Worries about demand and a slowing economy weigh on US Index Futures and European stocks as central banks in Europe and the US indicate a leaning towards raising interest rates to ensure inflation converges towards the goal.
By 07:27 AM, Dow Jones futures (DOWI:DJI) fell 90 points, or 0.26%. S&P 500 futures were down 0.41%, while Nasdaq-100 futures were down 0.52%. The 10-year Treasury yield was at 3.739%.
In the commodities market, the Brent oil futures contract for August continues to decline, recording a drop of 1.05% at US$73.36 a barrel, heading to close the week with a drop of approximately 3%. West Texas Intermediate crude for August was down -1.38% to settle at $68.56 a barrel. Meanwhile, the price of iron ore did not have a reference in China due to the holiday in the country, but registered a fall of 2.07% to US$ 109.35 per tonne on the Singapore Exchange.
On Friday’s US economic agenda, Atlanta Federal Reserve President Raphael Bostic speaks at 8:00 AM, and Purchasing Managers’ Indexes for June are out at 9:45 AM.
Elsewhere, the Eurozone Composite Purchasing Managers’ Index fell to 50.3 in June, down from 52.8 the previous month and below the market consensus of 52.5, according to a preliminary estimate. That recent reading indicated a sharp slowdown in output expansion in the bloc, a result of slower growth in service sector activity and an increasing slowdown in manufacturing output. On the other hand, the annual inflation rate in Japan surprisingly slowed to 3.2% in May, compared to 3.5% in April and below the market consensus of 4.1%. Costs related to furniture and household items decelerated, while prices for fuel, electricity and water tariffs fell for the fourth consecutive month, mainly due to the 17.1% drop in electricity prices.
At Thursday’s close, the Dow fell 4.81 points or -0.01% to 33,946.71 points. The S&P 500 also rose 16.20 points, or 0.37%, to 4,381.89 points. The Nasdaq Composite closed up 128.41 points or 0.95% to 13,630.61 points.
The session was characterized by rising interest rates in major economies and falling commodity prices due to expectations of lower growth in the global economy. In the United Kingdom, the Bank of England (BoE) once again accelerated the pace of monetary tightening by 0.5 percentage points, raising the country’s basic rate to 5.0% per annum, and indicated that further increases are expected in the next meetings. This decision was taken after yet another data of high consumer inflation in May, which kept the accumulated inflation in 12 months at 8.7%.
At the same time, in the United States, statements made by Jerome Powell, chairman of the Fed, during his hearings in the US Congress, indicated that interest rates should rise again after the pause in this month’s decision. In addition to Powell, other Fed directors have also been pointing in that direction, which reinforces the economic projections released by the institution in last Wednesday’s statement.
Naturally, given the significant gains achieved by US indices this year, the growing uncertainty about the end of the current monetary tightening cycle and the possible impacts of a contractionary monetary policy on the world’s largest economy tend to generate more volatility in the future.
Ahead of Friday’s quarterly results, traders will be watching reports from Carmax (NYSE:KMX) and Apogee Enterprises (NASDAQ:APOG).
Wall Street Corporate Highlights for Today
Meta Platforms (NASDAQ:META) – The Meta Platforms Supervisory Board has asked the company to assess its efforts to prevent the promotion of political violence on its platforms, after allowing a controversial video to remain after the 2022 Brazilian elections raised concern and highlighted the lack of metrics to measure the success of its election integrity efforts. In Canada, Meta plans to shut down access to news on Facebook and Instagram, in compliance with the Online News Act, which requires payments to news publishers. The legislation has passed and will receive royal assent from the Governor-General. Meanwhile, Malaysia will take legal action against Meta for failing to remove undesirable and provocative content about race and religion. The action takes place before the regional elections in the country.
Microsoft (NASDAQ:MSFT), Activision Blizzard (NASDAQ:ATVI) – The FTC has sought an injunction temporarily blocking Microsoft’s acquisition of Activision Blizzard, claiming that the merger would harm competition in the video game industry. Microsoft defends the deal, saying it would benefit gamers and game companies. The hearing will continue through the end of June.
Micron Technology (NASDAQ:MU) – Micron will invest up to $825 million in its first factory in India, located in Gujarat. With support from the Indian central government and the state of Gujarat, the total investment will be US$ 2.75 billion, generating up to 5,000 new direct jobs. Construction should start in 2023.
Applied Materials (NASDAQ:AMAT) – Applied Materials will invest $400 million over four years in a new engineering center in India. The Indian Prime Minister, Narendra Modi, invited the company to strengthen the chip industry in the country. The center will create 500 advanced engineering jobs.
iRobot (NASDAQ:IRBT) iRobot took a hit on Thursday following reports that its acquisition by Amazon.com would face an EU antitrust investigation. The European Commission is scheduled to launch a four-month investigation into Amazon’s purchase of iRobot.
