Market Wraps
Watch For:
Durable Good for June; Weekly Jobless Claims; Advance Estimate for GDP 2Q; earnings from AbbVie, Bristol Myers Squibb, Comcast, Ford, Honeywell, Intel, Mastercard, McDonald’s, Mondelez, Royal Caribbean, T-Mobile
Today’s Headlines/Must Reads
– What Fed Hikes? Much of America’s Consumer Debt Is Still Riding Ultralow Rates
– The Economy Has Defied Expectations. Here’s What to Focus On in the GDP Data.
– Private-Equity Fundraising Falls to Lowest Level in Five Years
– Netflix Reworks Microsoft Pact, Lowers Ad Prices in Bid for Growth
Opening Call:
Stock futures were pointing to a strong start on Thursday, after the Federal Reserve rate decision that offered few surprises and banner earnings from Meta Platforms.
HSBC said the fed funds target will be kept at this new range until the second quarter of 2024, followed by 75 basis points of cuts next year.
“The lack of hawkish additions or tweaks in the statement together with Powell’s press conference and the change of language in the statement from “modest” to “moderate” growth were – on balance – taken initially as a slight positive by risk assets,” HSBC said, adding it expects the 2-year Treasury yield to trade within the recent range of 4.6% to 5%.
Premarket Movers
Align Technology rose 13% after maker of clear tooth straighteners posted second-quarter adjusted earnings that beat expectations and said it expects third-quarter revenue of $990 million to $1.01 billion vs. consensus of $990 million.
Chipotle declined 8.8% after the chain’s second-quarter earnings beat expectations but revenue of $2.51 billion fell short.
Lam Research rose 2.7% after the maker of chip equipment said it expects fiscal first-quarter revenue of between $3.1 billion and $3.7 billion, while analysts forecast $3.3 billion.
Shares of Meta Platforms rose 7.7% after it reported better-than-expected second-quarter earnings and said it anticipates third-quarter revenue of $32 billion to $34.5 billion, higher than Wall Street estimates of $31.2 billion.
ServiceNow posted better-than-expected earnings in the second and lifted its full-year outlook, but the stock was down 2.3%.
Forex:
The dollar was steady in Europe after falling following the Fed’s expected interest-rate rise.
The Fed said further moves will depend on economic developments, and ING advised waiting for data before selling the currency further.
“We would not chase the move [lower in the dollar] just yet and prefer to take our cue from the data.”
The carry trade will remain popular and with the federal-funds rate in a 5.25% to 5.5% range, “the dollar is clearly not a funding currency,” ING said.
With the ECB fully expected to raise interest rates by 25 basis points on Thursday, focus will center on the outlook and this could be negative for the euro, DZ Bank Research said.
Christine Lagarde is unlikely to flag another rise in September, instead stressing the need to wait for data, DZ Bank said.
The euro “should hardly be able to hide its displeasure at the less ‘hawkish’ rhetoric,” DZ Bank said.
Energy:
Oil prices rose more than 1% after Jerome Powell said further Fed rate hikes would depend on how the economy fares in the coming months.
Commonwealth Bank of Australia expects Brent will rise to $85/bbl by the fourth quarter on expectations of OPEC+ supply cuts and resilient demand, which will force global oil stockpiles to fall. Still, CBA also thinks demand in affluent countries will ultimately weaken and this will weigh on prices in the first half of 2024, driving prices to $75/bbl in the second quarter.
Metals:
Base metals made solid gains after the Fed raised interest rates for what many predict will be the final time of the current campaign.
While “incoming data will be the deciding factor…the hiking cycle is effectively complete,” ANZ said.
Today’s Top Headlines
Bud Light Brewer Lays Off Hundreds of U.S. Workers
Anheuser-Busch InBev laid off hundreds of workers at its U.S. offices after months of slumping sales at Bud Light.
The world’s largest brewer, which also sells Stella Artois and Budweiser, on Wednesday said the cuts would affect less than 2% of its roughly 18,000 U.S. workforce. The layoffs won’t impact front-line workers such as brewery and warehouse staff, the company said.
Justice Department and EPA Probe Telecom Companies Over Lead Cables
The Justice Department and Environmental Protection Agency are investigating the potential health and environmental risks stemming from a sprawling network of toxic lead-sheathed telecom cables across the U.S.
The Justice Department’s civil inquiry, by the U.S. attorney’s office for the Southern District of New York, is in preliminary stages and focuses partly on whether telecom companies had knowledge of the potential risks to their workers and future environmental impact when they left behind the lead cables, according to a person familiar with the inquiry.
