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Beyond the Numbers

Futures Pointing To Initial Rebound On Wall Street
8/3/2022 8:46 AM

The major U.S. index futures are currently pointing to a higher open on Wednesday, with stocks likely to move back to the upside following the pullback seen over the two previous sessions.

Traders may look to get back into the markets after the drop seen early in the week dragged the major averages down from their recent highs.

The tech-heavy Nasdaq ended last Friday’s trading at a nearly three-month closing high, while the Dow and the S&P 500 reached their best closing levels in well over a month.

Buying interest may be somewhat subdued, however, as traders remain concerned about rising tensions between the U.S. and China following House Speaker Nancy Pelosi’s visit to Taiwan.

Traders may also be reluctant to make more significant moves ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

U.S. stocks closed on a weak note on Tuesday as rising tensions between the U.S. and China and signs of slowing global growth weighed on sentiment. Hawkish comments from a couple of Federal Reserve officials also contributed to the weakness on Wall Street.

The major averages all ended in negative territory although the S&P 500 and the Nasdaq managed to spend some time above the flat line.

In addition to digesting the latest batch of earnings updates and economic data, investors looked ahead to the non-farm payroll data for the month of July due later in the week.

The Dow ended with a loss of 402.23 points or 1.2 percent at 32,396.17, slightly off the session's low. The S&P 500, which advanced to 4,140.47, settled with a loss of 27.44 points or 0.7 percent at 4,091.19, while the Nasdaq, which rebounded to 12,503.34 from an early low, ended with a loss of 20.22 points or 0.2 percent at 12,348.76.

Tensions between the U.S. and China have risen due to U.S. House Speaker Nancy Pelosi's visit to Taiwan.

Chinese foreign ministry spokesman Zhao Lijian said that Pelosi's visit would lead to “very serious developments and consequences.” The White House warned China against turning her visit into a crisis.

Caterpillar (CAT) slumped nearly 6 percent after reporting lower than expected revenues in the latest quarter. The company reported second-quarter earnings of $1.67 billion or $3.13 per share compared to $1.41 billion or $2.56 per share a year ago. Revenue for the quarter rose 10.6 percent to $14.25 billion from $12.89 billion last year.

DuPont (DD) drifted down 2.7 percent, weighed down by a downward revision in the company's full-year outlook.

Uber Technologies (UBER) shares soared nearly 19 percent after the company said that gross bookings reached an all-time high of $29.1 billion in the second quarter this year, up 33 percent over the corresponding quarter last year. The company reported a net loss of $2.6 billion for the second quarter. For the third quarter of this financial year, Uber expects gross bookings of $29 billion to $30 billion.

Pinterest (PINS) surged 12.3 percent, buoyed by news about Elliott Investment Management becoming the largest shareholder of the company.

Data from the Labor Department showed the number of job openings in the U.S. fell by 605,000 from a month earlier to 10.7 million in June of 2022, the lowest in nine months and below market expectations of 11 million.

Commodity, Currency Markets

Crude oil futures are jumping $1.74 to $96.16 a barrel after rising $0.53 to $94.42 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,783.60, down $6.10 compared to the previous session’s close of $1,789.70. On Tuesday, gold edged up $2.

On the currency front, the U.S. dollar is trading at 133.54 yen compared to the 133.17 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0189 compared to yesterday’s $1.0166.

Asia

Asian stocks turned in a mixed performance on Wednesday after a private survey showed China's services sector grew at a faster clip in July compared to the previous month as a result of easing COVID-19 curbs.

A cautious undertone prevailed after U.S. House Speaker Nancy Pelosi's visit to Taiwan triggered a strong reaction from China.

Taiwan struck a defiant tone as a furious China geared up for military exercises dangerously close to the island's shores in retaliation for the visit. China views Taiwan as a breakaway province.

The dollar edged higher and U.S. Treasury yields rose after a trio of Fed policymakers talked up the potential for further, aggressive interest rate hikes.

Oil prices were flat to slightly lower in Asian trading ahead of a meeting of OPEC+ producers that may not lead to a further boost in crude supply.

China's Shanghai Composite Index closed 0.7 percent lower at 3,163.67 after a choppy session. Hong Kong's Hang Seng Index rose 0.4 percent to 19,767.09.

