North American Morning Briefing: Stock Futures Muted, as Fresh Cues Eyed

Dow Jones08-21

OPENING CALL

Stock futures and bond yields were little changed early Wednesday, as investors awaited what they hope will be confirmation on Friday by Jerome Powell that interest rate cuts will start in just under a month's time.

Powell's speech at the Jackson Hole Symposium--in which he is expected to lay the groundwork for an interest rate cut at the central bank's September 18 meeting--has been dominating investor thinking for the last few days, particularly given a dearth of economic data.

However, Wednesday brings some potential catalysts for traders to parse that may shift yields.

The minutes of the FOMC meeting that concluded at the end of July will be published at 2 p.m. Eastern. Investors will looking for confirmation that the Fed is minded to deliver looser policy in coming months now that inflation is below 3% and the economy is cooling somewhat.

Traders also will be keen to see what the Bureau of Labor Statistics says about the underlying health of the jobs market when it delivers its annual revision to nonfarm payrolls, due at 10 a.m.

"Powell has indicated that the Fed is monitoring the labor market carefully for indications of deterioration and stands ready to intervene if necessary," LPL Financial said.

"Should the report reveal a considerably smaller number of jobs that were created than were initially announced in monthly payroll reports, the Fed Chair's concerns could be amplified in his comments."

Retail Earnings

Earnings from TJX, Target and Macy's should give an indication of how chirpy American shoppers are, and whether or not the economy tips into recession depends partly on whether Americans keep spending.

Walmart raised its sales and profit targets last week, while official data showed a chunky rise in retail sales in July. But some companies have said customers are tightening their belts.

Premarket Movers

JD.com: Walmart said it was looking to sell its 10% stake in JD.com and its American depositary receipts fell around 7%.

Keysight Technologies' earnings rose last quarter and it expects results to improve. Shares rose 11%.

Postmarket Movers

La-Z-Boy's profit fell and the company warned consumers are pulling back on purchases. Shares fell 3.2%.

Toll Brothers posted better-than-expected revenue and lifted its outlook amid optimism that the housing market will rebound further. Shares rose almost 1%.

Today's Headlines/Must Reads

- Texas Instruments Tries to Ease Its Capital Pain

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- Alibaba, Tencent Cast Wide Net for AI Upstarts

- Obamas Try Again to Help Defeat Trump, Elect the First Female President

MARKET WRAPS

Forex:

The dollar could fall if revisions to U.S. jobs growth and the Fed's meeting minutes later support the case for rate cuts, ING said.

MUFG Bank said it might fall initially if the Bureau of Labor Statistics delivers a bigger-than-expected downward revision to jobs growth data for the year to March, but the depreciation is unlikely to be sustained, MUFG Bank said.

While revisions can be substantial, the Fed measures inflation risks stemming from the labor market in many ways beyond the nonfarm payrolls print itself, it added.

The euro could extend recent gains against the dollar ahead of expected imminent interest-rate cuts by the Fed, particularly if it rises above resistance levels, ING said.

The U.S. election could limit any rally but if EUR/USD does manage a sustained break above resistance, it could rise sharply given very low realized volatility levels.

"And we are reluctant to fight this EUR/USD bull trend ahead of a slowing U.S. economy and the first Fed cut in September."

Mitsubishi UFJ Morgan Stanley Securities said the dollar could fall below 140 yen by the end of 2025, with the interest-rate gap between the U.S. and Japan expected to narrow further.

It expected the Fed to cut interest rates to a range between 3.75% and 4% by end-2025, while the BOJ was expected to raise its policy rate target to 0.75% in the final quarter of 2025.

Energy:

Hopes of a ceasefire between Israel and Hamas were weighing on oil, along with lingering demand concerns, ING said.

While weaker Chinese demand has already been well covered, refinery margins are pressured around the globe for most of August, suggesting demand concerns aren't limited to China.

OPEC+ was set to gradually unwind supply cuts from October, but the negative market sentiment could make the group think twice about this plan, according to ING.

Unfortunately for OPEC+, global oil balance is set to be looser next year, suggesting plans to ease cuts through 2025 may also have to be revisited, it added.

Metals:

A depressed dollar has helped gold shine, but prices might be inflated, Swissquote Bank said.

While emerging central banks have been buying gold to diversify, and the geopolitical and financial landscape is driving capital toward safe havens, current prices are more consistent with levels that suggest a recession, it added.

Chinese consumers are reportedly lowering purchases given high prices, the dovish Fed expectations look overpriced and data suggests gold is about to enter overbought territory.

Gold Chart

However RHB Retail Research said Comex gold futures are likely to extend their upside movements and test resistance at $2,600/oz, based on the daily chart.

