September S&P 500 E-Mini futures (ESU26) are up +0.37% this morning, signaling a new record high for the benchmark index as the prospect of a U.S.-Iran deal to reopen the Strait of Hormuz continues to buoy sentiment.
Axios reported that the U.S., Iran, and Oman were close to reaching an interim 60-day agreement to reopen the Strait of Hormuz, with Washington aiming to announce the deal later on Wednesday. The proposal would impose no tolls or fees, with inbound vessels using a northern lane and outbound traffic using a southern one. Still, the price of WTI crude reversed earlier losses and rose more than +1% on Wednesday after Yemen’s Houthi militant group threatened to intensify attacks on Saudi vessels in the northern Red Sea.
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On the negative side, SpaceX (SPCX) plunged over -11% in pre-market trading after Elon Musk’s rocket, satellite, and AI conglomerate reported higher-than-expected spending on its AI business in Q2, while finance chief Bret Johnsen said heavy capital expenditures are expected to continue this year. Also, Advanced Micro Devices (AMD) slumped more than -8% in pre-market trading as the chipmaker’s Q3 revenue guidance failed to impress investors.
Investors are now awaiting the U.S. ADP employment report, remarks from a Federal Reserve official, and a new round of corporate earnings reports.
In yesterday’s trading session, Wall Street’s major indexes closed sharply higher, with the S&P 500 and Dow notching new record highs and the Nasdaq 100 posting a 3-week high. Palantir Technologies (PLTR) popped over +29% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the technology company reported blowout Q2 results and raised its full-year revenue and income forecasts. Also, chip and AI infrastructure stocks rallied, with Arm Holdings (ARM) jumping over +17% and Marvell Technology (MRVL) surging more than +12%. In addition, Caterpillar (CAT) climbed over +5% and was the top percentage gainer on the Dow after the industrial machinery maker posted upbeat Q2 results. On the bearish side, Aptiv (APTV) tumbled more than -16% and was the top percentage loser on the S&P 500 after the company reported weaker-than-expected Q2 net sales and cut its full-year guidance.
Economic data released on Tuesday were lukewarm. U.S. JOLTS job openings fell to 7.359 million in June, weaker than expectations of 7.440 million. Also, U.S. factory orders unexpectedly fell -0.3% m/m in June, weaker than expectations of +0.2% m/m. In addition, the U.S. trade deficit narrowed to -$73.3 billion in June, compared to expectations for a contraction to -$73.0 billion.
Philadelphia Fed President Anna Paulson said on Tuesday that she would remain open-minded about the path for interest rates, focusing on underlying inflation trends. “I see two plausible scenarios for how current policy is affecting inflation, and the incoming evidence will clarify which path we’re on and what adjustments, if any, may be needed,” Paulson wrote in an essay.
Meanwhile, U.S. rate futures have priced in a 58.9% chance of a 25-basis-point rate hike and a 41.1% chance of no rate change at the September FOMC meeting.
Second-quarter corporate earnings season continues in full swing, and investors are looking forward to new reports from prominent companies today, including Sandisk (SNDK), Western Digital (WDC), Disney (DIS), Uber Technologies (UBER), AppLovin (APP), and Eli Lilly and Company (LLY). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +26% jump in quarterly earnings for Q2 compared to the previous year.
On the economic data front, investors will keep a close eye on the U.S. ADP private payrolls report, which is set to be released in a couple of hours. Economists, on average, forecast that private-sector payrolls will rise by 68K in July following a 98K gain in June.
The U.S. ISM Non-Manufacturing PMI and S&P Global Services PMI will also be in focus today. Economists expect the July ISM services index to come in at 54.5 and the S&P Global services PMI at 53.6, compared to the previous month’s readings of 54.0 and 51.2, respectively.
The EIA’s weekly crude oil inventories report will be released today as well. Economists expect this figure to be -1.5 million barrels, compared to last week’s value of -7.2 million barrels.
In addition, market participants will be anticipating a speech from Fed Governor Lisa Cook.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.62%, down -0.06%.
The Euro Stoxx 50 Index is down -0.09% this morning, hovering near a record high as investors digest corporate earnings reports and await a U.S.-Iran deal to reopen the Strait of Hormuz. Losses in a couple of heavyweight stocks weighed on the benchmark index. Novo Nordisk (NOVOB.C.DX) fell over -3% after it reported disappointing sales of its blockbuster Wegovy weight-loss drug, overshadowing better-than-expected Q2 results. Also, HSBC Holdings Plc (HSBA.LN) dropped more than -3% following a series of analyst downgrades. At the same time, mining stocks outperformed on Wednesday, supported by rising metal prices and solid results from Glencore. A survey released on Wednesday showed that Eurozone business activity climbed to an 8-month high in July as a recovery in services accompanied a strengthening manufacturing sector. “July’s final PMI adds to a picture of encouraging resilience of the euro zone economy amid the ongoing conflict in the Middle East, but also underscores how the business climate is being steered by the changing geopolitical landscape,” said Chris Williamson at S&P Global Market Intelligence. In other corporate news, Sandoz Group AG (SDZ.Z.EB) climbed over +9% after the generic drugmaker posted a 9% increase in Q2 net sales.
