North American Morning Briefing: PCE Inflation Report Tops Agenda

Dow Jones07-26

OPENING CALL

The Nasdaq's rebound is back on track with futures jumping in Friday's premarket. Futures for the Dow and S&P 500 were also on the rise, while bond yields were steady as investors awaited a key inflation report.

The core PCE index data is predicted to show a slight slowdown as markets increasingly expect the Federal Reserve will cut interest rates in September, if not potentially at next week's meeting, Swissquote Bank said.

"Even with the likelihood of a faster-than-desirable monthly reading, Fed officials have noted recently that inflation is trending in the right direction and that disinflation is broadening," Daiwa Capital Markets America said.

"The path back to two percent is likely to be nonlinear, although broadly speaking inflation data for Q2 have been more positive than not."

Premarket Movers

Alphabet was up 0.8% after OpenAI announced it has been testing new artificial-intelligence search capabilities with a temporary prototype called SearchGPT.

Coinbase's stock rose more than 4%, tracking a similar move in the price of bitcoin, which rose above $67,000.

Coursera reported a jump in second-quarter revenue beating analysts' estimates. The stock rose 24%.

Deckers Outdoor raised its profit outlook for fiscal 2025 after first-quarter earnings and revenue beat analysts' estimates. Shares climbed 11%.

DexCom dropped 37% after it cut its fiscal-year sales forecast.

Ford was rising 1.1% after shares of the auto maker tumbled on Thursday, the stock's worst daily percentage decline since it fell 25% on Nov. 19, 2008.

Postmarket Movers

Norfolk Southern posted earnings that rose from a year earlier and beat Wall Street estimates. The stock rose 6.8%.

Olin lowered its outlook as a result of Hurricane Beryl disrupting operations at a Texas facility. Shares fell 10%.

Zynex cut its outlook following worse-than-expected results. Shares fell 24%.

Watch For:

Personal Income and Outlays for June; University of Michigan Final Consumer Survey for July

Today's Headlines/Must Reads

- America Is Running Out of Generic Drugmakers. Another One Is on the Brink.

- The New Threat to the Chip Industry: Worker Unrest

- The Junk in Your Index Fund Is Costing You Big-Time

MARKET WRAPS

Forex:

Morgan Stanley is inclined to be positive on the dollar, helped by signs of economic weakening in the eurozone, but said expectations of more interest-rate cuts by the Fed pose a risk.

The Fed's July meeting next week could be a catalyst for markets to price in additional rate cuts, in line with Morgan Stanley's forecast for seven consecutive reductions by mid-2025.

"This...does therefore raise near-term downside risks for the dollar."

Moves in the euro could be limited into the weekend and during the coming weeks, with a quiet August likely in store for the single currency, according to Monex.

Although the yen has strengthened recently and reversed some of its excessive weakness against the dollar, it remains a long way from fair value, Citi Research, said. Citi estimates dollar-yen fair value at around 145.

Citi noted the dollar has now broken below the 100-day moving average against the yen, which last week was acting as resistance.

Speculation of a possible Bank of Japan rate increase at next week's meeting has helped lift the yen with markets pricing in a near 70% probability of a 10 basis-point hike.

Energy:

Oil was headed for a third weekly loss amid worries over the demand outlook in top importer China and broader risk-off sentiment across commodities this week.

"China's apparent oil demand fell 8.1% on year to 13.66 million barrels a day in June," ANZ Research said.

"The weakness is likely driven by gasoline and diesel, as rising new energy and autonomous driving vehicles become more popular."

BMI said the prospect of softening global demand and the return of some OPEC+ barrels into the market later this year could also be weighing on prices.

Metals:

Gold prices rose but were on track for a modest weekly loss amid some profit taking and broader negative sentiment across commodities this week.

   
 
 
   
 
 

TODAY'S TOP HEADLINES

 
 

Apple's iPhone Lost More Ground in China in Second Quarter

Apple's performance in China's smartphone market weakened further in the second quarter, hurt by rising popularity of local brands, preliminary data from a trio of industry trackers showed.

Apple fell out of a ranking of the top five shippers of smartphones in China, according to separate reports by Canalys and International Data Corp., while Counterpoint Research estimated that Apple's market share by sales contracted.

   
 
 

EssilorLuxottica Shares Climb After Eyewear Giant Draws Big Tech Interest

EssilorLuxottica shares rose after the eyewear giant said Google and other big technology companies showed interest in exploring partnerships after its tie-up with Meta Platforms to make Ray-Ban smart glasses.

The Ray-Ban maker is aware of Meta's intention to take a stake, but any share purchases would have to be carried out on the market, EssilorLuxottica Chief Executive Francesco Milleri said during a call with analysts. The remarks came after The Wall Street Journal reported last week that Meta was in talks to buy a stake of about 5% in EssilorLuxottica.

   
 
 

Mercedes-Benz Lowers Margin Goal for Cars Division After Earnings Drop

Mercedes-Benz Group lowered the ceiling for a key profitability target and flagged a tough Chinese market and trade tensions, but predicted a sunnier second half of the year.

