Closing Stock Market SummaryOn the heels of the earnings reports from Alphabet (GOOG 113.60, +8.16, +7.7%) and Microsoft (MSFT 268.74, +16.84, +6.7%), the stock market opened on a high note. The main indices stuck to a fairly narrow range as market participants waited for the FOMC decision. There was some whipsaw action immediately after the rate hike announcement but the market moved sharply higher during Chairman Powell's subsequent press conference. Each of the indices closed near session highs.
The strength in the early going was thanks to better-than-feared results and/or guidance from Alphabet and Microsoft, which was good enough for a market that seemingly priced in worse considerations during the selloff in the first half of the year.
The real upside momentum came after the FOMC announced its decision. The 75 basis point rate hike was as expected and the vote was unanimous. However, this was not the catalyst that sent the market on a sharp incline.
After listening to Fed Chair Powell's press conference, the market thinks that the pace of the Fed's rate increases may soon start to slow down given that the economy is slowing, too. Fed Chair Powell did not rule out another 75 basis point increase (or larger) at the September meeting, but he said the data will dictate that decision. Importantly for the market, he also said that, with the frontloading of rate hikes, it intuitively makes sense that slowing the pace of rate increases would be appropriate.
The stock market seems to have latched on to the latter admission as the post-FOMC rally catalyst, notwithstanding the added acknowledgment that it will be quite challenging for the Fed to achieve a soft landing and that the task has gotten even more challenging in recent months.
As was the case before the press conference, the mega caps led the upside moves. The Vanguard Mega Cap Growth ETF (MGK) closed up 4.3% versus a 2.6% gain in the S&P 500 and a 1.9% gain in the Invesco S&P 500 Equal Weight ETF (RSP).
The late-session rally left all 11 S&P 500 sectors in positive territory. Gains ranged from 0.1% (utilities) to 5.1% (communication services).
As for the Treasury market, there was very little immediate reaction to the Fed's 75-bps rate hike announcement, but most tenors rallied to fresh highs during Fed Chairman Powell's press conference. The 2-yr note yield fell four basis points to 3.00% while the 10-yr note yield fell five basis points to 2.73%.
Also, energy complex futures made big moves today. WTI crude oil futures rose 2.8% to $97.54/bbl. Natural gas futures fell 2.0% to $8.57/mmbtu. Unleaded gasoline futures rose 2.7% to $3.19/gal.
Ahead of Thursday's open, Altria (MO), American Tower (AMT), Comcast (CMCSA), Harley-Davidson (HOG), Hershey Foods (HSY), Honeywell (HON), Mastercard (MA), Merck (MRK), Northrop Grumman (NOC), Pfizer (PFE), Royal Caribbean (RCL), Southwest Air (LUV), Stanley Black & Decker (SWK), and STMicroelectronics (STM) headline the earnings reports.
Thursday's economic data is limited to:
- 8:30 ET: Advance Q2 GDP (consensus 0.5%; prior -1.6%), advance Q2 GDP Deflator ( consensus 7.1%; prior 8.2%), weekly Initial Claims ( consensus 253,000; prior 251,000), and Continuing Claims (prior 1.384 mln)
- 10:30 ET: Weekly natural gas inventories (prior +32 bcf)
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index -1.8%; Prior -6.3%
- June Durable Orders 1.9% ( consensus -0.5%); Prior was revised to 0.8% from 0.7%; June Durable Orders, Ex-Transportation 0.3% (B consensus 0.3%); Prior was revised to 0.5% from 0.7%
- The key takeaway from the report is that business spending remained on a positive trajectory. New orders for nondefense capital goods, excluding aircraft, increased 0.5% for the second consecutive month.
