September S&P 500 E-Mini futures (ESU24) are up +0.51%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.60% this morning as market participants awaited Federal Reserve Chair Jerome Powell’s Jackson Hole speech for more clues on the amount and timing of interest rate cuts.
In yesterday’s trading session, Wall Street’s major indexes ended in the red. Snowflake (SNOW) tumbled over -14% after the company reported weaker-than-expected Q2 billings and provided Q3 product revenue guidance that failed to impress investors. Also, chip stocks lost ground, with Intel (INTC) slumping more than -6% to lead losers in the Dow and Advanced Micro Devices (AMD) falling over -3%. In addition, Urban Outfitters (URBN) slid more than -9% after reporting weaker-than-expected Q2 retail comparable sales growth. On the bullish side, Zoom Video (ZM) surged about +13% after the company posted upbeat Q2 results and raised its full-year guidance.
Economic data on Thursday showed that the U.S. S&P Global manufacturing PMI fell to an 8-month low of 48.0 in August, weaker than expectations of 49.5. Also, the number of Americans filing for initial jobless claims in the past week rose +4K to 232K, in line with expectations. At the same time, the U.S. August S&P Global services PMI unexpectedly rose to 55.2, stronger than expectations of 54.0. In addition, U.S. existing home sales increased +1.3% m/m to 3.95M in July, stronger than expectations of 3.94M.
“The U.S. economy overall has, thus far, been robust enough to take an extended Fed rate pause,” said Don Rissmiller at Strategas. “But there’s a clear case for rate cuts soon.”
Boston Fed President Susan Collins stated on Thursday that it would soon be appropriate for the U.S. central bank to start a rate-cutting cycle. “I think a gradual, methodical pace once we are in a different policy stance is likely to be appropriate,” Collins said. Also, Philadelphia Fed President Patrick Harker said that upcoming economic data will guide the appropriate magnitude of the Fed’s first interest rate reduction. “In September, we need to start a process of moving rates down,” Harker said. At the same time, Kansas City Fed President Jeffrey Schmid stated that he wants to see more economic data before backing any decision to start lowering interest rates. “I still think we could see a little bit of a demand pickup if we’re not careful with the decisioning,” Schmid said.
Meanwhile, U.S. rate futures have priced in a 75.5% probability of a 25 basis point rate cut and a 24.5% chance of a 50 basis point rate cut at the September FOMC meeting.
Today, all eyes are focused on Fed Chair Jerome Powell’s address at the central bank’s annual economic symposium in Jackson Hole, Wyoming. Market participants will be keenly focused on what he indicates about the pace and timing of rate cuts in the coming months.
On the economic data front, investors will focus on U.S. New Home Sales data, set to be released in a couple of hours. Economists, on average, forecast that July New Home Sales will stand at 624K, compared to the previous figure of 617K.
The U.S. Building Permits data will also be reported today. Economists expect July’s figure to be 1.396M, compared to 1.454M in June.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.857%, down -0.13%.
The Euro Stoxx 50 futures are up +0.33% this morning as investors digested dovish comments from a European Central Bank official and looked ahead to Fed Chair Jerome Powell’s speech at the Jackson Hole Economic Symposium. Automobile and energy stocks gained ground on Friday, while technology stocks slumped. France’s statistical agency Insee reported Friday that the nation’s business climate indicator improved in August. Meanwhile, ECB policymaker Martins Kazaks stated on Friday that the central bank could potentially lower interest rates two more times this year as inflation continues to follow the downward trajectory that policymakers anticipated. “We are broadly along the baseline of our projections and that is consistent with a gradual decline in interest rates,” Kazaks said. In corporate news, Nestle Sa (NESN.Z.IX) dropped more than -2% after the Swiss food group announced that CEO Mark Schneider would be replaced by company veteran Laurent Freixe following a period of lackluster performance.
France’s Business Survey was released today.
The French August Business Survey came in at 99, stronger than expectations of 96.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.20%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.40%.
China’s Shanghai Composite Index closed higher today, snapping three consecutive days of losses as risk sentiment improved following the housing regulator’s pledge to accelerate the purchase of unsold homes and turn them into affordable housing. Automobile, technology, and insurance stocks outperformed on Friday. Vice Minister of Housing and Urban-Rural Development Dong Jianguo stated in a briefing in Beijing on Friday that the country will rapidly implement a program to buy unsold apartments and convert them into affordable housing. Dong also said that the government will advance the renting and selling of public housing units as soon as conditions are favorable. Meanwhile, China’s Commerce Ministry convened a meeting on Friday with automakers and industry associations to discuss increasing import duties on large-engined gasoline vehicles, sounding an alert as the European Union approaches a tariff decision on Chinese electric cars. In corporate news, NetEase plunged over -10% in Hong Kong after the gaming firm reported weak Q2 results. At the same time, Ping An Insurance gained more than +3% after posting its best half-year performance in four years. Market participants are now awaiting 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 higher today, reversing losses from earlier in the session even as the yen strengthened after Bank of Japan Governor Kazuo Ueda indicated that the central bank remains on track to raise interest rates. Healthcare and materials stocks led the gains on Friday. Government data released on Friday revealed that Japan’s core consumer prices accelerated for the third consecutive month to 2.7% in July, marking the highest level since February. Meanwhile, BOJ Governor Kazuo Ueda stated that the central bank will continue to aim for further interest rate hikes if the economy and inflation progress according to its projections. “There is no change to our basic stance of adjusting the level of monetary easing going forward if we can confirm that the outlook for the economy and prices is more likely to realize as we expect,” Ueda said in a parliamentary session Friday. Ueda added that the central bank will continue to monitor movements in the financial markets “with a high sense of urgency,” as they remain volatile. In corporate news, Sharp Corp. climbed about +7% after a report indicated that SoftBank Corp. was in discussions to make a 100 billion yen ($686.72 million) investment in the electronics manufacturer. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -6.45% to 25.38.
The Japanese July National Core CPI has been reported at +2.7% y/y, in line with expectations.
Pre-Market U.S. Stock Movers
Workday (WDAY) surged over +11% in pre-market trading after the back-office software provider reported stronger-than-expected Q2 results, announced a $1 billion stock buyback plan, and published a new long-term outlook.
CAVA Group (CAVA) climbed more than +9% in pre-market trading after the company posted upbeat Q2 results and raised its full-year guidance for adjusted EBITDA and same-restaurant sales growth.
Ross Stores (ROST) advanced over +5% in pre-market trading after the company reported better-than-expected Q2 results and raised its FY24 EPS forecast.
Las Vegas Sands (LVS) fell more than -1% in pre-market trading after UBS downgraded the stock to Neutral from Buy.
Roku (ROKU) gained over +3% in pre-market trading after Guggenheim upgraded the stock to Buy from Neutral with a $75 price target.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Friday - August 23rd
Hafnia (HAFN), Buckle (BKE), So-Young (SY).
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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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