OPENING CALL
Stock futures were muted on Thursday following a brutal session on Wall Street in the previous session.
Equities have entered rockier territory after a record-setting rally. Disappointing earnings this week from Tesla and Alphabet have reinforced worries about stretched valuations and AI hype.
A stock-market rotation of historic proportions has added to the pressure on popular tech stocks.
Investors will parse more earnings from companies including Southwest and American, plus Northrop Grumman and Honeywell.
In addition, the first reading for second-quarter GDP is due later. Economists forecast that growth, adjusted for inflation, accelerated to 2.1%.
Overseas Markets
Stocks tumbled in Asia and Europe as investors caught up with the U.S. selloff.
Disappointing earnings from a host of big names in Europe added to investor worries and helped drag benchmark indexes sharply lower.
In Asia, the Nikkei fell 3.3%, hit by the global tech selloff but also concerns that a stronger yen will dent exporters' earnings.
Premarket Movers
Chipotle Mexican Grill reported a jump in sales and higher-than-expected profit. Shares rose 3%.
Edwards Lifesciences' shares dropped more than 20% after it lowered full-year guidance for sales of some heart valve replacements.
Ford reported disappointing second-quarter earnings and its shares fell 13%.
Stellantis posted a steep first-half drop in earnings, as more cars sat at dealerships in the U.S., prompting the company to consider price cuts. Shares fell 7%.
Watch For:
GDP first estimate for 2Q; Durable Goods for June; Weekly Jobless Claims
Today's Headlines/Must Reads
- How Government Programs Help Fuel Tesla Profit
- Insurers Brace for Claims From Global Tech Outage
- The Dollar's Supercycle Is Over. Where It's Headed.
MARKET WRAPS
Forex:
The dollar was lower after former Fed official William Dudley said the Fed should cut interest rates at the July 31 meeting, changing his view for a rate cut later this year.
Commerzbank said it could fall further if the second-quarter GDP data misses expectations, disappointing those who favor the currency due to the country's growth advantage.
Strong U.S. growth is positive for the dollar as it allows the Fed to pursue more restrictive policy for longer, while it makes investments in the U.S. particularly profitable.
The yen strengthened sharply to a nearly three-month high against the dollar, backed by growing expectations for an imminent rate increase by the Bank of Japan.
Mizuho Securities said that if the BOJ raises interest rates by 0.15 percentage point from the current range of 0% to 0.1%, that would heighten expectations among currency traders for further monetary tightening.
Bonds:
Bids from primary dealers at Treasury auctions are notably elevated by historical standards and even versus the past 12 months, which could prompt strains if there is a significant increase in issuance, HSBC said.
"Should a marked uptick in coupon issuance materialise--surprising markets and needing to be absorbed by primary dealers--this could exacerbate liquidity conditions, particularly in the short run."
Supply isn't the only factor influencing bond yields, however. Heavy issuance could be harder to absorb in a strong economy as investors look to riskier assets for better returns, it added.
HSBC projects unchanged auction sizes for Treasury bonds and notes as well as the five- and 30-year TIPS, with only an incremental $1bn increase for the 10-year TIPS re-opening.
Energy:
Oil prices were lower on broader negative sentiment across commodities, with concerns over the demand outlook in top importer China outweighing U.S. weekly inventory draws.
"Crude oil ended the session lower amid low liquidity and strong selling from quant funds," ANZ said.
"WTI fell below both its 50-day and 100-day moving averages, levels that normally provide some technical support."
Investors now await the GDP figures for the second quarter and PCE price index data on Friday for more cues on the path of inflation and interest-rate cuts this year.
Metals:
Gold retreated below the $2,400 mark on some profit taking ahead of key the U.S. data and copper extended its recent losses on Chinese demand concerns.
TODAY'S TOP HEADLINES
Nike Stock Is at Its Cheapest in a Decade. It Will Make a Comeback.
Nike stock, to use a sports metaphor, is getting blown out. But with a brand as good as the swoosh, you can always count on a comeback.
Nike will eventually take advantage of its enormous marketing war chest and upcoming events-including the Paris Olympics opening Friday-to right its mistakes. For now, investors can pick up the stock at its cheapest price in more than a decade.
Alphabet Stock Dropped After Stellar Earnings. Finally, an Opportunity to Buy.
Alphabet stock dropped after what looked like a strong earnings report-and it may have created a buying opportunity.
There wasn't much wrong with the numbers from Alphabet, home to Google and YouTube. The company reported earnings of $1.89 a share on revenue of $84.7 billion, beating estimates for $1.85 and $84.2 billion, respectively. It wasn't enough-the stock dropped 5% on Wednesday, its largest decline since late February, and is now off more than 9% from its peak on July 10.
Land of the Rising Banks
Japanese banks are on a roll. Rising interest rates and slimmer balance sheets could keep the winning streak going.