France’s Industrial Production, Eurozone’s Composite PMI, Eurozone’s Services PMI, and Eurozone’s PPI data were released today.
The French June Industrial Production rose +0.1% m/m, weaker than expectations of +0.3% m/m.
Eurozone’s July Composite PMI was revised higher to 52.0 from the preliminary reading of 51.9.
Eurozone’s July Services PMI was revised higher to 51.7 from the preliminary reading of 51.6.
Eurozone’s June PPI fell -0.3% m/m and rose +4.6% y/y, compared to expectations of -0.2% m/m and +4.6% y/y.
Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.47%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +3.66%.
China’s Shanghai Composite Index closed higher and hit a 1-week high today, buoyed by gains in chip stocks and growing hopes for a U.S.-Iran agreement to reopen the Strait of Hormuz. Chip stocks rallied on Wednesday as investors renewed bets on the AI trade. Semiconductor materials and equipment stocks got an extra boost after Reuters reported that Samsung Electronics and SK Hynix are assessing chipmaking equipment from China’s Advanced Micro-Fabrication Equipment for potential use at their factories in China. At the same time, shares of optical transceiver makers fell following a report that the U.S. may ban imports of new models of Chinese optical components. Meanwhile, a private survey released on Wednesday showed that China’s services activity grew in July at its slowest pace in nearly two years, as businesses became more cautious about an economy that continues to show signs of weakening. The reading aligned with official gauges indicating a loss of economic momentum in both services and manufacturing. Investor attention now shifts to China’s July inflation and trade data due later this week. Economists expect China’s consumer inflation to moderate further, while producer inflation is projected to ease after accelerating for three consecutive months. A weaker-than-expected CPI reading would likely strengthen calls for more forceful policy support and could place greater focus on the “effective and practical new measures” pledged by the Politburo for the September-October period. At the same time, economists project the nation’s trade activity to remain strong in July.
The Chinese July RatingDog Services PMI came in at 50.4, weaker than expectations of 53.7.
Japan’s Nikkei 225 Stock Index closed sharply higher today, tracking overnight gains on Wall Street amid optimism that a U.S.-Iran agreement to reopen the Strait of Hormuz could be reached soon. Chip and other AI-related stocks led the gains on Wednesday as investors poured into AI plays. SoftBank Group, viewed as a proxy for the AI trade, jumped about +14%, while chip-testing equipment maker Advantest climbed more than +8%, boosting the benchmark index. Metal and financial stocks also climbed. Meanwhile, minutes of the Bank of Japan’s June meeting released on Wednesday showed that policymakers discussed mounting inflation risks that would likely require further rate hikes, even as they raised borrowing costs to a 31-year high at that meeting. A few board members said consumer inflation is likely to receive a significant boost in the latter half of the current fiscal year as firms plan price increases across a wide range of goods. On the economic front, data showed on Wednesday that Japanese wage growth remained robust in June, supported by solid corporate earnings and a tight labor market, bolstering the case for another BOJ rate hike in the coming months. Real wages, adjusted for inflation excluding rents, rose 1.6% in June from a year earlier, marking a sixth consecutive month of gains, the longest streak since 2021. Separately, a survey showed that Japan’s services sector expanded at a slower pace in July as demand softened and firms contended with intense cost pressures. In corporate news, Murata Manufacturing surged over +9% after raising its full-year net profit guidance. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -3.50% to 33.07.
The Japanese July S&P Global Services PMI was revised lower to 51.2 from the preliminary reading of 51.9.
Pre-Market U.S. Stock Movers
SpaceX (SPCX) plunged over -11% in pre-market trading after Elon Musk’s rocket, satellite, and AI conglomerate reported higher-than-expected spending on its AI business in Q2, while finance chief Bret Johnsen said heavy capital expenditures are expected to continue this year.
