Trading opened this week with strength in consumer staples, energy and financials offsetting weakness in discretionary and technology shares ahead of key earnings reports for each of the latter two sectors. Oil prices rose as Israel responded to another Hezbollah attack from the North, while uncertainty over Libya production reemerged. Crude prices fell back late in the week following a report that OPEC+ was likely to proceed with a planned ‘gradual’ oil output increase starting in October. Gold prices continued to make new all-time highs, holding onto the recent relative outperformance over bitcoin. The S&P 500 continued to encounter fairly broad resistance around 5,600, a level that is ~20x average 2025 S&P earnings estimates that moved up towards $275 after Nvidia and others reported quarterly results. Stock indexes were mixed for the week, with the S&P edging up 0.2%, the DJIA adding 0.9%, and the Nasdaq off by 0.9%.
Economic data did nothing to derail expectations for more central bank rate cuts next month. Preliminary German and French CPI fell back below the 2% ECB target for first time since Aug 2021. Benign inflation prints across Europe and softer economic numbers from German in particular, kept the ECB policy focus on growth and likely another rate cut in September. US July durable goods data bounced back sharply, as expected, but the core capital goods sector (nondefense other than aircraft) was disappointing. Core capital goods shipments have not posted a monthly increase since April, and the July level was well below the Q2 average. The August Richmond Fed print was clearly soft, contracting at a level not seen since the pandemic. On Friday, the Fed’s preferred inflation gauge, the PCE, did little to change expectations of a September rate cut, while Q2 preliminary GDP and July personal consumption data remained solid. The US yield curve moved ever closer to de-inverting with the 2-10 spread now just a few basis points from positive territory.
In corporate news, key earnings reports continue to hold sway over the market, particularly in the retail sector which continues to flash mixed signals. Best Buy blew out earnings expectations, despite reporting its 11th quarter in a row of negative US same store sales, saying customers are increasing seeking value, but remain willing to spend on new technologies. Dollar General missed estimates and confirmed lower-end consumers are seeing their paychecks run out before the end of the month and now resorting to using credit cards for basic household needs. Shares of Temu-parent PDD got slammed as the company reported intensifying competition was pressuring revenue growth. Nvidia beat earnings expectations again, but saw a slightly less modest increase in guidance than usual, triggering a modest retracement in big tech names on Thursday. AI-adjacent name Marvell pleased investors with a strong earnings report and forecasting that custom silicon will become a large revenue growth driver. Meanwhile, beleaguered chip-maker Intel was reportedly mulling a major restructuring that could include a spin-off of its foundry business. In M&A news, the latest turn for the Paramount story was that the Edgar Bronfman Jr.-led consortium withdrew their acquisition proposal, leaving the path clear for Skydance to close the deal.
MON 08-26
(CA) Canada to impose 100% new tariffs on Chinese EVs, and 25% tariff on steel and aluminium produced in China [matches US tariff levels imposed in May] – press
(DE) GERMANY AUG IFO BUSINESS CLIMATE: 86.6 V 86.0E (lowest level since Feb)
(IL) US General C.Q. Brown says immediate risk of war in Middle East has 'eased somewhat' after Israel-Hezbollah clash - financial press
(LY) Libya's Tobruk-based government says will stop all oil production and exports; Waha Oil Co. says will gradually start cutting output
(US) AUG DALLAS FED MANUFACTURING ACTIVITY: -9.7 V -16.0E
(US) Fed’s Daly (voter): The time to adjust policy is upon us; Hard to imagine anything could derail September rate cut - press interview
(US) JULY PRELIMINARY DURABLE GOODS ORDERS: 9.9% V 4.9%E; DURABLES (EX-TRANSPORTATION): -0.2% V 0.0%E
(US) Reportedly White House this week expected to announce final implementation plans for tariff increases on certain Chinese imports, announced in May – press
AAPL *CFO Luca Maestri to transition from role to lead the Corporate Services teams; Promotes VP of Financial Planning and Analysis Kevan Parekh to new CFO, effective Jan 1st
