(Monday Market Open) Stock index futures pointed to a higher open as the US dollar retreated from Friday’s rally.
Market potential movers
Despite the movement of futures markets and currencies. it’s a relatively light news day on the economic calendar. However, there is plenty of inflation news this week to potentially move markets as investors continue to try to guess where the Federal Reserve will go next with interest rates. The consumer price index (CPI) is scheduled for Wednesday and the producer price index (PPI) for Thursday.
The Cboe Market Volatility Index (VIX) was higher ahead of the market open up 1.8% and back above the 21 level, suggesting some growing nervousness among investors. Markets could rebound ahead of inflation reports due to a lack of immediate catalysts and with the S&P 500® Index (SPX) is still testing its May highs.
There are a number of earnings reports this morning, but few household names. Here’s a look at a few and what they were up to during today’s pre-market session.
- Dominion Energy D beat earnings and revenue estimates and reaffirmed its full-year earnings guidance and long-term dividend growth plans. The stock rose 0.52%.
- BioNTech BNTX missed on the top and bottom numbers, sending the stock down 4.71%. BNTX has partnered with Pfizer DFP to develop their COVID-19 vaccine while reiterating its earlier financial outlook for 2022, saying their adjustments for the Omicron variant are on target.
- Palantize PLTR was down 14.4% after missing earnings estimates and offering weak revenue prospects.
- monday.com MNDY climbed 17.67% after reporting a lower-than-expected loss and higher-than-expected revenue. The company raised its forecast, but warned of currency headwinds.
- Tyson Foods TSN released mixed quarterly results, missing out on earnings despite higher-than-expected revenue. Tyson said higher prices helped offset lower sales volume. TSN fell 2.58% in premarket action.
A few other companies are moving due to news outside of profits. SVC Health SVC plans to acquire Signify health SGFYaccording The Wall Street Journal. CVS rose 0.64% in the premarket stock while SGFY jumped 15.75%.
You’re here TSLA rose 2.7% in extended trading hours on weekend news that the climate bill passed the Senate.
Bed, bath and beyond BBBY was up 33% before the opening bell, adding to last week’s gains of more than 20%. According S&P Global Market Intelligencethe moves may be related to a “short squeeze” forcing short sellers to hedge because the outlook for the business has not changed.
Market Minutes Review
Stocks were mostly negative on Friday as a better-than-expected July jobs report spurred investor fears that the Federal Reserve may need to be more aggressive with future rate hikes. Analysts had forecast non-farm payrolls to rise by 250,000 jobs – instead it was 528,000. The jobless rate fell to 3.5%, below the 3.6% expected. In particular, the activity rate has fallen, which has contributed to pushing up the unemployment rate.
The bond market reacted to the news by 2-year Treasury yield up 19 basis points to 3.23% and the 10-year Treasury yield (TNX) up 16 basis points to 2.84%. On Friday, the CME FedWatch Tool now calculates a 66.5% probability of a 75 basis point hike in September. On Thursday, FedWatch offered a 66% chance of a 50 point hike. Wednesday’s Consumer Price Index (CPI) report is like changing those odds once again.
The US dollar index ($DXY) rebounded 0.84% as yields climbed.
After all has been said and done, the S&P 500® Index (SPX) was able to recoup much of its intraday losses to close down 0.16% on the day. The Nasdaq ($COMP) was down 0.50% although Dow Jones Industrial Average ($DJI) closed the week up 0.23%.
Mega-cap stocks were among the biggest losers with You’re here (TSLA) down 6.6%, Metaplatforms (META) tumbling 2%, and Amazon (AMZN) slipping 1.24%. The CRSP US Mega-cap index fell 0.29%.
The energy sector rebounded slightly thanks in part to earnings from EOG Resources (EOG) which pushed this stock up 7.2%. In addition, WTI Crude Oil Futures gained 0.3% to end Friday at $88.73 a barrel.
CHART OF THE DAY: DAX THE WAY? The German DAX DBI appears to have found support around the 12,500 level. It is also showing relative strength against the S&P 500 (SPX — green), creating a bullish divergence. This could be a good sign for the German stock market. Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.
Three things to watch out for
EFFECTIVE BORDER: Most of the economic news out of Germany over the past few months has been negative, but the country could apply its well-known efficiency to a quick economic recovery. Last week, it topped the June manufacturing and services PMI forecasts. Additionally, the country recorded much better than expected gains in June exports, which is expected to boost the country’s GDP.
According to the World Bank, German exports account for nearly 47% of its GDP, and according to the US State Department, nearly a quarter of German jobs are export-related, so export gains are no small feat. affair.
The United States is Germany’s biggest trading partner, exporting $5 billion more in goods than it does to France or China. This means that Germany is likely to benefit from a stronger dollar as it makes German products cheaper for American customers.
LOSS OF PRODUCTIVITY: Friday’s employment increase against two straight quarters of US GDP decline could worry economists. Productivity is one of the main measures of a country’s ability to increase its wealth. It is not uncommon to see productivity decline during economic downturns, as the cost of labor often offsets any gains in production.
The US nonfarm productivity report fell 7.3% in the first quarter. The first drawdown of Q2 comes out on Tuesday and is expected at -4.6%.
WIDER MARGINS: The past week has been filled with second-quarter earnings announcements, with 87% of S&P 500 companies reporting so far. According to FactSet, 75% of companies had positive earnings surprises above the previous week’s number of 73%, but still below the five-year average of 77%. The surprise margin has also widened, from 3.1% last week to 3.4% this week, but that five-year average is 8.8%.
The Energy sector continues to show the strongest earnings and revenue growth, but Health Care continues to be a pleasant surprise among earnings surprises.
Average earnings growth for all S&P 500 companies in the second quarter is still on track at 6.7%, according to FactSet. For the third quarter, analysts expect earnings growth of 5.8% and 6.1% for the fourth quarter.
Notable Calendar Items
August 9: Emerson Earnings EMRSysco SYYRoblox RBLXCoinbase PIECE OF MONEYand Hyatt H
August 10: Consumer Price Index (CPI) and Walt Disney Revenue SAYand Honda Motors HMC
August 11: Producer Price Index (PPI) and Brookfield Earnings BAMIlluminated ILMNRivian SHOREand Cardinal Health HAC
August 12: Michigan Consumer Sentiment
August 15th : James Hardie Industries Profits JHX and ZipRecruiter ZIP *: ENGLISH
TD Ameritrade® Commentary for educational purposes only. SIPC member.
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