September S&P 500 E-Mini futures (ESU24) are trending up +0.17% this morning as market participants awaited an annual review of U.S. jobs data as well as the Federal Reserve’s July meeting minutes for further clues on the path of interest rates.
In yesterday’s trading session, Wall Street’s main stock indexes ended in the red. Boeing (BA) slid over -4% and was the top percentage loser on the Dow after the aircraft manufacturer paused flight tests of its 777X jetliner while it inspects cracks in a crucial structural component. Also, diabetes stocks lost ground on the news that Eli Lilly’s weight-loss drug Zepbound reduced the risk of diabetes by 94% in obese and pre-diabetic patients, with Insulet (PODD) slumping more than -6% to lead losers in the S&P 500 and Dexcom (DXCM) plunging over -6% to lead losers in the Nasdaq 100. In addition, Bank of America (BAC) fell more than -2% after an SEC filing revealed Berkshire Hathaway sold $550.7 million of its Bank of America stock holdings between August 15-19. On the bullish side, Palo Alto Networks (PANW) climbed over +7% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the cybersecurity company posted upbeat Q4 results and provided solid FY25 guidance.
“The momentum guys are driving the bus,” said Kenny Polcari at SlateStone Wealth. “Now the volumes have been trending lower as we move into the end of the month. Moves will be and are exaggerated as a result. And I think the recent rally is proof of that exaggeration.”
Fed Governor Michelle Bowman said Tuesday that she remains cautious about any shift in the Fed’s policy due to what she perceives as continued upside risks for inflation, warning that overreacting to any single data point could jeopardize the progress already achieved. “I still see some upside risks to inflation as supply conditions have now largely normalized and any further improvements to supply seem less likely to offset price pressures arising from increasing geopolitical tensions, additional fiscal stimulus, and increased demand for housing due to immigration,” Bowman said.
Meanwhile, U.S. rate futures have priced in a 69.5% probability of a 25 basis point rate cut and a 30.5% chance of a 50 basis point rate cut at the next FOMC meeting in September.
Today, investors will monitor the release of the Federal Reserve’s minutes from the July meeting, which may offer additional insights into the Fed’s next steps.
Also, market participants will be closely watching the release of preliminary benchmark revisions to U.S. employment data for the 12 months through March, scheduled for later in the day. Signs of weakness in the annual recalibration of U.S. payrolls could underscore the need for aggressive Fed rate cuts and evoke memories of the market turmoil in August following a disappointing payrolls report.
Goldman Sachs and Wells Fargo economists anticipate that payroll growth in the year through March was at least 600,000 weaker than currently estimated. While JPMorgan Chase forecasters predict a decrease of about 360,000, Goldman suggests it could be as large as a million.
On the economic data front, investors will likely focus on U.S. Crude Oil Inventories data, set to be released in a couple of hours. Economists estimate this figure to be -2.000M, compared to last week’s value of 1.357M.
On the earnings front, notable companies like TJX Companies (TJX), Analog Devices (ADI), Target (TGT), Snowflake (SNOW), Agilent (A), and Macy’s (M) are slated to release their quarterly results today.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.825%, up +0.08%.
The Euro Stoxx 50 futures are up +0.29% this morning as risk sentiment stabilized, while investors looked ahead to the Fed’s July meeting minutes and preliminary revisions to U.S. labor data. Mining and technology stocks climbed on Wednesday, while energy stocks lost ground. The Office for National Statistics announced Wednesday that U.K. public sector net borrowing stood at 3.1 billion pounds ($4.037 billion) in July, which is 1.8 billion pounds higher than the previous year and the highest July borrowing since 2021. Meanwhile, investor focus now turns to the Fed minutes, which are anticipated to indicate a cautious approach to interest rates, and to the U.S. payroll benchmark revision, which could reveal weaker job growth. In corporate news, Voestalpine Ag (VOE.V.DX) gained over +2% after Morgan Stanley upgraded the stock to Overweight from Equal Weight.
The European economic data slate is empty on Wednesday.
Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.35%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.29%.
China’s Shanghai Composite Index closed lower today, falling for the second consecutive session as the absence of new stimulus measures continued to weigh on investor sentiment. Financial and biotech stocks led the declines on Wednesday. At the same time, video game and related concept stocks surged after a new title launched on Tuesday by a Tencent-backed startup became the most-played game on a major online platform. Meanwhile, Reuters reported on Tuesday that the Hong Kong-based hedge fund, Strategic Vision Investment, closed its positions in Chinese stocks after its long-short strategy did not yield the expected results. According to Reuters, SVI liquidated the holdings of its long-short fund at the end of July and is returning its external capital to investors. In other news, China’s commerce ministry announced on Wednesday that it had initiated an anti-subsidy investigation into European imported dairy products starting August 21st. In corporate news, JD.com Inc. plunged over -8% in Hong Kong after Bloomberg reported on Wednesday that Walmart had raised approximately $3.6 billion from selling its stake in U.S.-listed shares of the Chinese e-commerce giant. Investors are anticipating the People’s Bank of China’s decision on the medium-term lending facility early next week after benchmark lending rates were kept steady in August.
Japan’s Nikkei 225 Stock Index closed lower today as overnight gains in the yen dampened sentiment, and investors adopted a cautious stance ahead of the release of the minutes from the July FOMC meeting and revisions to U.S. employment data. A stronger yen dents the profit outlook for Japan’s export-heavy industries and prompts investors to unwind popular carry trades. Energy and financial stocks led the declines on Wednesday. Data from the Ministry of Finance released on Wednesday showed that Japan’s exports rose at a slightly slower pace than anticipated in July, and shipment volumes continued to decline, while imports grew at a faster-than-expected pace, marking the strongest rise in purchases since January 2023. Meanwhile, Bank of Japan Governor Kazuo Ueda is set to attend a special session at Japan’s parliament on Friday to discuss the July 31st interest rate increase, which unsettled global markets. The BOJ will hike interest rates again by year-end, according to more than half the economists in a Reuters poll published on Wednesday, with the majority of those specifying a month leaning toward a December increase. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.03% to 27.05.
The Japanese July Trade Balance has been reported at -621.8B yen, weaker than expectations of -330.7B yen.
The Japanese July Exports stood at +10.3% y/y, weaker than expectations of +11.4% y/y.
The Japanese July Imports came in at +16.6% y/y, stronger than expectations of +14.9% y/y.
Pre-Market U.S. Stock Movers
Keysight Technologies (KEYS) climbed over +11% in pre-market trading after the company reported stronger-than-expected Q3 results and issued strong Q4 guidance.
Texas Instruments (TXN) rose more than +1% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a price target of $235.
American Express (AXP) dropped over -1% in pre-market trading after BofA downgraded the stock to Neutral from Buy.
Altus Power (AMPS) fell more than -2% in pre-market trading after Morgan Stanley downgraded the stock to Equal Weight from Overweight.
Chewy (CHWY) slid over -2% in pre-market trading after Raymond James downgraded the stock to Market Perform from Outperform.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - August 21st
TJX (TJX), Analog Devices (ADI), Synopsys (SNPS), Target (TGT), Snowflake (SNOW), Agilent Technologies (A), Zoom Video (ZM), Nordson (NDSN), Dycom Industries (DY), Macy’s Inc (M), Urban Outfitters (URBN), Corporacion America Airports (CAAP), Lufax (LU), Wolfspeed (WOLF), Zuora (ZUO).
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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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