- June Adv. Retail Inventories 2.0%; Prior was revised to 1.6% from 1.1%
- June Adv. Wholesale Inventories 1.9%; Prior was revised to 1.9% from 2.0%
- June Adv. Intl. Trade in Goods -$98.2 bln; Prior was revised to -$104.0 bln from -$104.3 bln
- June Pending Home Sales -8.6% (consensus -1.5%); Prior was revised to 0.4% from 0.7%
- Crude oil inventories had a draw of 4.52 mln barrels
- Prior week showed a draw of 446K barrels
- Gasoline inventories had a draw of 3.30 mln barrels
- Prior week showed a build of 3.50 mln barrels
- Dow Jones Industrial Average: -11.4% YTD
- S&P 400: -13.9% YTD
- S&P 500: -15.6% YTD
- Russell 2000: -17.6% YTD
- Nasdaq Composite: -23.1% YTD
- Mercedes (MBG TH) +2.8%
- Mercedes Raises Outlook Despite Inflation, Supply-Chain Woes
- BASF (BAS TH) +2.3%
- BASF Hikes Guidance as Fears of Russian Gas Halt, Slowdown Mount
- Rio Tinto (RIO1 TH) +2.2%
- Reckitt (3RB TH) +1.6%
- *RECKITT RAISES 2022 LFL NET REVENUE GROWTH GUIDANCE
- ASML (ASME TH) +1.6%
- Watch European Chip Stocks on Positive Texas Instruments Outlook
- Uniper (UN01 TH) +1.6%
- Deutsche Bank (DBK TH) +1.3%
- Credit Suisse Sees IB Loss, Deutsche Bank Trading Boost: TOPLive
- Zalando (ZAL TH) +1.2%
- EMEA Stocks Are Forming 21 Major Technical Chart Patterns
- Puma (PUM TH) +1.1%
- Adidas Profit Warning Is Worse Than Expected: Street Wrap
- Deutsche Boerse (DB1 TH) +1.1%
- Unilever (UNVB TH) -0.7%
- Kering (PPX TH) -0.9%
- LVMH (MOH TH) -1.2%
- LVMH ‘Solid’ 2Q Fashion Beat May Not Be Enough: Street Wrap
- GSK (GS71 TH) -1.2%
- *GSK RAISES FULL-YEAR OUTLOOK ON IMPROVING REVENUES, MARGIN
- Adidas (ADS TH) -3.7%
- Adidas Profit Warning Is Worse Than Expected: Street Wrap
DAX:
- Mercedes (MBG TH) +3.1%
- Mercedes Raises Outlook Despite Inflation, Supply-Chain Woes (1)
- BASF (BAS TH) +2.4%
- BASF Hikes Guidance as Fears of Russian Gas Halt, Slowdown Mount
- Qiagen (QIA TH) +2.3%
- Zalando (ZAL TH) +1.5%
- EMEA Stocks Are Forming 21 Major Technical Chart Patterns
- Deutsche Bank (DBK TH) +1.4%
- Deutsche Bank Scraps Cost Target as Inflation Headwinds Build
- Infineon (IFX TH) +0.4%
- Watch European Chip Stocks on Positive Texas Instruments Outlook
- Adidas (ADS TH) -3.2%
- Adidas Profit Warning is Worse Than Expected: Street Wrap
MDAX:
- Uniper (UN01 TH) +1.6%
- Germany’s Uniper Getting Less Russian Gas After Gazprom Cuts (2)
- Telefonica Deutschland (O2D TH) +1.2%
- Equinor, Rio Tinto, BAT, GSK: Earnings Day Ahead
- Bechtle (BC8 TH) +1.2%
- Commerzbank (CBK TH) +1%
- Aixtron (AIXA TH) +1%
- Aixtron Investor Cut Voting Rights to 3.67% on July 21
- Thyssenkrupp (TKA TH) +0.9%
SDAX:
- Adler Group (ADJ TH) +2.1%
- VERBIO Vereinigte (VBK TH) +1.4%
- Deutsche PBB (PBB TH) +1.2%
- SMA Solar (S92 TH) +1.1%
- flatexDEGIRO (FTK TH) +1.1%
- PNE AG (PNE3 TH) +0.7%
>>> Up
* Admiral Raised to Buy at Citi; PT 2,026 pence
* Axa Raised to Overweight at JPMorgan; PT 29 euros
* Legal & General Raised to Buy at Berenberg; PT 345 pence