Mattel Needs Barbie’s Movie Magic to Lift Toy Sales
Barbie was a box-office hit, but Mattel needs moviegoers to pick up dolls and Dreamhouses to boost its fortunes.
The company behind brands such as Hot Wheels cars, American Girl dolls and Fisher-Price gear remains a toy business at its core. And that business has slumped for months, as inflation has weighed on consumer spending and retailers have cut orders for a range of goods including toys and games.
Weaker Energy Prices Temper Shell’s Profit, but Not Cash Payouts for Investors
LONDON-Weaker oil and natural-gas prices and softer demand for everything from chemicals to U.S. renewable power took a bite out of Shell’s second-quarter profit a year after the war in Ukraine supercharged commodity prices, fueling a record haul for Europe’s biggest energy company.
Still, the U.K.-based company on Thursday increased its dividend and said it would buy back $3 billion more in shares this quarter, reflecting new Chief Executive Wael Sawan’s quest to keep cash-thirsty investors happy amid energy-price drops and economic uncertainty.
Volkswagen Lowers Delivery Targets as Supply-Chain Issues Persist
Volkswagen said some supply chain bottlenecks were easing, including less pressure on semiconductor supplies, but warned transportation delays persisted as it lowered its deliveries target for the year.
The German car giant said it would deliver between 9 million and 9.5 million vehicles this year, down from its previous estimate of 9.5 million. It also reported higher revenue and lower profit for the second quarter.
Buyers Are Getting Home Loans From an Unlikely Source: The Seller of Their House
Home sellers: Have you considered financing a buyer’s purchase of your home by taking back a mortgage? You’ll be in a tiny club, and there are good reasons it is so small.
According to an analysis by http://Realtor.com, as of May 2023, just 1.04% of all U.S. active listings mentioned some type of private financing, down from 1.08% in February and March, which was the highest that figure has been in three years. (News Corp, owner of The Wall Street Journal, also operates http://Realtor.com.)
The ECB Is Set to Follow the Fed With a Rate Hike. What Come’s After Is Less Clear.
With the European Central Bank projected to lift interest rates by a quarter-point on Thursday, attention will zero in on whether the central bank maintains a hawkish tone. That would indicate another rate hike is in store for September.
The ECB’s move will follow the U.S. Federal Reserve’s quarter-point rate hike on Wednesday, in which officials took rates to their highest levels in 22 years but offered little in the way of guidance for future meetings.
German Consumer Sentiment to Brighten in August on Easing Inflation Expectations
Consumer confidence recovered in Germany for August, a rebound from a decline in the month before, amid improved expectations for cooling inflation in the eurozone’s largest economy.
Germany’s forward-looking consumer sentiment index forecasts confidence to tick up to minus 24.4 in August, from a revised minus 25.2 in July, according to data from market-research group GfK published Thursday.
China’s Industrial Profit Decline Narrowed in June
The decline in China’s industrial profit narrowed for the fourth straight month in June, thanks to improved profitability in the country’s manufacturing sector, official data showed Thursday.
Industrial profit fell 8.3% from a year earlier in June, narrowing from the 12.6% drop recorded in May, said the National Bureau of Statistics. In the January-June period, China’s industrial profit declined 16.8%.
Russian Attack on U.S. Drone Spurs Fears of Escalation Over Syria
While the world’s attention has been focused on Russia’s invasion of Ukraine, new Russian attacks against U.S. drones have made Syria a fraught arena for military competition between Moscow and Washington.
The risk of confrontation was underscored Wednesday when a Russian jet fighter dropped flares that damaged the wing of a U.S. MQ-9 Reaper drone as it flew over northwest Syria, U.S. officials said.
In Need of Allies, Putin Courts African Leaders in St. Petersburg
At a high-profile meeting in St. Petersburg beginning Thursday with top officials from dozens of African nations, Russian President Vladimir Putin will be under pressure to reassure some of Russia’s closest allies that his war in Ukraine hasn’t compromised the Kremlin’s ability to provide military and political support to the continent.
Putin will meet over the next two days with top officials from 49 African nations, according to the Kremlin-a summit that comes at a particularly delicate time for Russian-African relations.
Military Officers Say They Removed Niger’s President
NAIROBI-A group of military officers in the West African country of Niger claimed late Wednesday that they had overthrown the elected president, shaking one of the most-reliable U.S. allies in the fight against al Qaeda, Islamic State and Boko Haram.
Speaking on state television late Wednesday, a Nigerien officer said a group called the National Council for the Salvation of the Fatherland had seized power and removed Niger President Mohamed Bazoum.
Source: Dow Jones Newswires