September S&P 500 E-Mini futures (ESU26) are up +0.14%, and September Nasdaq 100 E-Mini futures (NQU26) are up +0.46% this morning as investors kicked off the new week by piling into tech stocks amid fresh evidence of surging AI demand.
Chip and AI infrastructure stocks were among the biggest gainers in pre-market trading after Anthropic PBC’s strong revenue growth reinforced expectations that massive AI spending will be sustained. Bloomberg reported that Anthropic PBC told prospective investors its Q2 revenue surged at least 14-fold from a year earlier. Also, Anthropic reported positive adjusted operating income in Q2, according to documents seen by Bloomberg News.
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However, gains in stock index futures were limited as oil prices rose after fighting between Israel and Iran-backed Hezbollah over the weekend dealt another setback to efforts to end parallel conflicts in the Middle East.
This week, market participants are awaiting the minutes of the Federal Reserve’s latest policy meeting, a fresh batch of U.S. economic data, and earnings reports from retail heavyweights.
In Friday’s trading session, Wall Street’s major equity averages closed lower. Broadcom (AVGO) slumped nearly -6% and was the top percentage loser on the S&P 500 and Nasdaq 100 after SemiAnalysis reported that Google and AMD may have partnered on one of Google’s next-generation TPUs. Also, Applied Materials (AMAT) slid more than -5% as the semiconductor equipment maker’s FQ4 guidance failed to impress investors. In addition, software stocks slipped, with GoDaddy (GDDY) falling over -5% and Workday (WDAY) dropping more than -3%. On the bullish side, Sandisk (SNDK) climbed over +7% after several Wall Street firms commented on the memory supplier’s ambitious long-term revenue growth plan.
Economic data released on Friday were negative for equities. U.S. retail sales unexpectedly fell -0.6% m/m in July, weaker than expectations of +0.1% m/m, and core retail sales, which exclude motor vehicles and parts, fell -0.3% m/m, weaker than expectations of +0.2% m/m. The drop in July’s headline retail sales was the largest in 14 months. Separately, the University of Michigan’s preliminary U.S. consumer sentiment index fell to 51.0 in August, marking its first decline in three months and coming in below expectations of 54.7. Taken together with the weak July jobs report, these indicators suggest the American consumer may be losing momentum.
Ian Lyngen at BMO Capital Markets said, “It was a troubling update on the overall health of the consumer. This will contribute to the case for a Fed pause next month.” Meanwhile, Bret Kenwell at eToro said, “Economic weakness is a steep price to pay to avoid a quarter-point hike. For the economy to stay resilient, consumers will need to do the same.”
Chicago Fed President Austan Goolsbee said on Friday he was encouraged by the recent cooling in inflation but wanted to see more progress in the coming months to be confident it was returning to the central bank’s 2% target. “If we get three, four months in a row like what we saw in June, I will be feeling much better that we are on path back to 2%,” Goolsbee said.
U.S. rate futures have priced in a 69.4% chance of no rate change and a 30.6% chance of a 25-basis-point rate hike at the conclusion of the Fed’s September meeting.
This week, market participants will be closely watching the Fed’s minutes from the July 28-29 meeting. The Federal Open Market Committee last month voted 9-3 to leave rates unchanged, with three members dissenting in favor of a quarter-point rate hike to rein in above-target inflation. The minutes may give investors a clearer picture of the extent to which officials were growing impatient with high inflation.
Market watchers will also keep an eye on U.S. economic data releases this week. Preliminary U.S. August purchasing managers’ surveys for manufacturing and services will be the main highlight, providing an early indication of whether the mid-year pickup in U.S. business activity is being sustained. The Fed’s industrial production report for July will also attract attention. Other noteworthy data releases include the U.S. Export Price Index, the Import Price Index, Building Permits (preliminary), Housing Starts, Pending Home Sales, the Philly Fed Manufacturing Index, Initial Jobless Claims, and the Conference Board’s Leading Economic Index.
Second-quarter corporate earnings season is drawing to a close. Only twelve S&P 500 companies will report quarterly results this week, with retailers in the spotlight. Earnings reports from retail giants Walmart (WMT) and Target (TGT) will provide further insight into how consumers are holding up amid persistent inflation. Other retailers such as Home Depot (HD), The TJX Companies (TJX), Lowe’s (LOW), and Ross Stores (ROST), along with notable companies like Analog Devices (ADI), Keysight Technologies (KEYS), and Deere & Company (DE), are also set to release their quarterly results this week.
Today, investors will focus on the New York Fed-compiled Empire State Manufacturing Index, which is set to be released in a couple of hours. Economists project the August figure to come in at 10.6, compared with 15.6 in July.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.69%, down -0.11%.