3M (NYSE:MMM) – 3M announced a $10.3 billion settlement to resolve claims related to so-called “eternal chemicals” in drinking water. Payments will be made over 13 years and are intended to fund the detection and removal of these chemicals. 3M emphasized that the settlement is not an admission of liability. Shares in the company are down 16% year-to-date but have risen after the deal was announced.
Starbucks (NASDAQ:SBUX) – Some Starbucks stores across the US will go on strike following a clash with the union over Pride month decor. More than 150 stores and nearly 3,500 workers will join the strikes, while others vote on strike permits. The union claims the company didn’t allow the decor, but Starbucks denies changes to its guidelines. The strikes are also related to allegations of delays in contract negotiations.
Accenture (NYSE:ACN) – Accenture reported a lower-than-expectations revenue forecast of $15.75 billion to $16.35 billion due to reduced IT spending. Economic uncertainty has led customers to retain small businesses. The company expects growth in digital transformation deals and cloud migrations.
Methode Electronics (NYSE:MEI) – Stocks in Methode Electronics fell Thursday after reporting fourth-quarter earnings below Wall Street expectations.
Commercial Metals (NYSE:CMC) – Commercial Metals reported third-quarter earnings and revenue that beat analyst estimates.
Darden Restaurants (NYSE:DRI) – In its fourth quarter financial report, Darden Restaurants reported revenue of $2.7 billion in line with expectations. The $2.58 EPS beat the consensus estimate. Despite the drop in same-store sales, the company forecast growth of 2.5% to 3.5% for fiscal 2023. Analysts reiterated positive assessments, highlighting the sales performance of Olive Garden and LongHorn Steakhouse. Projections indicate earnings and revenue growth of 7.7% and 6%, respectively, with EPS forecast to grow 9.5%.
FactSet Research Systems (NYSE:FDS) – FactSet Research Systems has revised its full-year revenue expectations downward due to disruptive advances such as generative artificial intelligence impacting the data industry. The company expects to hit the lower end of its previous forecast, while maintaining confidence in gaining market share through cost management efforts and adapting to technological developments.
Citigroup (NYSE:C) – Citigroup will implement measures to hold employees accountable for complying with hybrid work model rules. Employees will be checked against the requirement to work at least three days a week in the office, and this will be factored into performance appraisals and pay.
American Express (NYSE:AXP), Morgan Stanley (NYSE:MS), UBS (NYSE:UBS), Barclays (NYSE:BCS) – US banks are seeking to water down a regulatory proposal that would increase bank capital requirements, fearing it would be too burdensome for lenders still reeling from the banking crisis. Banks are particularly concerned about applying higher capital charges on non-interest income. American Express, Morgan Stanley and the US units of UBS, Deutsche Bank and Barclays are among banks with a high proportion of non-interest income, according to a 2022 blog by Washington group The Bank Policy Institute. would affect smaller creditors. Regulators expect to reveal the proposal in late July.
Deutsche Bank (NYSE:DB) – Deutsche Bank is planning to cut 10% of its retail sector jobs in Germany over the next few years as part of a cost-cutting strategy. The cuts come as Claudio de Sanctis prepares to take over the retail unit in July. The bank is looking to increase profitability through cost savings. The cuts are in the planning stages and still subject to discussions with unions. Deutsche Bank is also streamlining its mortgage business and considering branch reductions.
Nasdaq (NASDAQ:NDAQ) – Nasdaq plans to sell debt worth $5.07 billion to finance the acquisition of Adenza, Thoma Bravo’s software company. The $10.5 billion deal aims to transform Nasdaq into a fintech company. The company also received bridge financing for the cash portion of the transaction.
Blackrock (NYSE:BLK) – BlackRock announced layoffs that would affect less than 1% of its workforce, as part of budget reallocations to critical priorities. The investment management firm had already cut 500 jobs this year. JPMorgan Chase also made layoffs in investment banking in Asia.
Berkshire Hathaway (NYSE:BRK.B) – Warren Buffett has donated an additional $4.64 billion in Berkshire Hathaway stock to five charities, bringing his total giving since 2006 to more than $51 billion. The annual donation, made on Wednesday, consisted of approximately 13.7 million Berkshire Class B shares. Buffett is donating 10.45 million shares to the Bill & Melinda Gates Foundation, which has received more than $39 billion in Berkshire shares in total. He is also donating 1.05 million shares to the Susan Thompson Buffett Foundation, named in honor of his late first wife, and 2.2 million shares split evenly among charities led by his children Howard, Susan and Peter: Howard G. Buffett, Sherwood Foundation and NoVo Foundation.
Boeing (NYSE:BA) – Boeing has announced a $100 million investment in infrastructure and pilot training programs in India. This comes after Air India signed firm orders for more than 200 Boeing jets and follows a series of agreements signed during the meeting between the US and Indian leaders.
