Market Wraps
Watch For:
ADP National Employment Report for June; International Trade for May; Weekly Jobless Claims; EIA Weekly Petroleum Status Report; Canada Official International Reserves for June; Canada International Merchandise Trade for May
Today’s Top Headlines/Must Reads:
– Iran Floods Global Markets With Cheap Oil as Saudi Arabia Cuts Output
– AI Boom Stems Tech’s Downturn
– Americans Have Quit Quitting Their Jobs
– As Greedflation Starts to Fade, Wageflation Creeps In
Opening Call:
Stock futures fell on Thursday as the prospect of the Federal Reserve keeping interest rates higher for longer – and the damage that may ultimately do to the global economy – again rattled sentiment in stock markets.
Rising bond yields also unnerved investors, with Treasury yields near four-month peaks, and in the case of the particularly monetary policy-sensitive 2-year the yield was just shy of 5% and only several basis points below its highest since 2006.
The Fed minutes left “no reason to doubt the Fed will go ahead with a July hike” and upcoming data will need to be significantly weak to change rate expectations, ING said.
Overseas, Asian equities were hit hard, with Hong Kong’s Hang Seng index shedding 2.9% after Goldman Sachs downgraded China’s banks.
Chinese investors appeared unconvinced that Beijing will deliver a big stimulus or economic reforms to support waning growth, according to a survey also by Goldman Sachs.
“Persistent geopolitical tensions, ongoing concerns about U.S.-China decoupling, domestic regulation, and China’s internal growth challenges continue to support the pessimistic arguments about China’s risk markets, ” SPI Asset Management said.
Declines in Asian and European bourses fed into U.S. index futures, with traders wary that Wall Street’s latest rally left the market vulnerable to renewed concerns about borrowing costs.
To that end traders will be keenly eyeing a batch of potential data catalysts in the next two sessions, with the nonfarm payrolls report on Friday arguably the most important.
Pre-Market Movers
Bank of America said it would boost its quarterly dividend to 24 cents a share from 22 cents beginning in the third quarter. Shares dipped premarket.
JetBlue Airways fell 0.3% after the airline terminated a joint venture with American Airlines following a judge’s ruling against the partnership and said it would turn its focus to completing its $3.8 billion acquisition of Spirit Airlines. American shares fell 1.5%. Spirit rose 2.8%.
Meta Platforms launched Threads, its rival to Twitter, on Wednesday evening, a day earlier than the release of the microblogging app had been expected. Shares were rising 1.5% in premarket trading.
Nikola fell more than 2%, having rallied Wednesday when the company reported that deliveries rose in the second quarter, although production nearly halved.
UPS edged lower, having fallen around 2% Wednesday after negotiations stalled on a new labor contract.
Wednesday’s Post-Close Movers
Histogen has paused further development of its current programs to explore strategic alternatives following a review of the business. Shares rose 30%.
VBI Vaccines said it began an underwritten public offering and a registered direct offering of common shares and accompanying common warrants. Shares fell 8.3%.
Forex:
Upcoming data will need to be significantly weak to change rate expectations and cause lasting dollar falls, ING said, after the Fed minutes.
“It will probably take some substantial downside surprise for markets [to] reconsider their expectations.”
ISM services data later could show a drop into contractionary territory, but the dollar’s reaction “may not prove particularly long-lived,” ING said.
Bonds:
The 10-year Treasury yield may rise toward 2023 high, based on technical charts, UOB’s Global Economics & Markets Research said.
The yield has recently risen above the top of a descending channel pattern on the weekly chart, UOB noted.
This upside break together with rapidly building upward momentum suggest the 10-year yield could climb toward a year-to-date high of 4.091%, it said. However, this high is a major resistance level and may not be easy to break.
Energy:
Crude oil prices remained largely rangebound in Europe, as production cuts from OPEC offset weak demand.
Brent on Wednesday had closed at its highest level in two weeks, but remained largely steady, even with surprise cuts from Russia and Saudi Arabia at the start of the week, Saxo Bank said.
“Overall, we believe prices are near a cycle low, but a few more challenging months cannot be ruled out, primarily because of worries that a robust pickup in demand, as forecast by OPEC and the IEA, will fail to materialize,” Saxo Bank said.
Metals:
Base metals were slightly weaker and gold flat in early London trading, with Peak Trading Research citing the hawkish Fed minutes as a tailwind for the dollar and a headwind for most commodity markets.
Today’s Top Headlines
Meta Launches Threads, Betting Instagram Mojo Can Take on Twitter With New App
Let the battle begin.
Facebook parent Meta Platforms on Wednesday launched Threads, a stand-alone microblogging app that takes direct aim at Twitter as user unrest on that platform has grown since Elon Musk took the company over in October.
Goodbye, Volkswagen: China’s New EV Winners
China’s electric-vehicle market continues to speed ahead in 2023, leaving the rest of the world in the dust-or gas fumes. But it’s still been a brutal year for many EV makers as competition heats up.
That has investors asking: Who will come out on top?
Home-Builder Stocks Are Booming as Homeowners Stay Put
Home-builder stocks are climbing, thanks partly to high mortgage rates that are keeping many homeowners in place.
So far this year, PulteGroup is up about 70%, and D.R. Horton and Lennar are both up more than 30%, compared with a 16% rise in the S&P 500.
Everyone Wants Interest on Their Deposits. That’s Bad for Main Street Banks.
Nicolet Bankshares thrived in the years after the financial crisis. The lender, based in Green Bay, Wis., bought up smaller banks and focused on the kinds of Midwestern cities and towns that megabanks ignored.
Then came the Federal Reserve’s rapid interest-rate increases starting last year. The 60-branch bank took a big loss on the bonds it bought when it thought rates would stay low. Depositors started moving their money into higher-yielding places such as Treasurys, forcing Nicolet to pay higher interest rates. The urgency only intensified after Silicon Valley Bank failed in March.
U.S. and China Look to Repair Ties, Again
SINGAPORE-U.S. Secretary of State Antony Blinken’s visit to Beijing last month was billed as an effort to put a floor under fast-deteriorating ties between the world’s two biggest economies.
In the weeks that followed, if anything, the U.S.-China relationship has gotten rockier.
Mar-a-Lago Surveillance Footage Shows Trump Aide Moving Boxes Days Before DOJ Visit
Surveillance footage from former President Donald Trump’s Mar-a-Lago resort showed his personal aide, Walt Nauta, moving dozens of boxes in the days before Justice Department investigators visited the property in June 2022 to retrieve records, according to newly unredacted portions of the FBI’s request for a warrant to search the property.
That footage was among the evidence the Justice Department used to justify its unprecedented search of the former president’s residence, Mar-a-Lago, two months later, in August 2022, according to the new details of the warrant application, made public late Wednesday.
Iran Tried to Seize Two Oil Tankers Near Strait of Hormuz, U.S. Navy Says
Iran attempted to seize two oil tankers near the Strait of Hormuz and fired shots at one of them, the U.S. Navy said, the latest in a series of attacks on tankers in the strategic waterway.
In both incidents, which occurred in international waters, the Iranian naval vessels left after the U.S. Navy dispatched a guided-missile destroyer to the scene, according to the U.S.’s Bahrain-based Fifth Fleet, which helps patrol the area. Both the commercial vessels continued their voyages, the U.S. Navy said.
Source: Dow Jones Newswires