Japan's gradual exit from its ultra-easy monetary policies has helped send Japanese banks into overdrive, with the Topix Banks index more than doubling in the past two years. The Bank of Japan in March raised interest rates for the first time in 17 years, ending its negative-rate regime. Another increase could be in the cards when the central bank meets next week.
Hannon's Take: The ECB Won't Be Complacent About Growth Risks
Signs that the eurozone economy is losing momentum are growing, and that is likely to be enough to nudge the European Central Bank toward a rate cut in September and one further reduction in borrowing costs before the end of the year.
The eurozone's annual rate of inflation is still above the ECB's 2% target, and services prices in particular are rising rapidly, as are wages. But should the eurozone economy slide back into recession, there is a sizable risk that inflation will fall below that target during 2025.
China's Central Bank Delivers Another Surprise Rate Cut
China's central bank surprised markets again by cutting another key policy rate, continuing a wave of monetary easing as it looks to support the country's ailing economy.
The People's Bank of China on Thursday lowered the rate on its one-year medium-term lending facility to 2.3% from 2.5%-the first such cut it has made since August last year. It also injected 200 billion yuan, or about $27.54 billion, of liquidity into the market via the mechanism.
China Casts Itself as Peacemaker in First High-Level Talks With Ukraine Since Russia's Invasion
Ukraine's top diplomat met with his Chinese counterpart Wednesday for hours of talks in his first such high-level visit to the country since Russia's full-scale invasion, as Kyiv seeks Beijing's support to end the war on "just" terms.
Chinese Foreign Minister Wang Yi reiterated Beijing's calls for a diplomatic solution to the war during the meeting in the southern Chinese city of Guangzhou with his Ukrainian counterpart, Dmytro Kuleba, who said his country would negotiate when Moscow was ready to engage "in good faith."
Write to clare.kinloch@wsj.com
TODAY IN CANADA
Earnings:
Advantage Energy 2Q
Baytex Energy 2Q
Bombardier 2Q
Canfor 2Q
Cenovus Energy 2Q
Eldorado Gold 2Q
FirstService 2Q
Hammond Power 2Q
Loblaw Companies 2Q
MEG Energy 2Q
Mullen Group 2Q
TFI International 2Q
Veren 2Q
Economic Indicators $(ET)$:
0830 May Employment, Earnings, Job Vacancies
Stocks to Watch:
Aecon 2Q Loss/Shr C$1.99; 2Q Rev C$853.8M; Board Authorizes Normal Course Issuer Bid to Purchase for Cancellation Up to 5% of Common Shrs
Athabasca Oil 2Q EPS 17c; 2Q EPS 83c; 2Q Rev $2.39B; 2Q Adj EPS 91c; Raises 2024 View To Rev $9.45B
Bitfarms: Riot Platforms Says Ontario Capital Markets Tribunal Has Terminated Bitfarms' Poison Pill
Imperial Metals Reports 2Q Production of 15.5M Pounds of Copper and 13,768 Ounces of Gold
StorageVault Canada 2Q Loss C$8.69M; 2Q Rev C$74.1M
West Fraser Timber 2Q Sales $1.705B; 2Q EPS $1.20; Raises Quarterly Dividend to 32c
Expected Major Events for Thursday
05:30/JPN: Jun Tokyo area department store sales
05:30/JPN: Jun Nationwide department store sales
06:45/FRA: Jul Monthly business survey (goods-producing industries)
08:00/GER: Jul Ifo Business Climate Index
08:30/UK: Jun Capital issuance statistics
08:59/JPN: Jul Monthly Economic Report
10:00/UK: Jul CBI Industrial Trends Survey
10:00/FRA: 2Q Claimant count and job advertisements collected by France Travail
12:30/US: Jun Advance Report on Durable Goods
12:30/CAN: May Payroll employment, earnings and hours, and job vacancies
12:30/US: 07/20 Unemployment Insurance Weekly Claims Report - Initial Claims
12:30/US: U.S. Weekly Export Sales
12:30/US: 2Q Advance estimate GDP
13:00/RUS: Weekly International Reserves
14:30/US: 07/19 EIA Weekly Natural Gas Storage Report
15:00/US: Jul Federal Reserve Bank of Kansas City Survey of Tenth District Manufacturing
17:59/UK: REC JobsOutlook survey
20:30/US: Foreign Central Bank Holdings
20:30/US: Federal Discount Window Borrowings
23:30/JPN: Jul CPI (Tokyo), CPI ex-Food (Tokyo)
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Thursday
American Airlines Group Inc $(AAL)$ is expected to report $1.02 for 2Q.
Atlantic Union Bankshares Corp $(AUB)$ is expected to report $0.29 for 2Q.
Conn's Inc $(CONN)$ is expected to report $-0.38 for 1Q.
(MORE TO FOLLOW) Dow Jones Newswires
July 25, 2024 06:22 ET (10:22 GMT)
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