US Index Futures are operating at lows, still under the effect of signals from the Federal Reserve yesterday that new interest rate hikes are yet to come, and before the decision of the European Central Bank for the interest rate in the Euro Zone.
By 7:00 AM, Dow Jones futures (DOWI:DJI) was down 73 points, or 0.21%. S&P 500 futures were down 0.37%, while Nasdaq-100 futures were down 0.63%. The 10-year Treasury yield was at 3.821%.
China cut the rate on the medium-term loan facility from 2.75% to 2.65% in a further effort to reinvigorate the economy. Data released last night provided further evidence of weakening Chinese economic dynamism. Industrial production had an annual increase of 3.5% in May, below the consensus of 3.8% and indicating a slowdown from the pace of 5.6% in April. Retail sales registered an annual expansion of 12.70% and fixed investments rose 4% in the year through May, both below expectations.
With the announcement of the interest rate cut and the expectation of more measures, the iron ore contract for September rose 1.43%, to 815.5 yuan (US$113.96) per tonne, the highest level since March 31 , on the Dalian Chinese Exchange. Brent crude for August was up 1.24% at $74.11 a barrel, also boosted by a 15.4% rise in Chinese refinery output in May, the second-biggest expansion on record. West Texas Intermediate crude rose 1.27% to settle at $69.14 a barrel.
The European Central Bank is expected to raise interest rates for the eighth time. The consensus is for an increase of 0.25pp, pushing the base rate to the highest level since the 2008 financial crisis.
Thursday’s US Economic Indicators schedule is May Retail Sales and Import Price Index, plus Empire State Activity Data from New York and the Philadelphia Fed for June at 8:30 AM. Data on American industrial production in May will also be released at 9:15 am.
By Wednesday’s close, the Dow Jones was down 0.68%, or 232.79 points. The S&P 500 was little changed up 0.08% and the Nasdaq Composite was up 0.39%. The FOMC has forecast two more rate hikes this year and Chairman Jerome Powell has indicated that no cuts are expected before mid-2024. These statements run counter to previous market expectations. It is worth noting that the projections do not represent future FOMC decisions, as mentioned by Powell. Furthermore, unemployment projections were revised downwards, suggesting a more heated economy scenario. This could result in a more hawkish stance by the Fed in future meetings, depending on future data.
Kroger (NYSE:KR) and Jabil (NYSE:JBL) are due to report quarterly results before the stock market opens. Adobe (NASDAQ:ADBE) is scheduled to report fiscal second quarter earnings after the close on Thursday.
Wall Street Corporate Highlights for Today
Tesla (NASDAQ:TSLA) – Tesla’s record 13-day earnings streak has come to an end. The stock closed flat after rising in value by more than $200 billion. During that time, Tesla surpassed Toyota in market value. The adoption of Tesla’s charging system by Ford and GM spurred the rally. Tesla’s price/earnings ratio is very high compared to other automakers, similar to Amazon. In other news, French President Emmanuel Macron will meet Elon Musk for the second time in a month, seeking to promote France as a possible location for an electric vehicle factory and discuss regulation. France is competing with other EU countries such as Spain to attract Tesla investment.
Toyota Motor (NYSE:TM) – Akio Toyoda, president of Toyota Motor, was re-elected to the board of directors with the support of approximately 85% of shareholders at the annual general meeting. However, his approval rating was the lowest in five years. The proposal to publicize climate change lobbying activities more received only 15% of the vote.
BYD (USOTC:BYDDY) – Chinese automaker BYD has resumed operations at two showrooms and a service center in Hong Kong after they were vandalized. Another showroom is in the process of being restored. The company will cooperate with the police investigation into the incidents, which are still under investigation.
XPeng (NYSE:XPEV) – XPeng American Depositary Receipts rose 2.3% in premarket after the Chinese electric vehicle maker said it has received approval to roll out its assisted driving technology on major ring roads and expressways in Beijing and elsewhere three cities.
TrueCar (NASDAQ:TRUE) – TrueCar announced a restructuring, which includes layoffs of 24% of its workforce and the appointment of a new CEO. The company expects to cut expenses by more than $20 million.
Uber (NYSE:UBER) – Uber announced the closure of its food delivery business in Italy and the exit from Israel due to lack of market share. The company intends to focus on markets with sustainable growth opportunities. Uber will continue to expand its mobility service in Italy and highlights the support of taxi drivers in Europe.
AutoZone (NYSE:AZO) – Auto parts retailer AutoZone’s board authorized the buyback of an additional $2 billion for the company’s ongoing buyback program.
EnerSys (NYSE:ENS) – Battery manufacturer EnerSys is considering developing a US battery plant in partnership with Verkor SAS. The companies are evaluating locations and funding to establish a US supply of lithium-ion cells. The initiative aims to meet customer needs and meet domestic manufacturing requirements.
Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), JD.com (NASDAQ:JD) – The People’s Bank of China has demonstrated commitment to economic recovery by lowering its benchmark interest rate, influencing bank financing costs. Disappointing data raised concerns about the post-pandemic recovery. Equities responded positively to the stimulus, reflecting expectations of more stimulus measures to boost demand and reach the 5% growth target this year.
