US index futures are lower in premarket trading on Wednesday, weighed down by disappointing numbers in Europe and a rise in the cost of oil the day before. These factors heighten inflation concerns as investors await new US indicators, including the Beige Book.
By 6:52, Dow Jones futures (DOWI:DJI) were down 51 points, or 0.14%. S&P 500 futures were down 0.20% and Nasdaq-100 futures were down 0.28%. The yield on the 10-year Treasury bond was at 4.248%.
On Wednesday’s US economic agenda, investors await, at 7:00 am, the weekly MBA mortgage index, while trade balance data, which should give an indication of how business is going, will be released at 8:30 am. The forecast is that the balance will have a deficit of US$68 billion in July.
Also at 8:30 am, Susan Collins, chairman of the Federal Reserve Bank of Boston, delivers a speech. At 9:45 am, S&P Global releases the Purchasing Managers’ Indices (PMIs) for August, forecast above 50 points for August, but below what was seen in July.
The most awaited release of the day is the Beige Book, at 2 pm. The Fed document should show the country’s economic conditions after recent inflation and employment data. Dallas Fed President Lorie Logan will speak shortly after at 3 pm. The API releases the weekly oil inventory at 4:30 pm, closing the schedule.
In the European Union, retail sales decreased by 0.20% in July, on a monthly basis, surpassing estimates that pointed to a drop of 0.10%. Industrial orders in Germany fell 11.7%, bucking the forecast for a 4% decline.
This sobering result in Europe’s most robust economy highlights the challenges for business in a tight economic environment. Such data should be considered by the European Central Bank (ECB) at its next monetary policy meeting on September 14th.
For this reason, the speech by Elizabeth McCaul, member of the ECB’s supervisory board, scheduled for 8:00 am today, gains importance.
In Asia, markets had a mixed close, once again reflecting the possibility of economic stimulus in China. Potential changes to ease constraints in the real estate sector are also under discussion.
According to reports in the Chinese press, there may be an easing of price limits for new homes. Country Garden, a major Chinese real estate company, brought forward bond interest payments of $22.5 million, easing concerns of a possible default.
This movement resulted in a significant increase in the shares of Chinese real estate companies. Evergrande appreciated by more than 50%, Sunac by 73%, Shimano by 46% and Country Garden by more than 20%.
In commodities markets, West Texas Intermediate crude for October fell 0.29% to trade at $86.44 a barrel. Brent crude for November fell 0.39% near $89.69 a barrel. Iron ore with 62% concentration grade rose 0.12% to $116.77 a tonne.
At the close of Tuesday, the US stock market suffered a pullback, influenced by an increase in US Treasury bond rates and the strengthening of the dollar. Dow closed with a loss of 195.74 points or 0.56% at 34,641.97 points. S&P 500 closed down 18.94 points or 0.42% to 4,496.83 points, while Nasdaq ended with a marginal loss of 10.86 points or 0.08% to 14,020.95 points.
The situation was aggravated by the increase of more than 1% in the price of oil, following the announcement of production reduction by OPEC+, which fueled fears of an accelerated return of inflation. At the same time, lower-than-expected PMI indices in China and Europe indicated an unstable economic scenario in these regions. Federal Reserve members Christopher Waller and Loretta Mester stressed the need to proceed with caution in tightening monetary policy, with Mester even considering the possibility of future rate hikes.
Ahead of Wednesday’s corporate results, traders are watching reports from Express (NYSE:EXPR), Zerofox (NASDAQ:ZFOX), Core&Main (NYSE:CNM), among others. After the close, reports will be expected from C3.ai (NYSE:AI), UiPath (NYSE:PATH), GameStop (NYSE:GME), Chargepoint (NYSE:CHPT), American Eagle Outfitters (NYSE:AEO), Sprinklr (NYSE:CXM), Couchbase (NASDAQ:BASE), Verint (NASDAQ:VRNT), Dave & Busters (NASDAQ:PLAY), and more.
Wall Street Corporate Highlights for Today
Arm – Arm Holdings, part of the SoftBank Group, has started its roadshow for an IPO estimated to be worth up to $52 billion, the biggest this year. The company met with influential investors including T Rowe Price and Sands Capital. SoftBank expects to raise up to $4.87 billion from the IPO, offering 95.5 million shares of Arm for $47 to $51 each.
TSMC (NYSE:TSM) – The chairman of TSMC, the world’s largest third-party chip maker, announced that the company will decide this week on whether to invest in Arm Holdings’ IPO.
Apple (NASDAQ:AAPL) – Apple has entered into a long-term agreement with Arm for chip technology that extends beyond 2040. Apple also invested $735 million in Arm’s IPO. In other news, BofA Securities analyst Wamsi Mohan suggests that Huawei could threaten Apple’s growth in China, especially with its new Mate 60 phones, equipped with high-speed chips.
Intel (NASDAQ:INTC) – Intel has partnered with Tower Semiconductor (NASDAQ:TSEM), which will invest $300 million in Intel’s New Mexico facility. The deal follows the failure of a $5.4 billion merger plan blocked by Chinese regulators. The collaboration will help both companies meet the growing demand for advanced chips.