* Unilever Raised to Buy at Deutsche Bank
>>> Down
* Eutelsat Cut to Hold at Deutsche Bank; PT 10 euros
* Generali Cut to Neutral at JPMorgan; PT 17 euros
* Logitech Cut to Hold at Loop Capital; PT 52.94 Swiss francs
* M6 Cut to Equal-Weight at Barclays; PT 16.50 euros
* Metro Bank Cut to Hold at Investec; PT 90 pence
* Scatec Cut to Neutral at Exane; PT 118 kroner
>>> Initiation
* Made.com Rated New Neutral at Davy
* Marks Electrical Group Rated New Neutral at Davy
* Sosandar Rated New Outperform at Davy
* Virgin Wines UK Rated New Neutral at Davy
>>> Call
* Admiral Raised to Buy at Citi, Can ‘Navigate Choppy Waters’
* Holcim ‘Over Delivered’, 2Q Beat Driven By Strong Margins: MS
* Lagardere Results ‘Pretty Robust,’ Drive EPS Upgrades at Citi
* US Small Caps Closer to Pricing Recession Than Large Peers: Citi
* Valeo Posts ‘Strong’ 1H Results, With a Beat on FCF: Street Wrap
US equity futures rallied Wednesday after resilient earnings from Google parent Alphabet Inc. and an upbeat outlook from Microsoft Corp. helped alleviate some of the wider caution in markets. Contracts on the tech-heavy Nasdaq 100 added over 1%, while S&P 500 futures were up more than 0.5%. Microsoft jumped in extended trading on a strong sales forecast, while Alphabet’s revenues assuaged investors’ worst fears. Still, the mood remains edgy ahead of a much-anticipated Federal Reserve interest-rate increase -- part of a global wave of monetary tightening to quell inflation that’s stoking concerns about a worldwide economic slowdown.
Asian shares retreated amid falls in Hong Kong, tracking a close in the red for US stocks Tuesday before earnings lifted spirits after the bell. Australia’s bond yields and currency declined on lower than expected inflation. Treasury yields were little changed as traders brace for a widely telegraphed 75 basis-point Fed hike later Wednesday. The dollar dipped, oil was around $95 a barrel and Bitcoinpeeked above $21,000. he projected Fed move to tackle price pressures would cement a combined 150 basis points increase over June and July -- the steepest rise in rates since the 1980s, when then chairman Paul Volcker wrestled with sky-high inflation. Monetary tightening, Europe’s energy woes amid Russia’s invasion of Ukraine and China’s property sector and Covid challenges are among the risks darkening the global outlook. The International Monetary Fund warned the world economy may soon be on the cusp of an outright recession.
US company earnings are providing a sliver of hope -- more than three-quarters of firms that have reported so far either beat or met expectations. But there are doubts about how long they can weather economic challenges. President Joe Biden will speak with Chinese leader Xi Jinping on Thursday amid fresh tensions over Taiwan. The White House is also considering whether to lift some tariffs on Chinese imports to stem inflation.