Siemens (USOTC:SIEGY) – Siemens plans to invest €2 billion in a new global plan to meet growing demand driven by the stimulus packages. The company will build new factories, research and development centers and training sites around the world. The investment program will include a new factory in Singapore and an increase in research and development spending.
Patterson-UTI Energy (NASDAQ:PTEN), NexTier Oilfield Solutions Inc (NYSE:NEX) – Patterson-UTI Energy announced a merger agreement with NexTier Oilfield Solutions Inc. worth US$5.4 billion. Under the terms of the agreement, NexTier shareholders will receive shares of Patterson-UTI. The deal will create a leading well drilling and completion company with a strong presence in major producing basins in the US and Latin America. The deal is expected in the fourth quarter and provides benefits in terms of revenue, free cash flow and cost savings. The CEOs of both companies will assume leadership roles in the combined company. NexTier shares are down year-to-date, while the S&P 500 has performed positively.
Vodafone (NASDAQ:VOD) – Vodafone and CK Hutchison have reached an agreement to create Britain’s largest mobile operator, but face regulatory scrutiny. The $19 billion deal will be scrutinized by Britain’s Markets and Competition Authority, as the reduction of networks from four to three raises competition concerns. Investment in 5G and the approval of the National Security and Investment Law are also challenges.
Bell (NYSE:BCE) – Canadian telecoms and media company Bell is cutting 1,300 jobs, closing six radio stations and selling three more, due to reduced revenues in its telephony and news businesses. The industry faces challenges, including dwindling advertising dollars and a shift to streaming. The company attributes the disruption to the delay in adjusting the regulatory environment and government pressure to reduce telephone bills. Proposed legislation to make internet giants pay for content also ran into obstacles. Canada’s finance minister expressed regret at the loss of experienced CTV journalists, while the union warned of the need for government action.
Safran (USOTC:SAFRY), Raytheon Technologies (NYSE:RTX) – Safran, the French aerospace engine manufacturer, is finalizing an approximately $1.8 billion deal to acquire the flight controls business of Raytheon Technologies Corp. This acquisition will allow Safran to expand its presence in this sector and strengthen its ties with Airbus and the US military. The deal represents Safran’s largest acquisition since 2018 and is part of Raytheon’s efforts to streamline its Collins Aerospace business.
MicroVision (NASDAQ:MVIS) – After withdrawing its plans from a $75 million stock offering, MicroVision shares recouped nearly all of the previous day’s losses, rising nearly 27% in Thursday’s premarket trade. The company cited market volatility as a reason to explore other capital raising opportunities.
H&M (USOTC:HNNMY) – H&M’s fiscal second quarter sales were slightly weaker than expected, but prospects for a better third quarter boosted shares in the Swedish retailer. While sales were steady, the strong start to June and the forecast of warmer weather boosted optimism. The company expects a 5% increase in sales in the third quarter and will benefit from increased tourism spending in Europe. H&M faced cost challenges and online competition, while Inditex (IDEXY) performed better over the same period.
Hugo Boss (USOTC:BOSSY) – Hugo Boss has raised its sales target to 2025, forecasting annual sales of €5 billion and an operating profit of €600 million, up from the previous target of around €480 million, and an EBIT margin of at least 12% against a previous forecast of around 12%. The company will continue to invest in marketing and expand its presence in markets, especially in China, while maintaining a strong performance in the United States.
Unilever (NYSE:UL) – Unilever announced that it is about to acquire the Yasso Holdings frozen yogurt brand in North America. The acquisition is in line with Unilever’s strategy to expand its ice cream division and meet growing demand for healthy snack options. Financial details of the deal were not disclosed, and the transaction is expected to close in the third quarter of 2023.
Santander (NYSE:SAN) – Santander announced that Pedro Castro e Almeida has been appointed as regional head for Europe, replacing Antonio Simões. Castro will be responsible for the bank’s business in Europe, including Spain, Great Britain, Poland and Portugal. The appointment will take effect on September 1, and Castro will continue as CEO of Santander Portugal.
Goldman Sachs Group (NYSE:GS) – Goldman Sachs is cutting more than 30 banking jobs in Asia, mostly in the banking and markets division. Most of the cuts affect bankers with a focus on China. These cuts are part of a new round of global layoffs that will affect fewer than 250 jobs. Other Wall Street banks, such as Morgan Stanley and Citigroup, are also carrying out layoffs in response to the challenging market environment.
Citigroup (NYSE:C) – Citigroup will face termination costs due to approximately 1,600 job cuts in the second quarter, resulting in restructuring charges. The bank has already exited seven markets it plans to divest and has warned of declines in revenues for investment and trade banks. Elsewhere, Mark Mason, Citigroup’s chief financial officer, said the bank’s markets revenue fell 20% in the second quarter, but the full-year outlook remains unchanged. While debt ceiling concerns have impacted investors, the current month has been more stable in terms of market volatility. Citigroup maintains its revenue forecast of between $78 billion and $79 billion for the year.