Advanced Micro Devices (AMD) slumped more than -8% in pre-market trading as the chipmaker’s Q3 revenue guidance failed to impress investors.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Wednesday - August 5th
Eli Lilly and Company (LLY), Sandisk (SNDK), Western Digital (WDC), The Walt Disney Company (DIS), Uber Technologies (UBER), AppLovin (APP), CVS Health (CVS), McKesson (MCK), DoorDash (DASH), Phillips 66 (PSX), The Allstate Corporation (ALL), MetLife (MET), Cencora (COR), Realty Income (O), Occidental Petroleum (OXY), Medline (MDLN), Block (XYZ), eBay Inc. (EBAY), Axon Enterprise (AXON), Revolution Medicines (RVMD), Iron Mountain (IRM), Expedia Group (EXPE), Cheniere Energy Partners (CQP), The Kraft Heinz Company (KHC), GLOBALFOUNDRIES (GFS), Symbotic (SYM), Curtiss-Wright (CW), Texas Pacific Land (TPL), Corpay (CPAY), Global Payments (GPN), SharkNinja (SN), United Therapeutics (UTHR), MKS Inc. (MKSI), NiSource (NI), CDW Corporation (CDW), Zimmer Biomet Holdings (ZBH), Western Midstream Partners (WES), The Carlyle Group (CG), CF Industries Holdings (CF), Royal Gold (RGLD), Host Hotels & Resorts (HST), Permian Resources (PR), Coeur Mining (CDE), Talen Energy (TLN), Circle Internet Group (CRCL), IonQ (IONQ), SiTime (SITM), Solventum (SOLV), Regal Rexnord (RRX), U-Haul Holding Company (UHAL), Albemarle (ALB), Exelixis (EXEL), Figma (FIG), TTM Technologies (TTMI), Fidelity National Financial (FNF), Warner Music Group (WMG), Dynatrace (DT), BorgWarner (BWA), Elanco Animal Health (ELAN), APA Corporation (APA), U-Haul Holding Company (UHAL.B), HubSpot (HUBS), Dutch Bros (BROS), The New York Times Company (NYT), Watts Water Technologies (WTS), Cognex (CGNX), Coca-Cola Consolidated (COKE), Owens Corning (OC), Insulet (PODD), CACI International (CACI), Bio-Techne (TECH), Encompass Health (EHC), Murphy USA (MUSA), Globalstar (GSAT), Lineage (LINE), Viavi Solutions (VIAV), Primerica (PRI), Chime Financial (CHYM), TeraWulf (WULF), StoneX Group (SNEX), NNN REIT (NNN), Kymera Therapeutics (KYMR), Zillow Group (ZG), Primo Brands (PRMB), Riot Platforms (RIOT), Etsy (ETSY), Zillow Group (Z), Paycom Software (PAYC), Kinetik Holdings (KNTK), Joby Aviation (JOBY), UGI Corporation (UGI), South Bow (SOBO), Chord Energy (CHRD), Avnet (AVT), SM Energy Company (SM), Clear Secure (YOU), Silicon Laboratories (SLAB), Arcosa (ACA), Enact Holdings (ACT), Cirrus Logic (CRUS), Rayonier (RYN), Clearway Energy (CWEN), BillionToOne (BLLN), Victory Capital Holdings (VCTR), Southwest Gas Holdings (SWX), Mirum Pharmaceuticals (MIRM), Ormat Technologies (ORA), Duolingo (DUOL), VSE Corporation (VSEC), Matador Resources Company (MTDR), Novanta (NOVT), Magnolia Oil & Gas (MGY), LandBridge Company LLC (LB), OUTFRONT Media (OUT), Klaviyo (KVYO), Blue Owl Capital (OBDC), Black Hills (BKH), Murphy Oil (MUR), Louisiana-Pacific (LPX), Dave Inc. (DAVE), Valaris (VAL), Radian Group (RDN), Remitly Global (RELY), Icahn Enterprises (IEP), e.l.f. Beauty (ELF), Valvoline (VVV), Choice Hotels International (CHH), Kulicke and Soffa Industries (KLIC), Blue Owl Technology Finance (OTF), The Brink's Company (BCO), Spire (SR), Materion (MTRN), Caris Life Sciences (CAI), Tutor Perini (TPC), Envista Holdings (NVST), Miami International Holdings (MIAX), Excelerate Energy (EE), Solaris Energy Infrastructure (SEI), Warrior Met Coal (HCC), Griffon (GFF), Tango Therapeutics (TNGX), WaterBridge Infrastructure LLC (WBI), Seaboard (SEB), Extreme Networks (EXTR), Mueller Water Products (MWA), Diodes (DIOD), Hagerty (HGTY), Delek US Holdings (DK), Apple Hospitality REIT (APLE), F&G Annuities & Life (FG), Howard Hughes Holdings (HHH), Fastly (FSLY), Genworth Financial (GNW), Centrus Energy (LEU), Arcus Biosciences (RCUS), Power Integrations (POWI), NuScale Power (SMR), NCR Atleos (NATL), National HealthCare (NHC), Helmerich & Payne (HP), American States Water Company (AWR), Veeco Instruments (VECO), Arcutis Biotherapeutics (ARQT), Atlanta Braves Holdings (BATRK), Kyndryl Holdings (KD), Crane NXT (CXT), GRAIL (GRAL), LCI Industries (LCII), Delek Logistics Partners (DKL).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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