Market Wraps
Watch For:
Employment Report for July; Canada Labour Force Survey for July; earnings from Enbridge
Today’s Headlines/Must Reads
– Hiring Has Stayed Strong. Here’s Where to Look for Signs of Cooling
– Stocks Have Had a Great Year. Cue the September Effect
– Amazon Shines During Apple’s Off-Season
– China Has Become a Strain on Private-Equity Firms
Opening Call:
Stock futures rose on Friday ahead of the key jobs report, as traders gave a mixed reception to results from Amazon.com and Apple.
Economists polled by the Wall Street Journal expect the Labor Department to report that 200,000 jobs were created in July.
“From the Fed’s perspective, the labor market remains too hot for comfort, but there are signs that it has begun to move in the right direction,” Credit Agricole said, which forecasts a 190,000 rise.
A report in line with expectations would leave the Fed comfortable with staying on hold in September, but a strong upside surprise would raise the risk of another hike, the French bank said.
Amazon shares were sharply higher premarket after the company reported earnings far ahead of consensus.
“Not only did we get a trifecta beat–retail revenue, AWS revenue and margins–but also the tone from management on the call was that there is more to come on retail margins and AWS acceleration,” UBS said, lifting its price target to $175 from $150.
Apple stock was about 1% weaker in premarket trade as the tech giant reported slightly better-than-expected earnings on in-line sales.
“Apple’s latest quarter and guidance were not materially different from the outcomes investors have been used to seeing in the latest quarters…” JPMorgan said.
Other Premarket Movers
Atlassian rose 23% after it issued a forecast for fiscal first-quarter sales that was above analysts’ expectations.
Block was down 4.3%. The company raised its guidance for the year but the stock declined after it indicated that gross profit growth slowed to 21% in July.
Booking Holdings reported earnings that beat analysts’ estimates and forecast a record summer travel season. Its stock was up 12%.
DraftKings rallied 15% after it reported a surprise adjusted profit in the second quarter and boosted its full-year sales forecast.
Opendoor Technologies declined 11% and Redfin was down 10% after the real estate companies issued revenue guidance well below Wall Street expectations
Forex:
Friday’s jobs data should confirm the U.S. economy is performing well and keep the dollar propped up, Commerzbank said, although there is a risk the market has raised its expectations for the data following Wednesday’s very strong ADP print, which means a low bar for disappointment and the dollar could ease in an initial reaction.
Sterling’s strength could be fragile due to a weak U.K. economic outlook, Pictet Asset Management said, as it cuts its position on the currency to underweight from neutral.
“We think that sterling investors will start to price in an increasingly gloomy economic outlook. Sterling’s ascent since last October has seemingly defied gravity. But we question for how much longer.”
Pictet warns that U.K. economic data risk being “outright disappointing” in the coming months. Having kept to a fairly tight range in recent years, sterling broke higher over the last nine months as expectations for U.K. interest rates ratcheted up, it said.
Bonds:
International bond markets aren’t looking good at all, despite the fact that inflation has recently fallen significantly in some cases and growth is weakening, Metzler said.
“Looking at 10-year Treasury, BTP or Bund yields, one gets the impression at the moment that yields will probably only go up once again, ” Metzler said, adding that this is what charts indicate.
Energy:
Oil prices edged higher after Saudi Arabia and Russia said they’d extend a round of oil production cuts.
Meanwhile, the Russian Black Sea port of Novorossiysk was reportedly the target of a drone attack. The port is a major hub for Russian oil exports though it was unclear if the port itself had suffered any damage.
Metals:
Base metals were lower with gold flat, as investors awaited the U.S. jobs data, with the strength of the labor market likely to influence whether or not we see another Fed rate hike this year.
“The recent Fed hike on July 26 will pressure prices in the short term,” BMI said.
It added that longer term, a weakening of the dollar should present upside to prices, though a shift in attitude from the Fed isn’t likely until 2024.
Today’s Top Headlines
KKR in Advanced Talks to Buy Simon & Schuster for Roughly $1.65 Billion
Private-equity firm KKR is in advanced talks to acquire Simon & Schuster for about $1.65 billion, according to people familiar with the situation, capping a yearslong effort by Paramount Global to sell the publisher of such authors as Stephen King and Bob Woodward.
Paramount put Simon & Schuster on the sales block for a second time earlier this year after an earlier sale to Penguin Random House was blocked by a federal judge last year.
UAW Demands 40% Pay Hike in Labor Talks With Detroit Automakers
The United Auto Workers union is pressing the Detroit car companies to give its factory workers a 40% pay hike in the next labor contract, an increase that would be the largest in recent memory.
The union conveyed this demand to the automakers this week, along with a list of other items it plans to push for at the bargaining table.
Wells Fargo, SocGen to Settle With SEC, CFTC Over Use of Messaging Apps
Wells Fargo and Société Générale are in talks with U.S. regulators to settle investigations into their employees’ use of messaging applications that might have broken record-keeping rules.