BlackRock (NYSE:BLK) – BlackRock sees high demand from its global clients for infrastructure investment in Saudi Arabia, with more than $15 billion already committed to natural gas pipelines and additional investment opportunities on the horizon. The partnership with the Public Investment Fund of Saudi Arabia strengthens this initiative. In other news, Larry Fink, CEO of BlackRock, stated that he has no plans to leave the company any time soon and has highlighted developing next-generation leaders as his top priority. Succession at BlackRock is an important focus as the company pursues growth and meets customer needs. The company is targeting organic growth and is eyeing acquisitions to boost its growth. The private market will play a key role in this growth, with expectations of doubling revenues over the next five years. BlackRock also seeks transformational opportunities and is open to expanding its business footprint.
Deutsche Bank (NYSE:DB) – Deutsche Bank has added three senior negotiators to its team of bankers who advise financial institutions. Marie-Soazic Geffroy and Jeff Cady will join the bank in Paris and New York, respectively, while Chris Williams and Aaron Saperstein will take on key roles in Europe and the US. The bank is looking to boost its revenues in the investment banking sector, which declined in the first quarter.
Charles Schwab Corp (NYSE:SCHW) – Shares in Charles Schwab Corp fell -0.66% in premarket trading following the Federal Reserve’s announcement to keep interest rates steady despite plans to raise them in the future. The company also projected a drop in second-quarter revenue, which sparked earnings concerns. The company’s bond prices are also under pressure, indicating less confidence in Schwab’s prospects.
Live Nation (NYSE:LYV), Ticketmaster (NASDAQ:TKTM) – Live Nation and Ticketmaster have agreed to provide full pricing to consumers on their ticketing platforms. President Joe Biden has called a meeting with private companies, including SeatGeek and Airbnb (NASDAQ:ABNB), as part of his efforts to fight hidden fees. Biden is pursuing legislation that would require upfront pricing and ban surprise fees across multiple industries.
Target (NYSE:TGT) – New York Attorney General Letitia James has criticized Target’s decision to pull LGBTQ-themed merchandise from stores, calling it wrong and calling on the retailer to reverse the decision. At least 14 New York officials also expressed concern. Target justified the decision by citing clashes between shoppers and employees. Other companies such as Kohl’s (NYSE:KSS) and Bud Light (NYSE:BUD) have also faced similar backlash.
LVMH (USOTC:LVMUY) – The LVMH group has teamed up with Epic Games, creators of Fortnite, to deliver immersive experiences and virtual fitting rooms. Using Epic’s tools, LVMH will create products, collections and advertising campaigns in virtual worlds, allowing customers to preview items before they are produced. The partnership aims to engage younger generations in the metaverse, an immersive version of the internet. Other brands such as Roblox (NYSE:RBLX) are also exploring this virtual territory.
Activision Blizzard (NASDAQ:ATVI) – Microsoft and Activision Blizzard have asked a US judge to expedite the blocking process for the $69 billion acquisition as the deadline approaches. A hearing was scheduled to discuss the temporary suspension of the agreement pending a court decision. The FTC declined to comment on the matter. Microsoft and Activision highlighted the importance of a quick decision given the challenging timelines involved.
Microsoft (NASDAQ:MSFT) – Microsoft co-founder Bill Gates is scheduled to meet Chinese President Xi Jinping during his visit to China. It will be Xi’s first meeting with a foreign private entrepreneur in years. The purpose and details of the meeting were not disclosed. Gates’ visit comes amid rising tensions between China and the United States.
Cava (CAVA) – Mediterranean restaurant chain Cava priced its initial public offering at $22 a share, above its previously reported range. With the sale of 14.4 million shares, the company raised approximately US$ 318 million. The shares will go public on Thursday under the symbol CAVA. Cava, with more than 260 restaurants, posted an increase in net sales in 2022, but also a higher net loss compared to the previous year.
Lennar Corp (NYSE:LEN) – Shares of Lennar Corp. rose 2.83% premarket, buoyed by quarterly results and an upbeat forecast that beat Wall Street’s expectations. The company posted net income of $871.7 million for the fiscal second quarter on revenue of $8.05 billion. Lennar expects to deliver between 18,000 and 19,000 homes in the next quarter and between 68,000 and 70,000 for the year, beating previous forecasts.
Adobe (NASDAQ:ADBE) – Analysts expect Adobe to post earnings of $3.79 per share on sales of $4.8 billion, up from $4.4 billion a year earlier. Wall Street will also focus on the company’s generative AI strategy and its pending $20 billion bid for Figma, which provides collaborative design tools.
Market view
Domino’s Pizza (NYSE:DPZ) – Domino’s Pizza gained 2.05% to $312.00 after being raised to Buy from Hold on Stifel and its price target raised to $350 from $320.
Corning (NYSE:GLW) – Corning was up 1.56% in premarket trade to $33.76 after shares in the specialty glass maker were raised to Buy from Neutral at Citi. The target price has been increased from $36 to $40.