September S&P 500 E-Mini futures (ESU24) are down -0.02%, and September Nasdaq 100 E-Mini futures (NQU24) are down -0.21% this morning as investors looked ahead to the release of the minutes of the Federal Reserve’s latest policy meeting, Fed Chair Jerome Powell’s speech at Jackson Hole, and earnings reports from a diverse group of prominent companies.
In Friday’s trading session, Wall Street’s major averages ended in the green, with the benchmark S&P 500 and blue-chip Dow rising to 2-week highs and the tech-heavy Nasdaq 100 climbing to a 3-week high. H&R Block (HRB) surged over +12% after the tax preparation company reported upbeat Q4 results, provided an above-consensus FY25 forecast, and announced a new $1.5 billion share repurchase program. Also, Coherent (COHR) climbed more than +7% after the company reported better-than-expected Q4 results and issued solid Q1 revenue guidance. In addition, Fox Corp. (FOXA) gained over +1% after Wells Fargo double-upgraded the stock to Overweight from Underweight with a price target of $46. On the bearish side, Applied Materials (AMAT) fell more than -1% after giving an in-line Q4 net sales forecast that disappointed investors looking for a bigger payoff from AI spending.
Economic data on Friday showed that the University of Michigan’s U.S. consumer sentiment index stood at 67.8 in August, stronger than expectations of 66.7. At the same time, U.S. July housing starts fell -6.8% m/m to a 4-year low of 1.238M, weaker than expectations of 1.340M. In addition, U.S. building permits, a proxy for future construction, fell -4.0% m/m to a 4-year low of 1.396M in July, weaker than expectations of 1.430M.
Chicago Fed President Austan Goolsbee supported rate cuts on Friday after noting that the U.S. labor market and some leading economic indicators are showing warning signs and expressing concerns that unemployment will continue to increase. Goolsbee stated that the speed of transmission of lower rates would “depend on many factors” and indicated his support for a “gradual” rather than rapid pace of rate cuts.
U.S. rate futures have priced in a 71.5% chance of a 25 basis point rate cut and a 28.5% chance of a 50 basis point rate cut at September’s monetary policy meeting.
In other news, Goldman Sachs over the weekend reduced the probability of a U.S. recession in the next year to 20% from 25%, citing last week’s healthy economic data.
Meanwhile, Fed Chair Jerome Powell is scheduled to deliver the keynote address at the central bank’s annual economic symposium in Jackson Hole, Wyoming, on Friday. Market participants will be keenly focused on what he indicates about the pace and timing of rate cuts in the coming months. Earlier in the week, Fed Governor Christopher Waller, Fed Vice Chair for Supervision Michael Barr, and Atlanta Fed President Raphael Bostic will be making appearances.
“We look for Powell to signal that given recent progress, the Fed is likely to ease policy next month - without fully committing to the size of the rate cut. We expect a 25 basis-point reduction,” according to TD Securities’ strategists.
Investors will also be monitoring a spate of economic data releases this week, including the U.S. S&P Global Composite PMI (preliminary), S&P Global Manufacturing PMI (preliminary), S&P Global Services PMI (preliminary), Crude Oil Inventories, Initial Jobless Claims, Existing Home Sales, Building Permits, and New Home Sales.
Retailers Lowe’s (LOW), Target (TGT), TJX (TJX), and Ross Stores (ROST), along with notable tech players such as Zoom Video (ZM), Snowflake (SNOW), Palo Alto Networks (PANW), Workday (WDAY), and Analog Devices (ADI), are among the prominent companies set to release their quarterly results this week.
In addition, market participants will pay close attention to the publication of the Federal Reserve’s minutes from the July meeting on Wednesday, during which Fed Chair Jerome Powell acknowledged progress on inflation and left the door open for a rate cut in September.
Today, investors will focus on the U.S. Conference Board Leading Index, set to be released in a couple of hours. Economists expect July’s figure to be -0.4% m/m, compared to the previous number of -0.2% m/m.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.868%, down -0.70%.
