MARKET WRAPS
Watch For:
EIA Weekly Petroleum Status Report; Earnings from Disney, Roblox, Penn Entertainment, Wynn Resorts
Today's Top Headlines/Must Reads:
- U.S. to Ban Some Investments in China
- Banks' Problems Aren't Over, According to the Bond Market
- Japanese Carmakers See Next Few Years as Fight for Survival in China
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Opening Call:
Stock futures pointed to slight gains on Wednesday as investors reacted to news of deflation in China and looked ahead to U.S. price data.
News of falling consumer prices in China - which fell 0.3% for the year to July - dovetailed with the country's weak trade data released this week and raised concerns that growth is faltering in the world's second biggest economy.
Read China Slips Into Deflation in Warning Sign for World Economy
"China is now witnessing the actual cost of goods both in stores and at the factory gate falling. It is indicative of a significant slowdown in the Chinese economy, which is beset by high levels of indebtedness," Hargreaves Lansdown said.
However, traders also note that deflationary pressures emanating from China may help further reduce goods inflation in the U.S. and elsewhere, thereby helping central banks to soon stop raising borrowing costs.
The upshot is a mildly positive mood across markets as investors welcome how stocks rallied off Tuesday's lows, and as they await the important U.S. consumer price index data on Thursday, and producer prices on Friday.
"Markets don't appear too adventurous ahead of the U.S. CPI; instead, traders are reverting the risk-off trade from overnight markets after yet another August storm front passed. But much of the move is likely pre-U.S. CPI housekeeping, given that stocks, bonds and currency markets react wildly to CPI beats and misses," SPI Asset Management said.
Helping support sentiment was a better showing in Europe with the Stoxx 600 up about 1%. Italian banks recouped some of the previous day's big losses, after Rome partially walked back plans for a windfall tax.
Pre-Market Movers
Doximity fell 26% after saying it would be cutting 10% of its workforce, about 100 employees, and reduced revenue guidance for fiscal 2024 to a range of $452 million and $468 million.
Lyft fell more than 6% in premarket trading, even though it reported higher quarterly revenue and trimmed its loss.
Penn Entertainment was up 11% after saying its Barstool Sportsbook app would be rebranded as ESPN Bet this fall as part of a 10-year agreement with ESPN, owned by Walt Disney.
Rivian Automotive posted better-than-expected second-quarter results and raised its full-year production forecast. The stock rose 1.9% in premarket trading.
Take-Two Interactive's adjusted earnings in the fiscal first quarter missed expectations but the stock rose 2.7% after CEO Strauss Zelnick touted the company's "powerful, powerful release schedule."
Toast was rising 13% after topping second-quarter revenue expectations and recording positive free cash flow of $39 million.
Twilio rose 6.4% after saying it expects operating income for the full year of $350 million to $400 million, higher than prior guidance of $275 million to $350 million. Analysts were expecting operating income of $329 million.
Upstart Holdings fell 19% after the artificial-intelligence lending company issued an earnings and revenue forecast for the third quarter below expectations.
WeWork fell 17% premarket after the company issued a going-concern warning, saying co-working clients are canceling their memberships at a faster clip than it expected.
Forex:
The safe-haven dollar turned lower after stocks rebounded following falls the previous day.
MUFG said currencies have been highly sensitive to levels of risk recently, and expects the dollar to remain supported, given a mostly risk-averse environment.
"In this global backdrop, it is highly likely that the U.S. dollar will remain well supported," MUFG said.
"A worst-case scenario [for risk appetite] would be for a much higher-than-expected CPI print that would likely pressure global equity markets further lower."
Energy:
Oil prices edged higher in Europe, adding to the prior day's gains on fears of supply disruptions.
Fears that Ukraine could continue to target ships heading to Russian Black Sea ports have added to oil prices while production cuts from Saudi Arabia have also kept the market supported.
Monday's rally was driven by "Saudi's reaffirmation of commitment to output cut and headlines saying Ukraine might strike Russian facilities if the latter blocked Ukrainian ports," Saxo said.
Metals:
Metals prices were rising in early London trading as a sliding dollar helped boost commodities.
Despite the rise in prices, lackluster demand has meant prices for copper are still down over 4% this month. That said, underlying data in China is proving to be a bright spot, according to ANZ.
Despite primary copper imports falling 2.7% on year last month, domestic production was strong, the bank said.
Stockpiles of copper in warehouses have also fallen sharply, down 15% last week, which ANZ said was sharply below the seasonal average.
TODAY'S TOP HEADLINES
Honda More Than Doubled First-Quarter Net Profit as Car Business Recovered
Honda Motor said Wednesday that its first-quarter net profit more than doubled from a year earlier, driven by a sharp recovery in earnings at its car business as the chip shortage eased.