Advanced Micro Devices (NASDAQ:AMD) – At the Goldman Sachs conference, AMD CEO Lisa Su expressed optimism about strong demand in AI, saying she has seen “a continued acceleration of commitments” in this sector. Su highlighted AMD’s unique position with a complete portfolio in AI technology.
Alphabet (NASDAQ:GOOGL) – Google has reached a tentative settlement in a class action lawsuit brought by more than 30 US states, alleging antitrust practices in the Play Store. The settlement, the details of which were not disclosed, would cancel the trial scheduled for Nov. 6. The deal still requires court approval.
Amazon (NASDAQ:AMZN) – Amazon could face a Federal Trade Commission antitrust lawsuit, which could lead to its split. However, analysts at DA Davidson suggest that the split could benefit shareholders, raising the value per share to between $148 and $193.
Zoom Video Communications (NASDAQ:ZM) – Zoom CEO Eric Yuan has asked the Federal Trade Commission to investigate Microsoft (NASDAQ:MSFT) for bundling its Teams video conferencing software, especially after the company spun off the software in Europe due to to antitrust concerns. Yuan emphasized the need for fair competition.
Big Techs – The European Union is stepping up scrutiny of tech giants like Apple, Microsoft, Google and Amazon under the new Digital Markets Act. Companies have six months to comply with rules that prohibit monopolistic practices and improve data privacy.
Verb Technology (NASDAQ:VERB) – Shares of Verb Technology plunged 25% in premarket Wednesday after a 347% jump on Tuesday, following the announcement of a new strategic partnership with TikTok.
Chevron (NYSE:CVX) – Workers at Chevron’s Gorgon and Wheatstone LNG projects in Australia are planning a two-week strike starting Sept. 14, intensifying disputes over wages and conditions. The strike could affect volatility in global gas markets.
General Motors (NYSE:GM) – Gerald Johnson of General Motors stated in a video that the demands of the United Auto Workers union could negatively impact the company’s production. Together with GM chairman Mark Reuss, both emphasized the search for a “fair” deal without shutdowns.
Tesla (NASDAQ:TSLA) – Tesla Shanghai is suing Bingling Intelligent Technology for breach of technology secrets and unfair competition. The case will be heard in Shanghai on 10 October. A Xiaomi unit owns 11.9% of Bingling. Furthermore, Tesla’s Shanghai factory has achieved production of 2 million vehicles, as announced on the company’s WeChat account on Wednesday.
Lordstown Motors (NASDAQ:RIDE) – Amidst bankruptcy, electric vehicle maker Lordstown Motors does not plan to pay for Foxconn preferred stock. The company will focus on paying off other debts if it manages to generate enough funds from the sale of its assets.
Toyota Motor (NYSE:TM) – A server malfunction after maintenance shut down all Toyota plants in Japan for a day. The problem, which was not a cyberattack, occurred due to a lack of disk space during an update to the parts ordering system.
Boeing (NYSE:BA) – Boeing and Aviation Capital Group have confirmed an order for 13 737 MAX jets, increasing Aviation Capital’s backlog to 47 of these aircraft.
Telefonica (NYSE:TEF) – Saudi Telecom is buying a 9.9% stake in Telefonica for $2.25 billion. The transaction, which will face regulatory scrutiny in Spain, is part of Saudi Telecom’s growth efforts and does not seek a majority control.
Illumina (NASDAQ:ILMN) – Jacob Thaysen of Agilent Technologies (NYSE:A) has been named CEO of Illumina, succeeding Francis deSouza, who left following a proxy battle with billionaire Carl Icahn. The appointment comes as Illumina faces regulatory pressure and financial forecast revisions. Thaysen takes over on September 25.
Horizon Therapeutics (NASDAQ:HZNP), Amgen (NASDAQ:AMGN) – The US Federal Trade Commission allowed Amgen’s acquisition of Horizon Therapeutics, contrary to its own antitrust goals. The deal, worth $27.8 billion, allows Amgen to purchase drugs that are not subject to price negotiation and potentially reduce its tax burden.
Kroger (NYSE:KR), Albertsons (NYSE:ACI) – SoftBank-backed C&S Wholesale Grocers is close to a deal to buy stores that Kroger and Albertsons plan to sell to gain regulatory approval for their $25 billion merger, according to Reuters.
Bank of America (NYSE:BAC) – Bank of America has been increasing its cash reserves in response to a slowing economy and stricter liquidity rules. This cautious approach comes on the heels of uncertainties in the banking sector and could lead to credit constraints.
Wells Fargo (NYSE:WFC) – Wells Fargo announced the hiring of Jill Ford, formerly Co-Head of Capital Markets for the Americas at Credit Suisse, as its new Head of Capital Markets. Based in New York, Ford will report to Tim O’Hara, head of banking at Wells Fargo.