BHP.AU Reports FY24 Underlying Net $13.4B v $13.5Be ($13.4B y/y), Underlying cont ops Profit $13.7B v $12.9B y/y, Underlying EBITDA $29.6B v $28.95Be ($28.0B y/y), Rev $55.66B v $53.8B y/y; China experiencing uneven recovery among end-use sectors
PDD Reports Q2 (CNY) 21.61 v 9.0 y/y, Rev 97.1B v 52.3B y/y; Competition to 'inevitably' pressure Rev growth, "resolute" investment to impact profitability
PDD CEO: Unavoidable that profitability will trend lower over the long-term; Seeing many new challenges ahead from changing consumer demand amid intensifying competition, uncertainties in global environment - earnings call
MAERSKB.DK Experiencing industry-wide equipment and capacity shortages, long-term additional costs, strong demand from customer-base, and delays at ports due to the market developments related to the ongoing situation in the Red Sea and Gulf of Aden; Changes will take effect from the price calculation date, Sept 15th
TUES 08-27
(CN) China Commerce Ministry (MOFCOM): Canada tariff move will disrupt stability of global supply chains
(CN) Eurizon SLJ Capital: Chinese companies may be enticed to sell a $1T pile of US dollar-denominated assets as the US cuts interest rates; This could strengthen Chinese yuan (CNY) by up to 10% and this is now the biggest risk that’s not priced in properly across markets
(RU) Ukrainian Pres Zelenskiy: Ukraine has successfully run test of its first ballistic missile; War will end through dialogue, but Ukraine must be in a powerful position
(US) AUG RICHMOND FED MANUFACTURING INDEX: -19 V -14E (lowest since May 2020); New orders -26 v -23 prior (lowest since May 2023)
(US) Fed Discount Minutes: Chicago, NY directors (Goolsbee and Williams) were prepared to support a rate cut in July
BHP Market Outlook: China experiencing an uneven recovery among its end-use sectors, and India likely to continue as the fastest growing major economy; Ongoing supply issues have prevented prices from returning to pre-Covid levels
CTRN Reports Q2 -$1.94 adj v -$0.61 y/y, Rev $176.5M v $173.5M y/y; Back-to-school categories off to a strong start with positive Q3 SSS low-single-digit growth through the first three weeks of the quarter
LLY Releases Zepbound (tirzepatide) single-dose vials, four-week supply of the 2.5 mg Zepbound single-dose vial is $399, a four-week supply of the 5 mg dose is $549; Notes the single-dose vials are priced at a 50% or greater discount compared to the list price of all other incretin (GLP-1) medicines for obesity
WED 08-28
(IL) Israel denies earlier media reports that it had paused fighting in Gaza for Polio vaccinations - financial press
(US) AI safety bill passed by California State Assembly to limit AI replicas in the first-of-its-kind legislation; Needs California Gov Newsom signature
(US) TREASURY $70B 5-YEAR NOTE AUCTION DRAWS 3.645% V 4.121% PRIOR, BTC 2.41 V 2.40 PRIOR AND 2.42 OVER THE LAST 12 (tailed WI by 0.3 bps)
1211.HK Reports H1 (CNY) Net 13.6B v 11.0B y/y, Rev 301.1B v 260.1B y/y
ANF Reports Q2 $2.50 v $2.14e, Rev $1.13B v $1.09Be; Raises outlook; Notes Hollister continued its sequential acceleration to growth of 17% with better-than-expected summer and back-to-school selling; Seeing increasingly uncertain environment
CRM Reports Q2 $2.56 v $2.35e, Rev $9.33B v $9.23Be; CFO steps down, effective end of FY24; Raises EPS guidance, but guides Q3 Rev below est
CRWD Reports Q2 $1.04 v $0.98e, Rev $964M v $959Me; Cuts FY25 outlook inclusive of incentives related to customer commitment package
FIVE TTN Earnings Call Summary: As we've exited Q2 and gone into August, have seen improvements in traffic, but performance remains inconsistent between lower and higher-income demographics; Plans to moderate store growth for 2025 to enhance execution and focus on operational initiatives
FIVE Reports Q2 $0.54 v $0.54e, Rev $830.1M v $822Me; Cuts FY guidance
FL Reports Q2 -$0.05 v -$0.08e, Rev $1.90B v $1.88Be; Trims margin outlook despite solid start to Back-to-School; To close stores in South Korea, Norway, Sweden, Denmark; To relocate its headquarters to St. Petersburg, Florida in 2025
HPQ Reports Q3 $0.83 v $0.86e, Rev $13.5B v $13.3Be; Authorizes $10B buyback program; Narrows guidance
KSS Reports Q2 $0.59 v $0.46e, Rev $3.53B v $3.80Be
NVDA Reports Q2 $0.68 v $0.64e, Rev $30.0B v $28.4Be; Approves $50B additional buyback program (~1.6% of market cap); Guides Rev strong again but % above consensus moderates and implied gross margin guidance is below est at mid-point
THRS 08-29
(CN) Barclays analysts: Chinese exporters may be prompted to convert more dollars into Chinese yuan if USD/CNH falls below the key 7.10 level