Breaching this resistance would open the door for an uptrend toward the $2,775/oz level, and the precious metal probably has a technical advantage if it remains above both 20- and 50-day simple moving averages, it added.

Iron Ore

Fitch Solutions downgrades its 2024 iron-ore price forecast citing subdued Chinese demand. It now expects an average price of $110/metric ton this year, down from $120/ton previously.

"We expect negative sentiment over the sluggish mainland Chinese property sector, the downfall of which now looks irreversible, to persist, further capping prices."

   
 
 
   
 
 

TODAY'S TOP HEADLINES

 
 

Tesla Stock Shrugs Off Double Whammy of Bad News. Here's What's Happening.

Tesla stock was edging up on Wednesday, shrugging off a double whammy of bad news.

XPeng, a rival EV maker in China, had reported quarterly results, in line with or slightly above expectations on Tuesday. However, its outlook disappointed.

   
 
 

S&P 500 bursts back with most sharp daily gains in any month since June 2023

Stocks have been on a volatile ride this month, with the S&P 500 bursting back from its early August slump with more sharp moves higher than any month since last year, according to independent research firm CappThesis.

Monday marked the S&P 500's fifth daily gain of at least 1% so far in August, the most for a calendar month since June 2023, said Frank Cappelleri, founder of CappThesis, in a note Tuesday.

   
 
 

China Launches Anti-Subsidy Probe Into Dairy Imports From EU

China has launched an anti-subsidy investigation into dairy imports from the European Union, marking the latest escalation in trade tensions between the two sides.

The probe was requested by two state-backed industry groups representing Chinese dairy-product producers, China's commerce ministry said in a statement released Wednesday.

   
 
 

Japan Trade Slips into Deficit, Yen's Rise Clouds Export Outlook

TOKYO-Japan's balance of trade fell back into the red in July, with the yen's recent appreciation dimming the outlook for the nation's exports.

Japan posted a trade deficit of 621.8 billion yen for July, equivalent to $4.28 billion. That followed a 224 billion yen surplus in June, Ministry of Finance data showed Wednesday, and compared with the 359.1 billion yen deficit expected by economists polled by data provider Quick.

   
 
 

Walz's Uber-Liberal Record as Governor Opens Line of Attack for GOP

CHICAGO-Three days after Democrats narrowly won control of Minnesota's Senate, House and governor's mansion in 2022, Gov. Tim Walz summoned party leaders to his formal office in the state's Capitol building for an early morning huddle.

The two top Democrats in the legislature outlined their ideas for passing a major agenda with their new control of power. Their plans included pouring money into education, public works and vastly expanding the state's social safety net.

   
 
 

Write to clare.kinloch@wsj.com

TODAY IN CANADA

Earnings:

Patriot Battery Metals 2Q

Economic Calendar $(ET)$:

0830 Jul Industrial product and raw materials price indexes

Stocks to Watch:

Canada's Northland Power said about 17 workers were hospitalized Tuesday after an incident at the onshore substation of an offshore wind project in Taiwan.

   
 
 

Expected Major Events for Wednesday

06:00/UK: Jul Public sector finances

06:45/FRA: 2Q New home sales

11:00/US: 08/16 MBA Weekly Mortgage Applications Survey

12:30/CAN: Jul Industrial product and raw materials price indexes

14:00/US: 2Q Advance Quarterly Services

14:30/US: 08/16 EIA Weekly Petroleum Status Report

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

   
 
 

Expected Earnings for Wednesday

Agilent Technologies Inc $(A)$ is expected to report $1.14 for 3Q.

Analog Devices Inc $(ADI)$ is expected to report $0.75 for 3Q.

Aviat Networks $(AVNW)$ is expected to report $0.54 for 4Q.

California First Leasing Corp (CFNB) is expected to report for 4Q.

Children's Place Inc $(PLCE)$ is expected to report $-1.05 for 2Q.

ClearSign Technologies Corp $(CLIR)$ is expected to report for 2Q.

Cue Health Inc $(HLTHQ)$ is expected to report for 2Q.

Dycom Industries Inc $(DY)$ is expected to report $2.22 for 2Q.

Encision Inc (ECIA) is expected to report for 1Q.

Giga-Tronics Inc (GIGA) is expected to report for 2Q.

Guess? Inc $(GES.AU)$ is expected to report $0.46 for 2Q.

Guided Therapeutics Inc (GTHP) is expected to report for 2Q.

Koss Corp $(KOSS)$ is expected to report for 4Q.

Macy's Inc $(M)$ is expected to report $0.28 for 2Q.

Mesa Air Group Inc $(MESA)$ is expected to report $0.22 for 3Q.

(MORE TO FOLLOW) Dow Jones Newswires

August 21, 2024 06:15 ET (10:15 GMT)

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