Market Wraps
Watch For:
Preliminary Productivity and Costs; ADP National Employment Report; Weekly Jobless Claims; Factory Orders; Canada Official International Reserves; earnings from Amazon.com, Apple, Hasbro, Kellogg, Moderna
Today’s Headlines/Must Reads
– Bud Light Boycott Sparks Big U.S. Profit Drop for AB InBev
– Fitch Downgrade Won’t Break Washington’s Tax, Spending Habits
– California Law Threatens to Help Drive Up Bacon Prices
– Apple’s Goldman Savings Accounts Reach $10 Billion
Opening Call:
Stocks were poised for renewed losses on Thursday, while bonds came under further pressure, as an increase in borrowing by the U.S. and lackluster earnings threaten this year’s surge in share prices.
Rising bond yields, spurred in part by America’s credit downgrade, have weighed on stocks, adding to pressure from the decline in corporate profits. The selling has spread overseas, contributing to losses for stocks in Europe and Asia on Thursday.
Stocks face a fresh test after the close, when Amazon and Apple are due to report quarterly results. Before the bell, the Bank of England is expected to nudge up interest rates at 7 a.m. ET.
Overseas, the Stoxx Europe 600 dropped almost 1%, while Asian markets were also broadly lower, but mainland Chinese stocks rose after survey data showed a pickup in services activity.
Premarket Movers
Albemarle jumped 5% after its second-quarter earnings topped Wall Street forecasts and it raised its earnings forecast for the full year.
DoorDash was up 3.2% after second-quarter revenue rose to $2.1 billion from $1.6 billion a year earlier and topped analysts’ forecasts.
Occidental Petroleum was down 2.6% after it reported earnings that missed analysts’ earnings estimates on weaker crude oil prices.
PayPal fell 9% after it reported second-quarter adjusted operating margin was 21.4%, below the 22% that PayPal previously estimated.
Qualcomm shares declined 8.5% after it issued a fiscal fourth-quarter revenue forecast below analysts’ expectations.
Forex:
Wednesday’s significantly stronger-than-expected U.S. ADP private payrolls data revealed a robust labor market which should enable the dollar to continue rising, Danske Bank Research said.
The data “underscores the resilience of the U.S. labor market” ahead of Friday’s closely-watched non-farm payrolls figures, and although there isn’t a reliable correlation between ADP and nonfarm payrolls they showed private sector payrolls growth is “still relatively strong,” Danske Bank said.
The decision by the BOE later will be a key driver for the GBP/USD pair and any indication the central bank is considering a pause or nearing the end of its hiking cycle potentially translates to some downside risks for the pair, IG Research said.
Any breakdown of the 1.264 level may pave the way toward the 1.239 level next
Energy:
Crude prices declined for a third session with oil markets being driven by broader risk-off moves after the U.S. credit downgrade, ANZ said.
Metals:
Base metals and gold were weaker due to a stronger dollar and with markets in risk-off mode ahead of the U.S. nonfarm payrolls, Peak Trading Research said.
It added that investors were profit taking after a strong July in crude oil and gasoline markets, while firm U.S. jobs data and the country’s credit downgrade were helping to boost the dollar.
Today’s Top Headlines
Meta’s Ray-Ban Smart Glasses Fail to Catch On
The Ray-Ban smart glasses launched by Meta Platforms almost two years ago have struggled to catch on with owners, many of whom appear to be using the devices infrequently, according to internal company data.
Less than 10% of the Ray-Ban Stories purchased since the product’s launch in September 2021 are used actively by purchasers, according to a company document from February reviewed by The Wall Street Journal. Meta sold a total of 300,000 of the wearable devices through February, but the company only had about 27,000 monthly active users.
Sunrun Stock Jumps After Surprise Profit. Why It Won’t Lift the Solar Stock Gloom.
Sunrun stock surged higher early Thursday after the country’s largest residential solar developer reported a surprise profit. But it’s not quite the ray of sunshine for the sector investors might think.
Solar stocks are having a tough earnings season so far, with SolarEdge Technologies (ticker: SEDG) the latest company to issue disappointing guidance Wednesday. The stock had its worst day in nearly a year, dropping 18% after its revenue outlook fell short of expectations. Enphase Energy (ENPH) and SunPower Corp (SPWR) also warned of weakening demand last week.
A big Wall Street streak was snapped on Wednesday. Here’s how markets typically respond.
Wednesday’s big slide in the S&P 500 snapped a 47-session streak in which the benchmark U.S. stock index did not suffer a drop of more than 1%.
The S&P 500 fell by 1.4%, as investors reacted negatively to news showing a strong rise in private-sector payrolls and a downgrade of the U.S. credit rating.
The Bank of England Will Likely Follow the Fed. But Its Work Is Far From Done.
The Bank of England is set to match moves from fellow central banks with a quarter-point interest-rate hike this week, but its work in taming inflation remains far from finished-and investors should still brace for a hawkish surprise.
While the Federal Reserve and European Central Bank raised rates by 25 basis points last week both of those central banks have signaled that their work is nearly done and will be data-dependent. That amount is also the consensus for the Bank of England’s move on Thursday.
Sterling Could Fall Further Even After BOE Rate Rise – Analysis
Sterling risks falling further, especially against a buoyant dollar, if the Bank of England opts to raise interest rates by 25 basis points to 5.25%, as most economists expect, in a decision at 1100 GMT on Thursday, analysts say.
A 25 basis-point rise would disappoint some investors, given that there is a sizeable risk of the BOE opting for another larger 50 basis-point rise to tackle persistent inflation.
China Caixin Services PMI Strengthened in July
A private gauge of China’s services activity edged up in July, pointing to continued recovery in the nation’s services sector.
The Caixin services purchasing managers index climbed to 54.1 in July from June’s five-month low of 53.9, Caixin Media Co. and S&P Global said Thursday.
Brazil’s Central Bank Cuts Selic to 13.25%
Brazil’s central bank cut its benchmark interest rate by half a percentage point, the first change to the rate in a year, and said it could be the first of a series of cuts meant to substantially reduce one of the world’s highest interest rates.
The bank’s monetary policy committee, or Copom, reduced its key Selic rate to 13.25% from 13.75%, after raising it to that level in August 2022. The move reverses a rate-increase cycle launched in March 2021 when the Selic was at a record low of 2%.
Trump’s New Lawyer Calls DOJ’s Case a Shocking Abuse of Power
When former President Donald Trump appears in a federal courthouse in Washington on Thursday, he will be accompanied by the recently hired John Lauro, a seasoned trial lawyer retained exclusively to battle special counsel Jack Smith’s sweeping indictment released this week.
“This case with President Trump is going to be a tough one because the government has something like 60 lawyers and investigators all aligned,” Lauro said in an interview. “It is going to be a real courtroom battle, and we anticipate there may be over 100 witnesses called and the trial could last many, many months.”
SALT Deduction Cap Vexes GOP After Vexing Democrats After Vexing GOP
WASHINGTON-The $10,000 cap on the state and local tax deduction is bedeviling Congress. Again.
Taxpayers who itemize deductions can get a federal break for state and local income- and property-tax payments. Republicans in 2017 limited that deduction to help pay for tax cuts, and the new restrictions largely pinched high-income people in high-tax states.
Source: Dow Jones Newswires