Market Wraps
Watch For:
Personal Income for July; Weekly Jobless Claims; earnings from Broadcom, VMware, Dell Technologies, Lululemon, Dollar Genera, Campbell Soup
Today’s Headlines/Must Reads
– Americans Likely Increased Their Spending Significantly Last Month
– China’s Economy Shows Fresh Signs of Weakness in Factories, Consumer Spending
– Arm, Instacart, Klaviyo Prep for Their IPOs-With Caution
– Microsoft to Unbundle Teams Software in Europe
Opening Call:
Early action in futures showed Wall Street striving for a five-day winning streak. But achieving it will likely depend on the July personal consumption expenditures price index, due for release at 8:30 a.m. Eastern.
With the PCE among the Federal Reserve’s most favored gauges of inflation, investors will be hoping it can show price pressures have not revived, and supporting the bullish narrative of a less hawkish central bank in coming months.
Analysts forecast the core PCE to have risen 0.2% month-on-month, the same as in June, and for the annual rate to be 4.2%, against June’s 4.1%.
Traders will also be aware of Friday’s nonfarm payrolls report, which will provide more information “as to whether the labor market is actually softening, with a consensus that 170,000 jobs will have been added in August compared to 187,000 the previous month,” Interactive Investor noted.
“With traders currently assuming an interest rate pause for September, the question remains as to whether the end of the hiking cycle has been reached. Such an outcome would be positive for growth stocks in particular, which has enabled ongoing strength within the mega cap technology sector,” Interactive Investor added.
Overseas, European stocks gained. while major Asian stocks were mixed, with business surveys showing China’s economic troubles continued in the latter half of the year.
Premarket Movers
Chewy reported a surprise second-quarter profit and higher-than-expected sales. However, it said it expects third-quarter net sales of between $2.74 billion and $2.76 billion, below expectations. Chewy shares fell 4.2%.
CrowdStrike earned 74 cents a share on an adjusted basis in the second quarter, higher than analysts’ expectations. The stock rose 1.3%.
Five Below fell 5.7% after it adjusted fiscal-year guidance to “reflect an anticipated increase in shrink reserves,” the industry term for merchandise theft and damage.
Okta shares rose 11% after it reported better-than-expected adjusted earnings and revenue in the second quarter and said it saw signs of stabilization in spending on information technology.
Palantir Technologies declined 4.4% after Morgan Stanley downgraded the shares to Underweight from Equal Weight.
Salesforce reported second-quarter earnings that beat analysts’ estimates and issued an outlook for the third quarter and fiscal year that also topped forecasts. The stock rose 5.4%.
Victoria’s Secret was down 5.4% after reporting a surprise loss in the second quarter and forecasting that fiscal-year sales would decrease in the low-single digit range from the year earlier.
Forex:
EUR/USD has been highly volatile this week as central banks’ next steps remain dependent on the latest economic data, which are being closely scrutinized by markets, Commerzbank Research said.
“As the two major central banks…are nearing the end of their interest-rate hiking cycle and are making their further actions data-dependent, uncertainty about what they will do next is particularly high,” Commerzbank Research said.
Weaker-than-expected U.S. job openings, sentiment indicators and ADP data weakened the dollar, while stubbornly high German inflation figures for August lifted the euro “because they feed expectations that the ECB…could raise the key rate again in September.”
Energy:
Brent inched down after data showed Chinese factory activity contracted for a fifth consecutive month in August, but the far larger than expected drawdown in U.S. crude stocks was putting a floor under oil’s declines. As were expectations that Saudi Arabia will roll over its 1 million barrel a day supply cuts for another month.
“There are clearly still some broader demand concerns and returning this supply to the market could see Brent back below [$80 a barrel]-something the Saudis would prefer not to see,” ING said.
Metals:
Base metals were mixed with gold flat, as recent U.S. data has lessened the likelihood of another Fed rate hike this year, weakening the dollar, Peak Trading Research said.
Today’s Top Headlines
UBS Posts Record $29 Billion Profit on Credit Suisse Deal
UBS booked a record $29 billion net profit last quarter after it integrated Credit Suisse into its books. But the gargantuan gain comes with an equally large challenge to meld the banking giants.
On Thursday, UBS provided a clearer picture of its future form, saying it will keep Credit Suisse’s large domestic arm in Switzerland rather than spin it off. It also showed strong inflows from rich clients, a sign that the world’s wealthy haven’t been turned off by the deal.
Salesforce Needs to Play Its AI Chips Wisely
Salesforce isn’t growing the way it used to. It also isn’t spending the way it used to. Keeping up the latter in the age of generative artificial intelligence will be the real trick.
The cloud-software pioneer on Wednesday posted stronger than expected results for its fiscal second quarter. Revenue rose 11% year over year to $8.6 billion. That rate of growth matched that of the previous quarter, which was a record low for a company that long had average growth rates well above 20%. But it also edged out Wall Street’s projections for 10% growth, as several analysts had expressed downbeat views ahead of the report about how Salesforce was tracking in an environment of constrained corporate technology spending.
Country Garden Flags Going-Concern Uncertainty
Country Garden Holdings said Wednesday that there is some uncertainty over its ability to continue as a going concern as it posted net loss for the first half of 2023 after writing down the value of property projects amid a slump in the Chinese real-estate market.
The Chinese property developer said its net loss was 48.93 billion Chinese yuan ($6.72 billion) for the six-month period ended June 30 compared with a net profit of CNY612 million in the year-earlier period.
Companies Are Using Fewer Temp Workers, but That Doesn’t Portend a Downturn
Temporary employment is falling, but that isn’t the bad omen it used to be.
The number of temp workers in the U.S. has been trending lower since it hit a peak in March 2022, and it has fallen every month since January.
Eurozone Inflation Comes in Higher Than Expected in August
The eurozone’s inflation rate in August came in higher than expected, remaining at the same level as July, a sign the European Central Bank may be on course to press ahead with a further interest-rate hike in September.
The euro area’s consumer price index rose 5.3% in August on year, preliminary data from the European Union’s statistics agency Eurostat showed Thursday, higher than the 5.1% that economists expected, according to a poll by The Wall Street Journal.
North Korea Conducts Tactical Nuclear-Strike Drill Amid U.S.-South Korean Military Exercises
SEOUL-Kim Jong Un reviewed North Korea’s war plans aimed at overwhelming a U.S. and South Korean invasion, as Pyongyang flashes more military might in opposition of Washington-Seoul combined exercises.
On Wednesday, the U.S. and South Korea had staged combined air drills that involved an American B-1B strategic bomber. The 11-day combined exercises ending Thursday have angered North Korea, which views the annual drills as rehearsals for war.
Japan Looks to Boost Defense Budget by 13% and Add New Missiles
TOKYO-Japan’s Defense Ministry on Thursday asked for a $53 billion budget for next fiscal year, a 13% increase, adding antimissile systems and boosting maintenance for a military that long skimped on basic functions.
In yen terms, the Yen7.74 trillion budget request is a record, reflecting rising tensions between the U.S. and China. Prime Minister Fumio Kishida has pledged to lift the defense budget to 2% of Japan’s gross domestic product by fiscal 2027, after many years in which the figure, calculated slightly differently, was around 1%.
Source: Dow Jones Newswires