The Euro Stoxx 50 futures are up +0.09% this morning, taking a breather after last week’s rally, as investors braced for a data-heavy week, with a focus on Fed Chair Jerome Powell’s speech at Jackson Hole. Mining stocks outperformed on Monday, while defense and energy stocks lost ground. Meanwhile, investors are awaiting the latest FOMC minutes and a speech by Fed Chair Jerome Powell at Jackson Hole, Wyoming this week to gain further clarity on the outlook for rate cuts. Flash Purchasing Managers’ Index data for France, Germany, Britain, and the Eurozone, along with the U.S. PMI and initial jobless claims data, will also be monitored by investors this week. In corporate news, Rheinmetall Ag (RHM.D.DX) slumped over -3% following a report that Germany will not approve new requests for aid to Ukraine as the government aims to curb spending. Also, Nexans (NEX.FP) fell more than -3% after Goldman Sachs downgraded the stock to Neutral from Buy.
The European economic data slate is mainly empty on Monday.
Asian stock markets today settled mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.49%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.77%.
China’s Shanghai Composite Index closed higher today as risk sentiment improved, while investors continued to evaluate the nation’s economic outlook. Bank stocks led the gains on Monday. Meanwhile, investors await the People’s Bank of China’s decision on its one-year and five-year loan prime rates on Tuesday. Authorities are anticipated to maintain the loan prime rates unchanged after the PBOC pledged last week to implement further steps to support economic recovery while cautioning against adopting “drastic” measures. In other news, China’s stock exchanges have stopped the real-time data feed on foreign inflows into onshore equities starting Monday. The Shanghai and Shenzhen exchanges will now publish select figures - turnover, number of trades, and top 10 traded stocks via the northbound link of the Stock Connect scheme - only once a day after the close of trading, as per their statements. In corporate news, JD Health International surged about +8% in Hong Kong as unexpectedly strong results from JD.com last week boosted sentiment about the group. Investors will be watching Chinese automakers this week, including Xpeng Inc., Geely Automobile Holdings Ltd., and Xiaomi Corp., all of which are expected to report higher vehicle sales.
Japan’s Nikkei 225 Stock Index closed lower today, snapping a five-session winning streak due to profit-taking and pressure on equities from a rallying yen. Energy and consumer cyclical stocks led the declines on Monday. Data from the Cabinet Office revealed on Monday that Japan’s core machinery orders, which exclude those for ships and electric power companies, increased more than expected in June compared to the previous month, marking the first rise since March. Meanwhile, Bank of Japan Governor Kazuo Ueda is set to attend a special session at parliament this week to discuss the July 31st interest rate increase, which unsettled global markets. The Japanese yen climbed for a second session on Monday to trade at around 146 per dollar. Hedge funds have become bullish on the nation’s currency for the first time since 2021, marking a significant shift from the extremely negative sentiment that prevailed as recently as early July. In corporate news, Seven & I Holdings soared over +22% after the Nikkei newspaper reported that the company had received a non-legally binding takeover offer from Canada’s Alimentation Couche-Tard. Market participants are now awaiting Japanese inflation figures due Friday to gain insight into the Bank of Japan’s monetary policy trajectory. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +11.23% to 29.52.
The Japanese June Core Machinery Orders arrived at +2.1% m/m and -1.7% y/y, compared to expectations of +0.9% m/m and +1.8% y/y.
Pre-Market U.S. Stock Movers
FuboTV (FUBO) climbed over +16% in pre-market trading, extending Friday’s gains, after a federal judge temporarily halted the launch of a competing sports streaming service from Warner Bros. Discovery, Fox, and Disney.
Advanced Micro Devices (AMD) gained more than +2% in pre-market trading after the company agreed to acquire AI infrastructure provider ZT Systems in a deal valued at about $4.9 billion.
HP Inc. (HPQ) fell about -2% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight.
Dutch Bros (BROS) slid more than -2% in pre-market trading after Piper Sandler downgraded the stock to Neutral from Overweight.
Sweetgreen (SG) dropped over -3% in pre-market trading after Piper Sandler downgraded the stock to Neutral from Overweight.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - August 19th
Palo Alto Networks (PANW), Estee Lauder (EL), Fabrinet (FN), ZIM Integrated Shipping Services (ZIM), ID Systems (AIOT), Bit Digital (BTBT), Agora (API), Flexsteel (FLXS).
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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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