(CN) China govt said to consider refinancing $5.4T of mortgages - financial press (sources not cited)
(CN) China PBOC purchased CNY400B Special Treasury Bonds from primary dealers – press
(CN) China Commerce Ministry (MOFCOM): Some Chinese experts proposed increasing import tariffs on large engine cars and argued that such duties are in line with WTO rules
(DE) GERMANY AUG CPI NORTH RHINE WESTPHALIA M/M: -0.1% V +0.3% PRIOR; Y/Y: 1.7% V 2.3% PRIOR (below 2% ECB target for the first time since spring 2021)
(DE) GERMANY AUG PRELIMINARY CPI M/M: -0.1% V 0.0%E; Y/Y: 1.9% V 2.1%E
(DE) Reportedly low water levels after recent dry weather again preventing cargo vessels from sailing fully loaded on the Rhine river in Germany, with surcharges added to the usual freight rates – press
(JP) JAPAN AUG TOKYO CPI Y/Y: 2.6% V 2.3%E; CPI (EX-FRESH FOOD) Y/Y: 2.4% V 2.2%E (Core highest since Mar, 2024)
(US) Democratic Presidential Candidate VP Kamala Harris & VP Candidate Tim Walz (D-MN Gov) in pre-taped interview with CNN's Dana Bash
(US) Redfin: Home sales aren’t yet improving because many would-be homebuyers are playing the waiting game; Some would-be buyers and sellers are waiting to see how new rules on agent fees play out before getting into the market; Some house hunters are hesitant to make a big purchase amid this year’s political uncertainty
(US) JULY PENDING HOME SALES M/M: -5.5% V 0.2%E; Y/Y: -4.6% V -2.0%E
(US) JULY PRELIMINARY WHOLESALE INVENTORIES M/M: 0.3% V 0.3%E
(US) INITIAL JOBLESS CLAIMS: 231K V 232KE; CONTINUING CLAIMS: 1.868M V 1.87ME
(US) Q2 PRELIMINARY GDP ANNUALIZED Q/Q: 3.0% V 2.8%E; PERSONAL CONSUMPTION: 2.9% V 2.2%E
(US) Q2 PRELIMINARY GDP PRICE INDEX: 2.5% V 2.3%E; CORE PCE PRICE INDEX Q/Q: 2.8% V 2.9%E
(US) WEEKLY EIA NATURAL GAS INVENTORIES: +35 BCF VS. +37 BCF TO +39 BCF INDICATED RANGE
(US) TREASURY $44B 7-YEAR NOTE AUCTION RESULTS: DRAWS 3.770% V 4.162% PRIOR, BID-TO-COVER RATIO: 2.50 V 2.64 PRIOR (Tails when issued by nearly 1 bps)
ASML.NL Reportedly Netherlands govt to place more curbs on company's China chip business, including limiting ASML's ability to repair and maintain its semiconductor equipment in China – press
BBY See Aug-to-date comp sales roughly flat; Notes it continues to be thoughtful about possible election-related impact to demand in Oct - earnings call
DELL Expects solid top-line growth in H2; Looking to lean into new opportunities in AI - Prepared remarks
DELL TTN Earnings Call Summary: Guides Q3 $1.90-2.10 v $2.22e; Rev $24-25B v $24.8Be; Guidance indicates strong revenue growth in the second half of the year, with specific expectations for ISG to grow ~30% driven primarily by AI.
GAP Reports Q2 $0.54 v $0.39e, Rev $3.72B v $3.61Be; Raises gross margin guidance; Affirms net sales [early release on website]
GMS Reports Q1 $1.93 v $2.11e, Rev $1.45B v $1.49Be; Notes economic tightening resulted in weaker than expected activity levels across all of its end markets, which will likely persist over the next several quarters
INTC *SAID TO EXPLORE OPTIONS WITH GOLDMAN, MORGAN STANLEY; Mulls splitting off foundry and product units, scrapping factory projects - financial press
RCO.FR Has taken note of announcement by China's Ministry of Commerce Not to impose provisional tariffs on brandy imported from the EU for now; To await MOFCOM’s final decision to be able to assess any potential future impact
FRI 08-30
(DE) GERMANY AUG NET UNEMPLOYMENT CHANGE: +2.0K V +16.0KE; UNEMPLOYMENT CLAIMS RATE: 6.0% V 6.0%E
(EU) EURO ZONE AUG ADVANCE CPI ESTIMATE Y/Y: 2.2% V 2.2%E (lowest annual pace since Aug 2021); CORE CPI Y/Y: 2.8% V 2.8%E
(FR) FRANCE AUG PRELIMINARY CPI M/M: 0.6% V 0.5%E; Y/Y: 1.9% V 1.8%E (1st time back under ECB target since Aug 2021)
(US) Atlanta Fed GDPNow: Raises Q3 GDP forecast to 2.5% from 2.0%
(US) AUG FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 67.9 V 68.1E
(US) JULY PCE DEFLATOR INDEX M/M: 0.2% V 0.2%E; Y/Y: 2.5% V 2.5%E
(US) JULY PERSONAL INCOME: 0.3% V 0.2%E; PERSONAL SPENDING: 0.5% V 0.5%E
D Reportedly expects the time it takes to connect large data centers to the electric grid to increase by 1-3 years to 7 years in total amid a surge in requests - press
GS Reportedly to cut over 1,300 workers, 3-4% of workforce, as part of annual pruning of low performers – WSJ
NVAX (US) FDA approves Updated Protein-based 2024-2025 Formula COVID-19 Vaccine
Reportedly OPEC+ likely to proceed with planned gradual oil output increase starting in October - press