Nikkei +0,11% Hang Seng -1,54% CSI -0,46% Shanghai -0,12% Shenzen +0,10%
Eur$ 1.0149 CNH 6,7651 CNY 6,7645 JPY 136,94 GBP 1,2054 CHF 0,9617 RUB 60,15 TRY 17,9746 WTI$ 95,19 GOld 1,715,59 BTC 21,212 +&% ETH 1,445,62 +4%
S&P +0,89 Nasdaq +1,45% EuroStoxx +0,17% FTSE +0,32% Dax +0,36% SMI
Macro :
- Biden Will Speak to Xi on Thursday as US-China Ties Worsen
- Wuhan Locks Down 1 Million Residents in Echo of Pandemic’s Start
Keep an eye on :
- ADS GY : Adidas Sees FY Net Income From Continuing Ops EU1.3B
- AENA SM : Aena 1H Net Income Misses Estimates
- AA US : Alcoa Nederland Holding Raised to Investment Grade by Moody’s
- ATO FP : Atos 1H Net Loss EU503M, Est. Loss EU117.7M
- ATO FP : Atos Secures 1.5 Billion Euros to Finance Split Plan
- AUTN SW : Autoneum 1H Sales Beats Estimates
- BAS GY : BASF Boosts FY Sales Forecast, Beats Estimates
- EN FP : Bouygues: FCA Investigators Issue Report on TF1 & M6 Deal
- CSGN SW : Credit Suisse Set to Name Ulrich Koerner as Chief Executive: FT
- BN FP : Danone Boosts FY Like-for-Like Sales Forecast
- DBK GY : Deutsche Bank Cuts FY Investment Bank Revenue Goal
- DB1 GY : Deutsche Boerse 2Q Ebitda Beats Estimates
- EOM B C : Econocom Sees FY Organic Revenue +5%
- ELIA BB : Elia Group 1H EPS EU2.29 Vs. EU1.82 Y/y
- ELIOR FP : Elior Group Sees FY Organic Revenue at Least +16%
- ENG SM : Enagas 1H Revenue EU478.2M Vs. EU480.6M Y/y
- ENG SM : Zara’s Amancio Ortega Buys 5% Stake in Enagas’s Renewable Unit
- RF FP : Eurazeo SE 1H NAV/Shr EU115.50 Vs. EU117.80 H/H
- ERF FP : Eurofins Scientific Boosts FY Adjusted Ebitda View, Beats Est.
- FCT IM : Fincantieri 1H Revenue Meets Estimatesµ
- HOLN SW : Holcim 2Q Sales Beats Estimates
- OIG IM : Italgas Unit in Pact With Energetica for Energie Rete Stake
- MT PL : J. Martins 1H Net Income EU261M Vs. EU186M Y/y
- KAMBI SS : Kambi 2Q Revenue Misses Estimates
- LI FP : Klepierre 1H Net Rental Income Beats Estimates
- KCR FH : Konecranes 2Q Adj. Ebita, Net Sales Miss Ests; Orders Grow (1)
- KPN NA : KPN Sees FY Adj. EBITDA AL Above EU2.40B, Saw About EU2.40B
- MMT FP : Lagardere 1H Revenue EU3.03B Vs. EU2.08B Y/y
- MC FP : LVMH 2Q Beat in Fashion, Wines & Spirits Impresses: Street Wrap
- LHA GY : Lufthansa Passengers Face Day of Turmoil as Ground Staff Strike
- LHA GY : ITA Airways Board May Call For EU400m Cash Injection: MF
- MELE BB : Melexis Boosts FY Revenue Forecast
- MEL SM :Melia Hotels 1H Net Income EU3.74M Vs. Loss EU156.1M Y/y
- MBG GY : Mercedes Boosts FY Cars Adjusted Return on Sales Forecast
- MMT FP : M6 1H Revenue Meets Estimates
- ML FP : Michelin Can Rejig European Plants to Use Oil, Coal, CEO Says
- NESTE FH : Neste to Acquire Walco Foods to Boost Raw Material Sourcing
- NEX FP : Nexans FY Ebitda Forecast Beats Estimates
- NYR BB : Belgian Court to Rule on Trafigura, Nyrstar Case in Its Totality
- PYPL US : Activist Elliott Management Holds Stake in PayPal -- WSJ
- QIA GY : Qiagen Boosts FY Adjusted EPS Forecast
- RAND NA : Great Resignation Is Slowing Amid High Inflation, Randstad Says
- RED SM : Red Electrica 2Q Net Income EU180.9M Vs. EU177.1M Y/y
- ROVI SM : Rovi 1H Net Income Beats Estimates
- SANOMA FH : Sanoma 2Q EPS Misses Estimates