The Euro Stoxx 50 Index is up +0.19% this morning, supported by gains in miners and tech stocks. Mining stocks led the gains on Monday as gold prices advanced on fading expectations of a Fed rate hike next month. Technology stocks also climbed after Anthropic PBC provided fresh evidence of robust AI demand. At the same time, food and beverage stocks underperformed. Meanwhile, Goldman Sachs on Friday lifted its 12-month target for the STOXX 600 to 695 from 660, citing resilient economic growth and solid corporate earnings. Investors will closely monitor preliminary Eurozone PMIs for August this week, which are expected to remain in expansion territory. Market participants will also keep a close eye on the Eurozone’s final July inflation data, Germany’s August ZEW indicator, and the European Central Bank’s monthly survey of consumers’ inflation expectations. In addition, ECB policymakers, including President Christine Lagarde and Chief Economist Philip Lane, are scheduled to speak this week, while Sweden’s central bank is set to announce its monetary policy decision. The Riksbank is widely expected to keep rates unchanged at 1.75%. In corporate news, Accelleron (ACLN.Z.IX) surged over +8% after Berenberg upgraded the stock to Buy from Hold.
The European economic data slate is empty on Monday.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.41%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.74%.
China’s Shanghai Composite Index closed higher today, led by gains in the tech sector. Semiconductor and other AI-related stocks rallied on Monday. Shenzhen China Micro Semiconductor jumped over +16% after the company reported nearly a 100% increase in first-half profit. Also, memory maker CXMT surged +12%, extending its rally after overtaking Tencent as China’s most valuable company last week. The global AI trade gained fresh momentum on Monday after Bloomberg reported that Anthropic PBC told prospective investors its Q2 revenue surged at least 14-fold from a year earlier. At the same time, liquor and consumer stocks underperformed. Meanwhile, data released after the market closed on Monday showed that China’s economic activity weakened across the board in July. The National Bureau of Statistics said China’s industrial output growth slowed in July for the first time in three months, coming in below expectations. Also, retail sales, a key gauge of Chinese consumer spending, rose less than expected in July. In addition, fixed-asset investment fell more than expected in the first seven months of the year. Finally, China’s real estate market remained sluggish in July, showing little sign of improvement. The downbeat figures renewed pressure on policymakers to support growth. “Another month of deterioration suggests higher odds for some support in the coming weeks and months to help stabilize growth,” said Lynn Song at ING. Investor attention now turns to the People’s Bank of China, which is set to announce the country’s benchmark lending rates later this week. Economists expect the one-year loan prime rate to stay unchanged at 3.00% and the five-year LPR at 3.50%.
The Chinese July Industrial Production rose +4.5% y/y, weaker than expectations of +5.0% y/y.
The Chinese July Retail Sales rose +0.6% y/y, weaker than expectations of +1.5% y/y.
The Chinese Fixed Asset Investment fell -6.7% y/y in the January-July period, weaker than expectations of -6.2% y/y.
The Chinese July Unemployment Rate was 5.2%, weaker than expectations of 5.1%.
Japan’s Nikkei 225 Stock Index closed higher today as investors moved back into AI names. Chip and other AI-related stocks broadly advanced on Monday. Memory chipmaker Kioxia Holdings popped over +15% and fiber-optic cablemaker Fujikura climbed more than +7%. However, the benchmark index’s gains were capped by weaker-than-expected GDP data from the country and unease over the Middle East. A Cabinet Office report showed on Monday that Japan’s economic growth unexpectedly slowed in the second quarter as capital spending continued to weaken amid uncertainty stemming from the Middle East conflict and private consumption stagnated under pressure from inflation. Still, Naoki Hattori, chief Japan economist at Mizuho Research Institute, said that solid wage growth and government subsidies are expected to support household spending, which could give the Bank of Japan confidence to proceed with a rate hike next month. “Even after today’s result, I think the September rate hike remains the base case,” Hattori said. Meanwhile, Japanese government bond yields jumped on Monday, with the 10-year yield reaching its highest level since 1996, amid fiscal concerns and expectations of a faster pace of BOJ rate hikes. Investor focus now shifts to Japan’s July National Core CPI due later this week, which is expected to show a modest pickup—a result that would keep the BOJ on course to raise rates as soon as next month. Market participants will also keep a close eye on Japan’s July flash PMIs, July trade data, and June core machinery orders. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -4.81% to 29.47.
The Japanese GDP rose +0.3% q/q and +1.1% y/y in the second quarter, weaker than expectations of +0.5% q/q and +2.0% y/y.
The Japanese June Industrial Production was revised upward to +1.9% m/m from the preliminary estimate of +1.3% m/m.
Pre-Market U.S. Stock Movers
Chip and AI infrastructure stocks climbed in pre-market trading after Anthropic PBC’s strong revenue growth reinforced expectations that massive AI spending will be sustained. Sandisk (SNDK) was up over +5%, Micron Technology (MU) was up more than +3%, and Intel (INTC) was up over +2%.
Alphabet (GOOGL) gained about +0.7% in pre-market trading after a regulatory filing revealed that Berkshire Hathaway significantly increased its stake in the company during the second quarter.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - August 17th
Fabrinet (FN), XP Inc. (XP), Dakota Gold (DC), Gorilla Technology Group (GRRR), Flexsteel Industries (FLXS), Duos Technologies Group (DUOT).
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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