Ford Motor (NYSE:F) – Ford Motor is preparing to lay off more salaried workers in the US in order to reduce costs. The new round of layoffs is expected to affect the gas, electric vehicle and software divisions, but the exact number of cuts is still unknown. Automakers are looking to streamline operations and control costs amid challenges such as rising prices and demand for electric vehicles. In other news, it has been reported that the US Department of Energy plans to lend up to $9.2 billion to South Korea’s Ford Motor and SK On joint venture to build three battery plants in the United States. The objective is to boost the production of electric vehicles and strengthen the national supply chain. The project could create 5,000 construction jobs and 7,500 operational jobs.
Honda (NYSE:HMC) – Honda is recalling approximately 1.2 million vehicles in the United States due to a faulty rear view camera, which may not display correctly on the display, according to the National Highway Traffic Safety Administration (NHTSA), on Friday.
Lucid (NASDAQ:LCID) – Shares in Lucid closed at a record low on Thursday on concerns over Tesla’s electric vehicle charger. The stock was the worst performer on the Nasdaq 100, while shares in Rivian also fell. Charging standardization is an important issue for Lucid, as its vehicles are designed to receive ultra-high voltages of 1,000 volts, while Tesla uses 500 volts. This difference can affect the loading speed of Lucid vehicles. Tesla’s charging deals have boosted its stock but have been a drag on Lucid.
Lordstown Motors (NASDAQ:RIDE) – Lordstown Motors founder and former CEO Stephen Burns has sold his entire stake in the electric vehicle maker. This action came after the company implemented a reverse stock split to comply with listing requirements and appease an investor.
Moderna (NASDAQ:MRNA) – Moderna has applied to the FDA for approval of its updated Covid vaccine targeting the XBB.1.5 omicron subvariant. The company says the submission is based on the FDA’s recommendation to update vaccines. Moderna, Pfizer (NYSE:PFE) and Novavax (NASDAQ:NVAX) expect to make their updated vaccines available to Americans in the fall, pending FDA approval. About 17% of the US population has received Pfizer and Moderna vaccine boosters to date.
Amgen (NASDAQ:AMGN), Horizon Therapeutics (NASDAQ:HZNP) – Six US states, including California, New York and Illinois, have joined the Federal Trade Commission (FTC) in a lawsuit to block the acquisition of $28 billion from Amgen for Horizon Therapeutics. The merger is contested due to monopoly concerns and potential harm to consumers. The FTC has taken a tougher stance on therapeutic overlaps in pharmaceutical agreements. Amgen defends the legitimacy of the agreement.
Virgin Galactic (NYSE:SPCE) – Virgin Galactic announced plans to raise $400 million through the sale of common stock to expand its business and improve its fleet. Virgin Galactic is gearing up for its first commercial flight this month. The company’s stock has performed well this year, outperforming the S&P 500 index.
GSK (NYSE:GSK) – GSK has announced a settlement of litigation involving the heartburn drug Zantac. Financial terms of the deal were not disclosed, but GSK said it did not accept liability. Analysts point out that GSK’s share price already reflects the possible liabilities arising from the case.
Novo Nordisk (NYSE:NVO) – Novo Nordisk has been alerted by the European Medicines Agency (EMA) to a safety signal related to the risk of thyroid cancer in products containing semaglutide, used in medicines for diabetes and obesity. The company is evaluating the data and highlighted that there is no evidence of a causal relationship between semaglutide and thyroid cancer. Other competing companies were also mentioned in the EMA safety sign. Sales of semaglutide products represented a significant portion of Novo Nordisk’s sales in 2022.
Genworth Financial (NYSE:GNW) – On Thursday, the number of victims of the MOVEit hack rose by several million, with Calpers pension fund and insurance company Genworth Financial revealing that personal information of its members and customers had been compromised. Both companies claimed that a third-party vendor, PBI Research Services, was affected by the hack, allowing data theft. MOVEit Transfer software, widely used to share confidential data, faces criticism for its vulnerability.
Conformis (NASDAQ:CFMS) – Conformis experienced a significant increase in its shares after agreeing to be acquired by Restor3d, a manufacturer of 3D printed orthotics. The stock nearly doubled to $2.20, reflecting confidence in the potential of the merger. Restor3d will pay $2.27 per share in cash for Conformis.
Smith & Wesson Brands (NASDAQ:SWBI) – The firearms maker reported fiscal fourth-quarter sales and earnings that beat expectations and boosted its quarterly dividend by 20%.
Canopy Growth Corp (NASDAQ:CGC) – Canopy Growth Corp is under investigation by the Securities and Exchange Commission over “distortions” in its sales in the BioSteel sports drink segment. The company reported a quarter with larger-than-expected losses. Canopy is cooperating with regulators and taking steps to correct the situation. Canopy Growth shares are down 82% over the last 12 months.
Market View
Alcoa (NYSE:AA) – Alcoa has been downgraded by a Morgan Stanley analyst to Underweight from Equal Weight .
DigitalOcean (NYSE:DOCN) – DigitalOcean was downgraded to Underweight from Neutral at Piper Sandler.
Anheuser-Busch InBev (NYSE:BUD) – Anheuser-Busch InBev has been upgraded by a Deutsche Bank analyst to Buy from Hold.