- SOW GY : Software AG 2Q Adjusted Ebita Beats Estimates
- TKTT FP : Tarkett 1H Adjusted Ebitda EU126.2M Vs. EU112.7M Y/y
- O2D GY : Telefonica Deutschland 2Q Mobile Service Revenue Meets Estimates
- UNI SM ; Unicaja 2Q Net Income Beats Estimates
_ UCG IM ; UniCredit 2Q Net Income Beats Estimates
- UCG IM : UniCredit Agrees to Sell 49% of CNP Vita Assicura for EU500m
- UPONOE FH : Uponor 2Q Operating Profit Misses Estimates
- FR FP : Valeo 1H Ebitda Beats Estimates
- VK FP : Vallourec Sees FY Ebitda EU650M to EU750M, Est. EU662.1M
- VPK NA : Vopak 2Q Revenue EU338.0M Vs. EU303.1M Y/y
- VOW3 GY : Porsche IPO Draws Scrutiny Over New Role for Top Boss: ECM Watch
- WIZZ LN : Wizz Air 1Q Net Loss EU452.5M, Est. Loss EU459.8M
- WLN FP : Worldline 1H OMDA Beats Estimates
After Hours Summary: MSFT +5.4% missed EPS, but pops on bullish guidance on call; CMG +8.6%, ENPH +8.3%, GOOG +5.1%, TXN +2.8% also higher on earnings; TENB -9.4%, AXTA -6.6%, JNPR -4.6% lower on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: TEVA +18.8% (also announces agreement for opioids settlement), CMG +8.6%, ENPH +8.3%, MANH +7.2%, TNET +6.9%, NAVI +6.8%, MSFT +5.4%, CNI +5.3%, GOOG +5.1%, EQR +3.9%, PEB +3.8%, MTDR +3.7%, BYD +3.2%, TXN +2.8%, NEX +2.3%, CSGP +2.1%, WH +1.5%, SYK +0.9%, CB +0.8%, LXFR +0.4%, SKX +0.4%, BXP +0.1%, HPP +0.1%, IEX +0.1%
Companies trading higher in after hours in reaction to news: AMSC +13.2% (announces $40 mln of new energy power systems orders), SIGA +5.2% (US may need $7 bln for monkeypox, according to WaPo), STRO +4.3% (first patient has been dosed in a Phase 1 study), CODX +2.6% (US may need $7 bln for monkeypox, according to WaPo), CS +1.4% (to name Ulrich Körner as CEO following reported exit of Thomas Gottstein, according to FT), ET +1.3% (increases dividend), WFC +1.2% (increases dividend), XOM +0.3% (has made two new discoveries offshore Guyana), PEP +0.3% (files mixed securities shelf offering), ASTL +0.1% (union successfully ratifies labor agreement)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: FXLV -50.9% (lowers FY revs outlook; also announces restructuring), TENB -9.4%, AXTA -6.6% (also CEO to step down), NXGN -4.7%, JNPR -4.6%, TER -4.2%, V -1%, ZWS -0.9%, AMP -0.4%, HA -0.3%, PGRE -0.3%, USNA -0.3%, EGP -0.2%, HIW -0.2%, MDLZ -0.2% (also increases dividend), AXS -0.1%, ESS -0.1%, FCF -0.1%
Companies trading lower in after hours in reaction to news: RXDX -1.4% (plans to file an IND for PRA052 in Q3; also to advance PRA052 into a Phase 1 trial in Q4), BBW -0.1% (Cannell Capital affirms 10.7% active stake and discloses prior conversation with the co)
Closing Stock Market SummaryThe stock market opened on a softer note and headed lower from there. There were several relatively negative corporate headlines before the open, which only added to the nervous sentiment ahead of the FOMC decision tomorrow. The S&P 500 tested its 50-day moving average (3,919) around midday where it found support from buyers. That support soon wavered and the S&P 500 traded below that level for most of the afternoon before a late session rally left the index just a hair above its 50-day moving average.