UBS (NYSE:UBS) – After the emergency acquisition of Credit Suisse, UBS CEO Sergio Ermotti argues that the expanded bank is not too big for Switzerland. With a balance of US$ 1.6 trillion, Ermotti points out that size is relative and does not threaten the Swiss economy. In other news, UBS will integrate Credit Suisse’s securities research service into its own operations by the end of the month. Institutional clients will be transferred to UBS Global Research, while Credit Suisse’s wealth management will remain unchanged.
Citigroup (NYSE:C) – The underperformance of Citigroup stock is worrying analyst Mike Mayo, who nonetheless maintains an ‘Outperform’ rating for the bank. While the stock has dropped 37% since Jane Fraser took over as CEO, Mayo sees potential for recovery and estimates an increase in tangible book value. He also highlights Fraser’s efficiency initiatives and the fact that Warren Buffett is still a shareholder.
Nubank (NYSE:NU) – Nubank, a leading fintech in Latin America, is launching personal loans in Mexico. The new service allows quick loans through its platform, Nu Mexico, and will follow a trial period between employees. The launch expands the company’s service offer in the country.
Coinbase (NASDAQ:COIN) – Coinbase Global will launch a cryptocurrency lending platform for institutional investors, having raised $57 million for the project. The move follows a recent regulatory win allowing the company to offer cryptocurrency futures to US retail customers.
Blackstone (NYSE:BX) – Acquisition firms are increasingly turning to private loan funds to finance purchases, highlighting the growing role of the $1.5 trillion private credit market. Blackstone’s Dwight Scott sees advantages such as greater confidentiality and certainty of execution.
BlackRock (NYSE:BLK) – BlackRock Investment Institute has become less pessimistic about short-term government bonds, attracted by high yields, but is more cautious about high-quality corporate debt over the long term. The institution cited the limited offset of these assets against sovereign bonds: “To become positive on long-dated bonds, we would need to see the term premium rise much higher or think that market expectations of future interest rates are too high. We’re not there yet“.
S&P Global (NYSE:SPGI) – S&P Global has raised its reinsurance sector outlook from negative to stable due to higher reinsurance rates and growing investment income. Moody’s has maintained a stable view as rates continue to rise in response to challenges such as natural disasters and inflation.
Mastercard (NYSE:MA) – Mastercard has denied reports that it plans to increase interchange fees charged to US merchants, contradicting an earlier Wall Street Journal report. Visa (NYSE:V) has also denied similar claims, saying its fees have remained stable.
Albemarle (NYSE:ALB) – Albemarle, the world’s largest lithium producer, plans to acquire Australia’s Liontown Resources (USOTC:LINRF) for $4.3 billion by 2024 to expand its supply of lithium for electric vehicle batteries. CEO Kent Masters sees the Liontown asset as an opportunity to meet growing demand.
BHP Group (NYSE:BHP) – BHP CEO Mike Henry acknowledges the company needs to do more to create a safe environment following a 20% increase in reports of sexual harassment. Although he has invested $191 million in security measures, Henry claims there is still “way to go.”
Manchester United (NYSE:MANU) – Shares of Manchester United fell 18.2% on Tuesday, marking their biggest drop since going public in 2012, following reports that the Glazer family plans to take the club off the market. The decision dashes expectations of an imminent sale, possibly to Sheikh Jassim of Qatar.
Spotify (NYSE:SPOT) – AI-focused Air Street Capital has raised a second $121 million fund, with backing from Daniel Ek, CEO of Spotify, and Jeff Dean of Google (NASDAQ:GOOGL). Specializing in AI startups, the company has seen success particularly in the area of drug discovery.
Earnings
Warner Bros Discovery (NASDAQ:WBD) – Warner Bros Discovery anticipates a drop in annual profit due to the continuing strike by actors and writers in Hollywood, the industry’s first double shutdown in 63 years. The studio has postponed the release of “Dune 2” and expects a reduction of up to $500 million in adjusted profits for 2023. The strike also affects other movie theater chains still reeling from the pandemic.
Zscaler (NASDAQ:ZS) – Shares in Zscaler fell -1.1% in premarket Wednesday despite a strong quarter that beat Wall Street expectations. CEO Jay Chaudry cited a “challenging macro environment” as a reason for slower business. The company forecast solid earnings of 48 cents to 49 cents per share on revenue of $472 million to $474 million for the fiscal first quarter, while FactSet estimates are 45 cents per share on revenue of $464, 8 million. However, Zscaler warns of economic uncertainties.
Gitlab (NASDAQ:GTLB) – Shares of Gitlab rose 6.3% in premarket trading on Wednesday after the company reported a surprise adjusted Q2 profit and raised its full-year forecasts. Gitlab now expects annual revenue of between $555-557 million, above previous estimates, and has also lowered its loss-per-share projections.
Asana (NYSE:ASAN) – Shares in Asana fell -2.5% in premarket trading on Wednesday even as the company beat estimates for second-quarter revenue and earnings. With a net loss of $71.4 million and revenue of $162.5 million, Asana beat analyst forecasts. The stock has grown 57% this year.