The German luxury-car maker said Friday that second-quarter net profit and revenue fell on year for the group after fewer sales and a drop in more profitable top-end vehicles. While revenue trailed forecasts, net profit rose above them.

   
 
 

'Boomer Candy' Funds Are Hot. The Taxes Are Not.

Investors are pouring dollars into exchange-traded funds that offer a dreamy combination of stock exposure and fat income payouts as high as 12%. But next year they could wake up to a hard reality-tax bills that are confusing or higher than expected.

These hot offerings are known as covered-call or derivative-income exchange-traded funds. Funds in this category recently held $87 billion as of July 17 compared with $8 billion at the end of 2020, according to FactSet. The number of funds in the group rose to 93 from 14 over the same period.

   
 
 

Barack Obama and Michelle Obama Endorse Kamala Harris for President

WASHINGTON-Former President Barack Obama and Michelle Obama endorsed Kamala Harris's presidential bid Friday, lending their support in the most notable sign yet of the vice president's rapid consolidation of the Democratic Party.

The endorsement from the Obamas came at the end of Harris's first week since becoming the party's expected nominee in the aftermath of President Biden's decision to withdraw from the race against his GOP rival former President Donald Trump.

   
 
 

Sabotage Hits France's Rail Lines as Olympics Begin

PARIS-France's rail network was the target of a massive act of sabotage Friday, the day of the opening ceremony of the Olympic Games, officials said, bringing service on several high-speed rail lines to a halt in outages that are expected to last for days.

Officials said fires were set at around 4 a.m. local time at several places around the country's rail network. The damage is disrupting service on the lines which bring traffic to Paris from the north, the southwest and east. In some spots, cables were cut and then burned, requiring laborious repairs.

   
 
 

Write to clare.kinloch@wsj.com TODAY IN CANADA

Earnings:

George Weston 2Q

Economic Indicators $(ET)$:

Nothing major scheduled

Stocks to Watch:

American Hotel Income Properties REIT LP Announces Passing of Chair W. Michael Murphy

Aurora Cannabis Receives Expanded Cultivation and Unique Research Licenses for German Facility

Canfor Corp 2Q Loss/Shr C$1.61; 2Q Adj Loss/Shr C$1.42; Loss C$191.1M; 2Q Sales C$1.38B

Canfor Pulp: Supply Stabilizes Following Disruptions in First and Second Quarters, and New Hardwood Capacity in China and Brazil Is Projected to Come Online; On Demand Side, Purchasing Activity During 3Q Projected to Dampen

Global Softwood Kraft Pulp Market Conditions Anticipated to Soften Through 3Q as Global Softwood Pulp Supply Stabilizes; Traditionally Slower Summer Period Is Forecast to Combine With Reduced Demand for Paper Products, Particularly in China, Further Weakening Pulp Demand; No Major Maintenance Outages Are Planned for the 3Q; 2Q Loss/Shr C$0.10; 2Q Loss C$6.3M; 2Q Sales C$220M

Hammond Power 2Q EPS C$1.98; 2Q Sales C$197M

Headwater Exploration 2Q EPS C$0.10; Headwater Exploration 2Q Net C$53.9M

MEG Energy Declares Initial Dividend of C$0.10; 2Q FFO C$1.30/Shr

Source Energy Services Partners With Trican Well Service to Develop Terminal in Taylor, British Columbia

   
 
 

Expected Major Events for Friday

05:00/JPN: May Indexes of Business Conditions - Revision

06:45/FRA: Jul Consumer confidence survey

08:00/ITA: Jul Consumer Confidence Survey

08:00/ITA: Jul Business Confidence Survey

12:30/US: Jun Personal Income and Outlays

14:00/US: Jul University of Michigan Survey of Consumers - final

All times in GMT. Powered by Kantar Media and Dow Jones.

   
 
 

Expected Earnings for Friday

3M Co $(MMM)$ is expected to report $1.68 for 2Q.

AllianceBernstein Holding LP $(AB)$ is expected to report $0.59 for 2Q.

Arbor Realty Trust Inc $(ABR)$ is expected to report $0.34 for 2Q.

Avantor Inc $(AVTR)$ is expected to report $0.14 for 2Q.

Baker Hughes Co $(BKR)$ is expected to report $0.49 for 2Q.

Balchem Corp $(BCPC)$ is expected to report $0.89 for 2Q.

Bank of the James Financial Group Inc $(BOTJ)$ is expected to report for 2Q.

Barnes Group Inc $(B)$ is expected to report $0.32 for 2Q.

Bogota Financial Corp (BSBK) is expected to report for 2Q.

Booz Allen Hamilton Holding Corp $(BAH)$ is expected to report $1.45 for 1Q.

Bristol Myers Squibb Co $(BMY)$ is expected to report $0.96 for 2Q.

(MORE TO FOLLOW) Dow Jones Newswires

July 26, 2024 06:19 ET (10:19 GMT)

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