Japanese shares rebounded after having hit a two-week low in the previous session. The Nikkei 225 Index climbed 0.5 percent to 27,741.90, while the broader Topix ended 0.3 percent higher at 1,930.77.

Air-conditioning maker Daikin Industries jumped 4 percent after lifting its outlook. Similarly, West Japan Railway rallied 3.5 percent and Sanrio surged 12.9 percent after reporting positive earnings.

A measure of Japan's services sector activity hit the lowest level since March in July, suggesting that the economy may struggle to stage a convincing recovery from the COVID- pandemic.

Seoul stocks rose notably, led by gains by automakers and battery makers. The Kospi advanced 0.9 percent to 2,461.45. LG Energy Solution topped the gainers list to close 4.8 percent higher at 437,000 won.

Australia stocks declined as the latest readings on retail sales and service sector activity proved to be a mixed bag. The benchmark S&P ASX 200 Index dropped 0.3 percent to 6,975.90, while the broader All Ordinaries Index closed 0.2 percent lower at 7,202.90.

Europe

European stocks are broadly higher on Wednesday despite concerns about escalating conflict between China and the United States over U.S. House Speaker Nancy Pelosi's trip to Taiwan.

Investors shrugged off the latest survey results suggesting that Eurozone business activity contracted in July amid a downturn in the manufacturing sector and slowing in the service economy.

Germany's exports growth accelerated more than expected in June, while imports increased at a weaker pace, separate data revealed.

While the French CAC 40 Index has climbed by 0.6 percent, the German DAX Index and the U.K.’s FTSE 100 Index are both up by 0.3 percent.

Just Eat Takeaway.com has moved notably higher. The food delivery service confirmed its full-year outlook despite posting a wider first half net loss.

Rolls Royce has also rallied. The industrial technology company announced that the Spanish government has approved the sale of ITP Aero to a consortium of investors led by Bain Capital Private Equity.

Housebuilder Taylor Wimpey has also jumped after raising its profit guidance to the top end of expectations.

Avast shares have also soared as the competition regulator provisionally cleared the anticipated acquisition of the company by NortonLifeLock following an in-depth merger investigation.

French insurer Axa has also surged after it posted a higher first-half profit and announced a share buyback program.

Societe Generale has also jumped. The lender reported better-than-expected earnings in the second quarter despite taking a 3.3 billion euro ($3.36 billion) hit from exiting its Russian operations.

Semiconductor firm Infineon Technologies has also rallied after raising its guidance for the fiscal year.

Lender Commerzbank has also moved to the upside after posting a better-than-expected profit in the second quarter.

Meanwhile, German luxury carmaker BMW has slumped after it warned of a highly volatile second half.

Hill & Smith Holdings has also moved to the downside. The British supplier of infrastructure products kept full-year expectations unchanged after reporting higher revenue and pretax profit for the first half.

Veolia has also fallen after it signed a merger agreement concerning the merger of Vigie SA (formerly known as Suez SA) into Veolia.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on service sector activity in the month of July at 10 am ET.

The services PMI is expected to dip to 53.5 in July from 55.3 in June, although a reading above 50 would still indicate growth in the sector.

Also at 10 am ET, the Commerce Department is due to release its report on new orders for manufactured goods in the month of June. Factory orders are expected to jump by 1.1 percent.

The Energy Information Administration is scheduled to release its report on oil inventories in the week ended July 29th at 10:30 am ET.

Crude oil inventories are expected to edge down by 0.6 million barrels after tumbling by 4.5 million barrels in the previous week.

Also at 10:30 am ET, Philadelphia Federal Reserve President Patrick Harker is due to deliver opening remarks at the Philly Fed’s sixth annual Fintech Conference.

Stocks In Focus

Shares of Sierra Wireless (SWIR) are moving sharply higher in pre-market trading after the communications equipment company agreed to be acquired by chipmaker Semtech (SMTC) for approximately $1.2 billion in cash.

Fintech company SoFi (SOFI) is also likely to see initial strength after reporting better than expected second quarter results and providing upbeat guidance.

On the other hand, shares of Match Group (MTCH) are seeing significant pre-market weakness after the dating service operator forecast third quarter revenues below analyst estimates.
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