Walmart's (WMT 121.98, -10.04, -7.6%) warning ahead of the open was the through-line for the price action in the indices today. The company cut its earnings outlook and said increasing levels of food and fuel inflation negatively affected customers' discretionary spending capacity. That led to a buildup in inventories on things like apparel. Walmart's CEO said this shift in spending will force the company to cut prices on general merchandise.
This warning created a ripple effect for other retailers. Target (TGT 151.81, -5.86, -3.6%) and Ross Stores (ROST 77.96, -4.67, -5.7%), among others, traded down today in solidarity. Adding more context, the SPDR S&P Retail ETF (XRT) closed behind the broader market, down 4.2%.
Other corporate headlines included Shopify (SHOP 31.55, -5.16, -14.1%) announcing it is going to reduce its workforce by approximately 10% by the end of the day. This comes ahead of the company's earnings report tomorrow morning. McDonald's (MCD 257.09, +6.71, +2.7%) reported better-than-expected earnings before the open but noted that "the operating environment across the competitive landscape remains challenging." This sent some restaurant names lower in solidarity.
In addition, Alphabet (GOOG 105.44, -2.77, -2.7%) and Microsoft (MSFT 251.90, -6.93, -2.7%) traded lower in front of their earnings reports after the close on concerns that their guidance would not live up to high expectations.
All this corporate news combined with existing rate-hike concerns ahead of the FOMC decision tomorrow at 2:00 p.m. ET. The worry is that inflation will remain sticky, so the Fed will remain aggressive.
On a related note, some weaker than expected new home sales and consumer confidence data exacerbated existing growth concerns and worries about the Fed's rate hikes leading to a possible recession. The 2-yr note yield ended the day unchanged at 3.04% while the 10-yr note yield fell three basis points to 2.79%.
The advance-decline line further illustrated the buyer trepidation today. Decliners led advancers by a roughly 8-to-5 margin at both the NYSE and the Nasdaq.
Energy futures settled mixed. WTI crude oil futures fell 1.9% to $94.92/bbl. Natural gas futures rose 1.4% to $8.75/mmbtu. Unleaded gasoline futures fell 1.1% to $3.08/gal.
Earnings reports tomorrow morning are headlined by Automatic Data (ADP), Boeing (BA), Bristol-Myers (BMY), General Dynamics (GD), Hilton (HLT), Humana (HUM), Kraft-Heinz (KHC), Norfolk Southern (NSC), Rockwell Automation (ROK), Sherwin-Williams (SHW), Shopify (SHOP), Spotify (SPOT), T-Mobile US (TMUS), and Waste Management (WM).
Tomorrow, market participants will receive the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior -6.3%)
- 8:30 ET: June Durable Orders (consensus -0.5%; prior 0.7%), Durable Orders ex-transportation (consensus 0.3%; prior 0.7%), June advance Retail Inventories (prior 1.1%), June advance Wholesale Inventories (prior 2.0%), and June advance goods trade deficit (prior -$104.0 bln)
- 10:00 ET: June Pending Home Sales ( consensus -1.5%; prior 0.7%)
- 10:30 ET: Weekly crude oil inventories (prior -0.45 mln)
- 14:00 ET: July FOMC Rate Decision ( consensus 2.25-2.50%; prior 1.50-1.75%)
- Dow Jones Industrial Average: -12.6% YTD
- S&P 400: -15.7% YTD
- S&P 500: -17.7% YTD
- Russell 2000: -19.6% YTD
- Nasdaq Composite: -26.1% YTD