US index futures are lower on Wednesday morning, due to weak activity data in China and Europe, which renewed fears of a global recession.
By 6:59 AM, Dow Jones (DOWI:DJI) futures were down 142 points, or 0.41%. S&P 500 futures were down 0.40%, while Nasdaq-100 futures were down 0.47%. Yields on 10-year Treasuries are at 3.853%.
The services and composite PMI indices in China decelerated, while in the Euro Zone the composite PMI was below consensus. The PMIs for Germany, France, Italy and India also frustrated the consensus.
In another matter of the day, China canceled the visit of the European Union’s foreign policy chief to the country without offering a specific justification. The cancellation comes one day before the scheduled visit of US Treasury Secretary Janet Yellen.
On Wednesday’s American economic agenda, the highlight of the day is the release of the minutes of the Federal Reserve’s last interest rate meeting at 2:00 PM, which may provide details on the strategy for pausing interest rate hikes. Some economists predict that the Fed will take a stance of raising rates in an alternating pattern until the fall in inflation is more pronounced. Other expected indicators are US Factory Orders and US Economic Optimism both at 10:00 AM. At 4:30 PM, changes in API oil inventories are expected.
Elsewhere in commodities markets, West Texas Intermediate crude for August was up 1.95% at $71.15 a barrel. Brent crude for September is close to $76.01 a barrel. Iron ore rose 0.73% in Dalian, China, at $114.39.
At the close of Monday, which ended early due to Independence Day, the Dow Jones added 10.87 points, or 0.03%, closing at 34,418.47 points. The S&P 500 was up 0.12% to close at 4,455.59 points, while the Nasdaq Composite advanced 0.21% to 13,816.77 points. The great highlight of the market was the result of Tesla, which showed record sales figures, despite the expectation of some slowdown. This, before the beginning of the earnings season, throws some hope of an extension of the risk assets rally in the country. Even so, several factors added up to demand more caution from investors, such as the slowdown of the US economy – reinforced by the industrial PMI, which came in lower than expected – and the expectation of at least one more increase in interest rates by the Fed.
Wall Street Corporate Highlights for Today
Big Tech – Seven companies, including Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), Meta (NASDAQ:META) and Microsoft (NASDAQ:MSFT), claim to comply with the new “gatekeeper” criteria of European Union, according to EU industry commissioner Thierry Breton. Samsung and ByteDance (which owns TikTok) also claimed to meet the criteria, although TikTok disputed its inclusion on the list. Booking.com (NASDAQ:BKNG) hopes to move into the gatekeeper category in the coming year. Under the EU’s Digital Markets Act (DMA), these companies are subject to stricter rules, including interoperability of messaging apps and a ban on favoring their own services over competitors. Fines of up to 10% of global annual turnover may apply for DMA violations. The European Commission will confirm gatekeeper designations by 6 September.
Alphabet (NASDAQ:GOOGL) – Alphabet’s Google removed more than half of links to Twitter pages in search results. These actions were taken in the wake of limitations placed by Elon Musk on the amount of how many tweets Twitter users could read. Musk said verified accounts are limited to reading 6,000 posts a day. For unverified accounts, the number drops dramatically to 600 posts a day. New unverified users can only access 300 posts per day.
Meta Platforms (NASDAQ:META) – Meta Platforms will launch its Twitter competitor Threads app on Thursday, allowing users to maintain their Instagram followers. The launch directly challenges Twitter, which has faced criticism after restrictions imposed by Elon Musk. In other news, a social media account affiliated with the Beijing Daily criticized Meta’s founder for his criticism of Chinese censorship and alleged theft of intellectual property. The editorial comes after reports of talks between Meta and Tencent Holdings Ltd. to sell the Quest VR headset in China despite Facebook and Instagram lockdown. Zuckerberg’s relationship with China has been rocky, and the editorial suggests he may be the biggest obstacle to finding a solution in China.