Wells Fargo disclosed in its quarterly earnings report filed Tuesday that it is in discussions with the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission to resolve the matter, but it said there is no guarantee of the outcome.
Berkshire Class A Stock Hits a Record in Early Birthday Present for Buffett
Warren Buffett is getting an early birthday present.
Berkshire Hathaway’s class A stock finished at a record high Thursday, lifting the value of Chief Executive Officer Buffett’s 15% stake in the company to $118 billion.
Tupperware, Lenders Agree to Restructure Debt Obligations Amid Turnaround Efforts
Tupperware Brands finalized an agreement with its lenders to restructure its existing debt obligations as it works to continue its turnaround efforts.
Apollo Seizes on ‘Great Time’ for Private Credit as Buyouts Become More Sparse
Apollo Global Management benefited from rising demand for private credit, which boosted its profit in the just-ended quarter as buyout deal making became more challenging.
“We are in the beginning of a secular shift in how credit is provided to businesses, and a shift that I believe will continue to gather speed,” Marc Rowan, chief executive of the New York-based asset manager, said on a call with analysts to discuss second-quarter results.
Coinbase Posts Sixth Consecutive Quarterly Loss
Digital asset prices are up, but Coinbase Global continues to face its own crypto winter.
Coinbase reported a sixth consecutive quarter of losses as regulatory risks and lower trading volumes continue to weigh on the company.
China’s Central Bank Pledges to Flexibly Use RRR Cuts, Other Policy Tools
The People’s Bank of China will need to flexibly use monetary policy tools including reserve-requirement-ratio cuts, open market operations and medium-term lending facilities to ensure ample liquidity in the country’s banking system, a senior central bank official said Friday.
The PBOC will guide banks to adjust rates on outstanding mortgages and support lenders to control the cost of liabilities, Zou Lan, head of the monetary policy department at the central bank, said at a press conference.
China Scraps Tariffs on Australian Barley
China’s Ministry of Commerce said Friday that it would scrap tariffs on Australian-imported barley, in the latest sign of improving ties between Beijing and Canberra.
The ministry said it is no longer necessary to keep imposing antidumping and countervailing duties on barley imports from Australia based on changes in the Chinese market.
Importing Laptops Into India Will Now Require a Permit
NEW DELHI-India is making it harder to import laptops, tablets and other consumer-electronics devices in a move intended to boost local manufacturing and curb imports from China, government and industry officials said.
India’s Ministry of Commerce and Industry said Thursday that imports of laptops and other personal-computing devices would now require permits, making the import process far more onerous.
Mike Pence Certified the 2020 Election. It Might Cost Him 2024.
Mike Pence’s last major act as vice president might doom his political future.
His certification of the 2020 election results during the early morning hours of Jan. 7, 2021, in defiance of former President Donald Trump and after a mob attacked the Capitol, is the biggest reason his 2024 Republican presidential nomination bid is struggling.
Appeals Court Lets Biden Asylum Policy Temporarily Stay in Place
A federal appeals court Thursday allowed the Biden administration to enforce its new asylum rules while litigation continues over the policy. It is the central pillar of President Biden’s post-Title 42 border enforcement efforts.
In a 2-1 ruling, the U.S. Court of Appeals for the Ninth Circuit agreed to a Biden administration request and blocked for now a lower court decision that would have barred the administration from enforcing its new policy.
Donald Trump Pleads Not Guilty to Charges Over Efforts to Change 2020 Election Result
WASHINGTON-Former President Donald Trump pleaded not guilty Thursday to charges that he conspired to overturn the results of the 2020 election to remain in power, appearing in a federal courtroom blocks from the U.S. Capitol that was stormed by his supporters on Jan. 6, 2021.
While the plea amounted to two words, their resonance was enormous. Trump denied the charges in the indictment, the first time a president has been accused of blocking the peaceful transfer of power to his successor.
U.S. to Place Armed Sailors, Marines on Tankers to Stop Iran’s Attacks
WASHINGTON-The Pentagon is poised to offer armed sailors and Marines to commercial vessels transiting the Persian Gulf region to deter Iranian forces from attacking the ships, according to U.S. officials.
The U.S. military would put the forces on commercial vessels that are considered vulnerable to attack by Iranian forces, particularly those ships sailing through the Strait of Hormuz. Roughly one-fifth of the world’s oil passes through that heavily trafficked but increasingly dangerous choke point south of the Persian Gulf, off the coast of Iran near the United Arab Emirates and Oman.
Russia Is Again Turning to North Korea to Replenish Ammunition Supplies
WASHINGTON-Russia is looking to buy more ammunition from North Korea to replenish its dwindling stockpiles amid Moscow’s ongoing war in Ukraine, the U.S. said Thursday.
National Security Council spokesman John Kirby said that any arms deal between North Korea and Russia would be a violation of several United Nations Security Council resolutions. He added that the U.S. would continue to identify and stop Russian efforts to acquire ammunition from North Korea, or any other state that might be prepared to support the Kremlin’s war in Ukraine.