The Japanese automaker said that net profit rose to 363.07 billion yen ($2.53 billion) for the quarter ended June from Y149.22 billion a year earlier. That beat the estimate of Y232.44 billion from a poll of analysts by Quick.
Ford Team Up With Tesla? It Should Get Real and Do This Instead.
For traditional automakers looking to break into the EV business, the rubber has hit the road.
Take Ford Motor (ticker: F). It is making fewer EVs than it projected and losing more money than it expected selling battery-powered cars. Investors need to ask themselves if a strategic pivot is coming and what one might look like.
NYSE, Nasdaq Battle for New Listings in Sign of IPO Awakening
The fight between the New York Stock Exchange and Nasdaq to win new stock listings is raging again, in another sign the market for initial public offerings is perking up after a long slumber.
The Nasdaq recently won grocery-delivery company Instacart's listing, set to take place before year-end, according to people familiar with the matter. The exchange also successfully wooed Arm, the big chip designer. NYSE snagged the listings of marketing-automation platform Klaviyo and trendy German shoe manufacturer Birkenstock.
A Top-Performing Muni Fund That Ventures Where Others Don't
Avoiding big losses is much more important to bond investors than scoring significant wins. "They're in the market for principal preservation and tax-free income," says Lyle Fitterer, who has been a municipal bond fund manager for over 30 years.
Fitterer, the co-lead manager of the $644.5 million Baird Strategic Municipal Bond fund (ticker: BSNSX), manages to both avoid losses and deliver wins, though his strategy might strike some as unconventional. The no-load fund's largest position is five-year U.S. Treasury note futures, for example, and it holds a significant amount of high-yield issues.
Judge Considers Limits on What Donald Trump Can Reveal About Election Subversion Case
WASHINGTON-The judge overseeing the criminal case against Donald Trump alleging he conspired to undo the 2020 election results set a court hearing for Friday morning to resolve disputes over what information the former president and his legal team can access and potentially publicly expose.
U.S. District Judge Tanya Chutkan's decision is an early sign that she wants to follow a disciplined timetable, which could run counter to the Trump team's tactics that have led to delays in other court proceedings. She scheduled the hearing after a flurry of court filings revealed several disagreements between the Justice Department and Trump's lawyers over how the voluminous evidence in the case should be handled.
New York State to Debut First Cybersecurity Strategy
The state of New York will debut its first cybersecurity strategy, including plans to modernize government networks, provide digital defenses at the county level and regulate critical infrastructure.
The strategy, which Gov. Kathy Hochul is expected to announce today, comes as an array of cyberattacks have battered New York, with the state's Division of Homeland Security and Emergency Services responding to 57 cyber incidents in 2022. These include a monthslong shutdown of municipal systems in Suffolk County, and attacks on schools and healthcare systems across the state.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
AirBoss of America 2Q
ATS 1Q
Ballard Power Sys 2Q
Bird Construction 2Q
Boat Rocker 2Q
Brkfld Asset Mgmnt 2Q
CAE 1Q
Calibre Mining 2Q
Canopy Growth 1Q
CCL Indus 2Q
Conifex Timber 2Q
Converge Tech Sols 2Q
Denison Mines 2Q
Enerplus 2Q
Fortuna Silver Mines 2Q
goeasy 2Q
Hydro One Limited 2Q
Kinaxis 2Q
Largo 2Q
LifeSpeak 2Q
Linamar 2Q
Lundin Gold 2Q
Manulife 2Q
MARTINREA 2Q
Medexus Pharma. 1Q
Metro 3Q
Nuvei 2Q
Orezone Gold 2Q
Osisko Gold Roylts 3Q
Pan American Silver 2Q
Payfare 2Q
Profound Medical 2Q
Q4 2Q
Savaria 2Q
SilverCrest Metals 2Q
Stantec 2Q
Stelco 2Q
Stella-Jones 2Q
SunOpta 2Q
Economic Calendar (ET):
0830 Jun Building permits
Stocks to Watch:
Chesswood Group 2Q Net C$1.85M; 2Q Rev C$80.5M; 2Q EPS C$0.10
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Element Fleet Management 2Q EPS C$0.29; 2Q Net C$120M; 2Q Rev C$323.1M
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Finning 2Q Rev C$2.8B; 2Q Net C$148M; Adj EPS C$1.00
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Hudbay Minerals 2Q Loss/Shr $0.05; 2Q Loss $14.9M; 2Q Rev $312.2M
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Mdf Commerce 1Q Loss/Shr C$0.12; 1Q Loss C$5.1M; 1Q Rev C$31M
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(MORE TO FOLLOW) Dow Jones Newswires
08-09-23 0618ET