Apple (NASDAQ:AAPL) – The London Court of Appeal ruled that Apple had infringed two telecommunications patents essential to 4G standards. Texan company Optis Cellular Technology sued Apple in 2019. In other news, Reuters pointed out that the exceptional performance of Apple shares is raising concerns among fund managers that they may not own enough of these shares. The rise in Apple’s stock price has boosted its share of stock indexes to record levels, making its weighting disproportionately high. This can hurt active fund managers looking to outperform benchmarks. According to the Financial Times, Apple is reducing production targets for the Vision Pro headset due to difficulties with its complex design. The company hopes to manufacture fewer than 400,000 units next year, below the internal target of 1 million. Manufacturers have been struggling with micro-OLED displays, the most expensive part of the device.
Microsoft (NASDAQ:MSFT) – The European Union is likely to open an antitrust investigation against Microsoft in the coming months. Remediation discussions to avoid this measure have hit a snag. Microsoft has been targeted by the EU following a complaint by Salesforce (NYSE:CRM) about Teams being integrated into Office 365. The company is trying to avoid an investigation and has offered to reduce the price of Office without Teams. The European Commission seeks a deeper price cut. Microsoft remains cooperative and may improve its proposal prior to the initiation of the investigation.
Amazon (NASDAQ:AMZN) – Amazon is to begin rolling out first Rivian electric vans (NASDAQ:RIVN) in Germany in the coming weeks. 300 electric vans will hit the roads in the Munich, Berlin and Dusseldorf regions as part of an order for 100,000 vehicles placed in 2019. Amazon has already launched Rivian vans in the US and plans to have 100,000 Rivian vehicles in its global fleet by 2030. In other news, Bloomberg reported that Amazon CEO Andy Jassy is reviewing the company’s Hollywood studio spending on original TV programming. With an increased focus on costs, he’s looking at the budgets and performance of the biggest shows. Amazon is looking to cut costs across the company and Jassy has abandoned projects deemed unnecessary. In other news, tech companies known as “the Magnificent Seven” have regained their dominance in the market, led by Nvidia Corp.
Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), AMD (NASDAQ:AMD) – According to the Wall Street Journal, the Biden administration plans to restrict China’s access to cloud computing services provided by American companies such as Microsoft and Amazon. These restrictions could affect companies like Nvidia and AMD, making it difficult for Chinese companies working on AI applications to sell advanced chips. Nvidia has expressed concerns about a possible “permanent loss of opportunity”. The move comes amid the Sino-US chip war and trade tensions between the two countries.
Tesla (NASDAQ:TSLA) – Tesla posted better-than-expected quarterly deliveries, boosted by discounts and volume increases, sending its shares up about 7% on Monday. Tesla’s market capitalization increased by about $57 billion. In other news, Kentucky has become the first state to require the Tesla charging plug at electric vehicle charging stations as part of a statewide program to electrify highways. Adoption of NACS has been a growing trend among electric vehicle manufacturers in the United States. However, a group of EV charger manufacturers and operators are contesting the requirement in Texas, citing safety certification and standardization concerns.
Lucid (NASDAQ:LCID) – Shares in Lucid Group posted their sixth consecutive gain on Monday, rising 7.3% to close at $7.39. Although one analyst downgraded its rating to neutral, optimism over delivery and production data from other EV manufacturers buoyed the sector. According to a note from Citi, near-term demand for the Lucid Air EV and the company’s gross margin remain uncertain.
Nikola (NASDAQ:NKLA) – Nikola Corp announced it is liquidating the assets of battery maker Romeo Power less than a year after the acquisition. The company faced challenges in meeting investor expectations and is now ending its operations with Romeo Power. Other electric vehicle startups are also struggling.
