MARKET WRAPS
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State Employment and Unemployment for July; Canada Retail Trade for June.
Opening Call:
Stock futures pointed to a lower start for Wall Street Friday as investors contended with mixed signals from the Federal Reserve on the pace of future interest-rate hikes and signs of a resilient economy.
Stocks closed with modest gains Thursday after jobless claims unexpectedly fell during the week ended Aug. 13, the first decline since late July, suggesting the labor market remains strong. The Philadelphia Federal Reserve's monthly manufacturing index also surprisingly accelerated in August.
The gains Thursday followed the release on Wednesday of the minutes from the Fed's July 26-27 meeting, at which Fed officials agreed they need to keep raising interest rates to cool inflation, but indicated the pace of those hikes could slow if economic data supported such a move.
St. Louis Fed President James Bullard on Thursday said he favored a three-quarters point hike at the Fed's next meeting in September. The Fed has boosted rates at that pace the last two times it has met. Bullard told The Wall Street Journal in an interview that the central bank "should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation."
Kansas City Fed President Esther George, however, said the "case for continuing to raise rates remains strong," but added that the "question of how fast that has to happen is something my colleagues and I will continue to debate, but I think the direction is pretty clear."
George told a Kansas City economic group that the Fed has "done a lot, and I think we have to be very mindful that our policy decisions often operate on a lag. We have to watch carefully how that's coming through."
Both Bullard and George are voting members of the Federal Open Market Committee, the central bank's rates-setting committee.
The comments from both Fed officials come before the Fed's annual Jackson Hole conference in Wyoming next week at which Fed Chairman Jerome Powell will be speaking. His comments will be closely monitored by Wall Street.
"After a weeks-long rally, the market is looking for its next catalyst, especially as earnings season winds down and there is still about one month remaining until the next Fed meeting," said William Huston, chief investment officer at Bay Street Capital Holdings in Palo Alto, Calif.
"Investor focus will now shift to the upcoming Jackson Hole meeting, where central bankers will have another opportunity to address how it plans to adjust monetary policy over the coming months."
Overseas, European markets were mostly in negative territory while stocks in Asia were mixed.
Forex:
The dollar rose to a one-month high in early European trading against a basket of currencies and the euro, though this may reflect difficulties facing European and Asian economies rather than U.S.-specific news, ING said.
"It is hard to pin down the exact reason for dollar strength... However, the move suits our generally positive stance on the dollar at a time when European and Asian growth prospects remain challenged," the Dutch bank said.
Barring "very poor" upcoming data, the dollar is likely to "consolidate near the recent highs."
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The current strong gains for the dollar may start to fade as the Fed could slow the pace of policy tightening, Insight Investment said.
"With the U.S. economy having experienced a 'technical' recession in the first half of 2022 it is clear that monetary tightening is working," it said.
This makes it unlikely that the Fed will need to increase rates meaningfully beyond what markets are already pricing in, and the pace of interest-rate rises is likely to become less aggressive, Insight Investment said.
Bonds:
DZ Bank continues to forecast rising spreads in almost all bond segments, but particularly in bank and non-financial corporate bonds. "Compared with their history, spread levels in the riskier bond segments are too low for a recession scenario in our view," it said.
DZ Bank finds it difficult to fathom the current risk-on sentiment with a recession on the horizon. But it has lowered its spread forecasts in the banking, sovereign bond and agency segment somewhat to reflect the levels at which spreads are currently trading, it said.
The bank's shift to a neutral weight in all bond segments in line with benchmark weighting, anticipating their performance to be broadly similar over a six-month horizon.
"Due to the combination of a more modest rise in interest rates and similar spread increases in some cases, the expected losses in all bond segments are fairly close together over a six-month horizon," DZ Bank said.
The opposing forces of recession and inflation will continue to hold sway over the bond markets for the foreseeable future, implying elevated uncertainty, the bank said.
Energy:
Oil prices were slightly down after finishing higher overnight on data which showed a sharp drop in U.S. inventories.
"Recession fears remain elevated for key markets, including the U.S. and EU, raising concerns over the strength of future oil demand," Fitch Solutions said.
Meanwhile, developments relating to a potential renewed nuclear deal with Iran will also likely be closely watched.
