLTR) climbed over +9% in pre-market trading after the company posted upbeat Q2 results, offered above-consensus Q3 revenue guidance, and raised its FY24 forecast.

ZoomInfo Technologies (ZI) tumbled more than -15% in pre-market trading after the company reported downbeat Q2 results and cut its full-year guidance.

CrowdStrike Holdings (CRWD) gained over +3% in pre-market trading after Piper Sandler upgraded the stock to Overweight from Neutral.

American Electric (AEP) fell more than -1% in pre-market trading after BofA downgraded the stock to Underperform from Neutral with a $97 price target.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - August 6th

Amgen (AMGN), Caterpillar (CAT), Uber Tech (UBER), Duke Energy (DUK), Zoetis Inc (ZTS), Airbnb (ABNB), Transdigm (TDG), Marathon Petroleum (MPC), Constellation Energy (CEG), Itau Unibanco (ITUB), Sempra Energy (SRE), Suncor Energy (SU), Fortinet (FTNT), Fidelity National Info (FIS), IDEXX Labs (IDXX), Yum! Brands (YUM), Super Micro Computer (SMCI), Kenvue (KVUE), Vulcan Materials (VMC), Chunghwa Telecom (CHT), Devon Energy (DVN), GlobalFoundries (GFS), Broadridge (BR), STERIS (STE), Axon Enterprise (AXON), Illumina (ILMN), Builders FirstSource (BLDR), Baxter (BAX), Jacobs Engineering (J), Westlake Chemical (WLK), Expeditors Washington (EXPD), Fox (FOXA), TPG Inc (TPG), Owens Corning (OC), Rivian Automotive (RIVN), Bentley (BSY), UWM Holdings (UWMC), Topbuild Corp (BLD), Hyatt (H), Toast (TOST), RB Global (RBA), Trimble (TRMB), DaVita (DVA), Permian Resources (PR), Jones Lang LaSalle (JLL), Aspen (AZPN), Molson Coors Brewing B (TAP), American Financial (AFG), nVent Electric (NVT), Celsius (CELH), Bruker (BRKR), Reddit (RDDT), Globus Medical (GMED), Henry Schein (HSIC), Assurant (AIZ), Aramark Holdings (ARMK), Mosaic (MOS), MarketAxesss (MKTX), Tempur Sealy International (TPX), Instacart (CART), Trex (TREX), Wynn Resorts (WYNN), Ingredion (INGR), ATI Inc (ATI), Hamilton Lane (HLNE), Exelixis (EXEL), Halozyme (HALO), Planet Fitness Inc (PLNT), VF (VFC), Cirrus (CRUS), GXO Logistics (GXO), Starwood Property (STWD), Masimo (MASI), Novanta (NOVT), Southwest Gas Hold (SWX), Stevanato Group SpA (STVN), Organon Co (OGN), Qualys (QLYS), Baldwin Insurance (BWIN), Nuvei (NVEI), Tidewater (TDW), NewJersey Resources (NJR), Ashland Global (ASH), Inspire Medical Systems (INSP), Ormat (ORA), Atkore Intl (ATKR), Grand Canyon Education (LOPE), Acushnet Holdings (GOLF), Skyline (SKY), Knife River (KNF), Inter Parfums (IPAR), California Resources (CRC), IAC/InterActiveCorp (IAC), Alight (ALIT), Avient Corp (AVNT), Sunrun Inc (RUN), Power Integrations (POWI), Surgery Partners Inc (SGRY), Hagerty (HGTY), National Health Investors (NHI), Enpro Industries (NPO), Arcadium Lithium (ALTM), Azenta (AZTA), American States Water (AWR), Stride (LRN), Osisko Gold Ro (OR), Hecla Mining (HL), Innospec (IOSP), Global Business Travel (GBTG), Lumen Technologies (LUMN), Clear Secure (YOU), Adtalem Education (ATGE), Blackline (BL), Rhythm Pharma (RYTM), LCI Industries (LCII).

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