Rivian (NASDAQ:RIVN) – Rivian Automotive beat expectations for second-quarter deliveries, buoyed by increased production and steady demand, sending its shares up 17.4% on Monday. The company delivered 12,640 vehicles, beating estimates of 11,000. These positive results indicate that Rivian may be overcoming production and competition challenges in the electric vehicle market. Its production target of 50,000 vehicles for this year looks achievable. Analysts highlighted Rivian’s focus on internal development, which has helped the company stand out among other startups in the industry. The company expects demand to remain stable through 2023.
Stellantis (NYSE:STLA) – Stellantis will invest up to €200 million at its Mirafiori site in Italy as part of its “green campus” program, transforming it into a carbon-neutral base. The project will house 10,000 workers and be completed by 2025, with a focus on electrified transmissions and the circular economy.
Ryanair Holdings (NASDAQ:RYAAY) – Ryanair announced it carried a record 17.4 million passengers in June, the most ever recorded for a single month, representing a 9% year-on-year increase. The company also reported that the flights had an average occupancy rate of 95%, the same as the previous year. Ryanair canceled more than 900 flights due to air traffic controller strikes, affecting around 160,000 passengers.
Exxon Mobil (NYSE:XOM) – Exxon Mobil faces a dilemma as it expands its global trading division: whether or not to pay cash bonuses to traders. Unlike other companies in the industry, Exxon pays regular salaries and small stock awards, which has led to frustration and hiring difficulties. The company pursues a cautious approach, without taking the same levels of risk as its competitors.
Nasdaq (NASDAQ:NDAQ), Blackrock (NYSE:BLK) – Nasdaq has re-filed an application to the US SEC to list a BlackRock Bitcoin ETF.
Coinbase (NASDAQ:COIN) – Shares of Coinbase surged 13% on Monday after Cboe revealed it is working with the company to launch a bitcoin spot exchange-traded fund (ETF). Cboe addressed the SEC’s concerns by naming Coinbase as the cryptocurrency platform that would help detect fraud in bitcoin markets. The SEC has also raised similar concerns about a BlackRock ETF filing. On Wednesday, Coinbase was downgraded to “Neutral” by Piper Sandler, with a target price lowered to $60.
Deutsche Bank (NYSE:DB) – Russian subsidiary RusKhimAlyans, with a stake in Gazprom, has filed lawsuits seeking a lump sum of 31 billion rubles ($348 million) from Deutsche Bank and Commerzbank, according to Russian court documents. RusKhimAlyans is seeking more than 22 billion rubles from Deutsche Bank and more than 8 billion rubles from Commerzbank.
UBS (NYSE:UBS) – The Ethos Foundation, representing former Credit Suisse shareholders, is supporting a class action lawsuit brought by LegalPass against the exchange ratio established in the acquisition of Credit Suisse by UBS. Credit Suisse shareholders have received an offer that Ethos considers unfavorable. Other holders of Credit Suisse bonds are also seeking damages. LegalPass claims the deal was made without proper consultation with shareholders and the case will be filed in court in Zurich. In other news, UBS has started a US recruitment drive for wealth managers despite planned 30% global workforce cuts.
Bank of America (NYSE:BAC), Citi (NYSE:C) – Bank of America and Citigroup have entered into a dialogue with the Federal Reserve to understand divergences between the central bank’s stress test results and those of the companies themselves. BofA has yet to announce a potential dividend increase, unlike its rivals. JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley increased their dividends. BofA seeks to understand differences in comprehensive results. Citigroup also made a similar statement, seeking to understand the differences in its stress test scores.
HSBC (NYSE:HSBC) – HSBC Holdings Plc will be the first UK bank to test an advanced data security system, in partnership with BT Group Plc, Amazon and Toshiba Corp. The test will involve distributing quantum keys to strengthen cyber defenses and protect financial transactions from hackers. This technology is considered an important part of the defense strategy as modern cryptography may be vulnerable to future quantum computers. HSBC hopes to analyze threats and better protect data through this test.