Metals:
Gold lost further ground after suffering a fourth straight session loss overnight due to a stronger dollar.
"The U.S. dollar might continue to strengthen if U.S. economic data continues to surpass expectations," Oanda said. "After breaking below $1,800, gold has been struggling to regain its footing."
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Metals were mostly down as a stronger dollar continues to weigh on commodity prices. Marex said the rising dollar "is a drag on commodities, " with sentiment still "risk-off."
Data showed U.K. consumer confidence fell to a record low this month, pushed by recession and inflation worries. That said, zinc is moving higher. Marex noted that zinc is a "standout," being the only metal down in terms of Chinese production, while other base metals rise.
TODAY'S TOP HEADLINES
For Bed Bath & Beyond, Investor's Turnabout Adds to Problems
Bed Bath & Beyond Inc. suffered another blow this week when its highest-profile investor sold out, just months after buying up shares and securing seats on the board.
Billionaire investor Ryan Cohen filed to sell his entire 10% stake in the company, a disclosure that sparked a pullback in its stock that began late Wednesday.
Just Eat Takeaway.com to Sell Around 33% Stake in iFood JV to Prosus
Just Eat Takeaway.com NV said Friday that it has agreed to sell its around 33% stake in the iFood joint venture to Prosus NV for up to 1.8 billion euros ($1.82 billion) as it looks to focus on improving profitability and on a disciplined capital allocation.
The Amsterdam-based food-delivery group said the amount comprises EUR1.5 billion in cash on closing and a deferred consideration based on the performance of the online food delivery sector over the next year of up to EUR300 million.
Roblox Poaches Seasoned Meta Executive as It Chases Growth in Asia
HONG KONG-Roblox Corp. has poached a Meta Platforms Inc. executive for the newly created role of Asia-Pacific head of public policy, as the videogame company chases growth in the region.
Steve Park, the longtime government relations head for South Korea and Japan at Facebook's parent company, will join Roblox next week, a spokeswoman for the San Mateo, Calif.-based company said.
China's GigaCloud Goes Public in U.S., Bucking Delisting Trend
E-commerce company GigaCloud Technology Inc. made its debut on the Nasdaq Stock Market on Thursday, a rare instance of an initial public offering by a Chinese company in the U.S. as the two countries head toward a financial decoupling.
GigaCloud, an online platform that connects manufacturers of bulky consumer items with buyers around the world, raised $36 million in gross proceeds after selling 2.94 million Class A shares. The deal valued the company at $486 million. The amount raised could increase to $41 million if the underwriter sells more shares to exercise the so-called overallotment options, typically when the stocks are in high demand.
Lloyd's to Exclude Catastrophic Nation-Backed Cyberattacks From Insurance Coverage
Lloyd's of London Ltd. will require its insurer groups globally to exclude catastrophic state-backed hacks from stand-alone cyber insurance policies starting next year.
Lloyd's is a marketplace where roughly 75 syndicates of underwriters congregate to provide insurance coverage for businesses, organizations and individuals. As of March 31, when coverage begins or is renewed, syndicates must exclude state-backed cyberattacks from policies that protect against physical and digital damage caused by hacks, Underwriting Director Tony Chaudhry said in a bulletin dated Aug. 16.
Ride-Hailing Stocks Reverse After Recent Rally
Ride-hailing firms Uber, Lyft and Grab have recovered some of their lost market value over the past month, but a selloff this week has undermined the rally.
The shares of Uber Technologies Inc. and Lyft Inc. have risen more than 35% since mid-July, aided by their stronger-than-expected results earlier this month. Singapore-based Grab Holdings Ltd., which is set to report its second-quarter performance on Aug. 25, has jumped 41%.
Investors Should Go Where the Float Is
The check is never really "in the mail."
As trillions of dollars move between two places, or when they just sit in the middle, the sum is often called "float." In the long era of easy money and superlow rates, those vast sums didn't matter much. Now they do. With rates rising and the Federal Reserve fighting to restrain inflation, merely a percentage of that mountain of money is in and of itself serious money. That will change things for companies and individuals, for better or worse.
Biotech Rebounds on Optimism and Deal Making
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08-19-22 0616ET