Jefferies Financial Group (NYSE:JEF) – Rizal Gozali, managing director of Credit Suisse, is joining Jefferies to strengthen its presence in Asia. He will start in September and will help oversee Indonesia’s coverage. Gozali is one of several Jefferies hires from Credit Suisse, with other top professionals also making the switch. Rival banks such as Deutsche Bank are also recruiting talent from Credit Suisse.
Pfizer (NYSE:PFE) – Samsung Biologics has entered into two deals with Pfizer worth a combined $897 million to manufacture biotechnology products. The contracts involve the production of biosimilar products in South Korea until 2029. With these orders, the combined value of Pfizer’s contracts with Samsung Biologics reaches US$1.08 billion. The South Korean company sees these agreements as an expansion of its strategic partnership and has already surpassed last year’s annual contract volume.
Taiwan Semiconductor Manufacturing (NYSE:TSM) – Globalization is taking a backseat to national security and technological leadership, with US-China relations characterized more by competition than cooperation, said Morris Chang, retired founder of TSMC. He pointed out that globalization has been redefined to allow business-to-business transactions as long as they do not undermine national security, technological supremacy and economic leadership. Chang mentioned that globalization peaked in the 2010s and has weakened in recent years, with the US and China strengthening their domestic chip industries.
Alibaba (NYSE:BABA) – Alibaba is considering options for its video streaming platforms, including the possibility of transferring assets to Alibaba Pictures Group and expanding its operations in Hong Kong.
Altria Group (NYSE:MO) – The FTC announced that it has dismissed a complaint against Altria Group, maker of Marlboro cigarettes, and Juul Labs, maker of e-cigarettes. The FTC will also overturn an administrative judge’s decision favorable to the companies in 2022. Altria dropped its stake in Juul and asked the FTC to drop the case. Altria expressed satisfaction with the withdrawal of the complaint.
Mondelez (NASDAQ:MDLZ) – Mondelez Global LLC has voluntarily withdrawn two varieties of belVita Breakfast Sandwich crackers from the United States due to the possibility of an undeclared presence of peanuts in the products. The company identified the possible presence of peanut protein residues in its manufacturing line. The recall is being conducted in compliance with the US Food and Drug Administration. To date, three possible allergic reactions related to these products have been reported. This action does not affect other belVita products or non-US markets.
AstraZeneca (NASDAQ:AZN) – AstraZeneca announced on Monday that its experimental precision drug, datopotamab deruxtecan, has been shown to slow the progression of advanced-stage lung cancer. However, the company’s shares fell on concerns that the benefits may not be as pronounced as expected. The drug belongs to the class of antibody drug conjugates and targets the TROP2 protein. AstraZeneca said the drug’s safety profile is in line with previous observations in clinical trials.
View (NASDAQ:VIEW) – The United States Securities and Exchange Commission (SEC) has accused “smart” window maker View Inc and its former chief financial officer of underestimating the costs of replacing defective windows, resulting in an upgrade. View will not pay a fine for its cooperation with the SEC, but the former CFO faces fraud charges. The company will restate its financials and its stock has dropped significantly since the merger.
UPS (NYSE:UPS) – Negotiations between UPS and the union representing more than 340,000 workers broke down, paving the way for a possible massive strike later in the month. The union rejected an offer deemed unacceptable by UPS and no further negotiations are scheduled. Workers voted in favor of a strike if a new agreement is not reached.
Marvell Technology (NASDAQ:MRVL) – Marvell Technology, with its exposure to artificial intelligence, has the potential to thrive, analyst Oppenheimer said on Monday. The analyst reiterated his “Outperform” rating with a price target of $70. The company, which provides chips and hardware products, has delivered solid results and expects to double AI revenue by 2024. Shares rose 2.6% on Monday -Friday, and 44% in the last 12 months.
Netflix (NASDAQ:NFLX) – Netflix was upgraded from “Sell” to “Neutral” by Goldman Sachs, which also raised its stock price target to $400.