Editorial StaffStock futures extend gains as dollar retreats, Fed bets fade; Week Ahead: earnings in focus with Tesla, Netflix headlining; Twitter shares lower as musk seeks February trial to settler takeover battle; Google shares set for adjusted debut after 20-for-1 split and IBM earnings on deck with cloud growth in focus.
1. — Stock Futures Extend Gains As Dollar Retreats, Fed Bets Fade
U.S. equity moved higher Monday, while the dollar retreated against its global peers and oil priced jumped, as investors plotted a cautious return to risk markets amid fading Federal Reserve rate bets and a busy week for domestic corporate earnings.
Soothing comments from some key Fed officials, as well as a surprise pullback in inflation expectations from Friday’s University of Michigan consumer sentiment survey, sparked a solid rally on Wall Street that has shifted into global markets to kick-off the week.
The CME Group’s FedWatch tool now suggests a 70% chance of a 75 basis point rate hike when the central bank meets next week in Washington, with firmer bets emerging for a smaller 25 basis point move in September.
Central bank rate decisions will likely loom large this week, with the European Central Bank set for its first rate increase in eleven years on Thursday — just hours after the Bank of Japan’s regular policy meetings — as investors look for catalysts to slow the relentless surge in the U.S dollar, which hit another 20-year high late last week.
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.43% lower at 107.599, a move that triggered an overnight rebound in global crude markets.
Oil was also on the march following President Joe Biden’s weekend meeting in Saudi Arabia, which didn’t yield any firm commitment from the Kingdom to either increase its domestic production or influence the OPEC cartel to do the same.
WTI futures for August delivery, which are closely-linked to U.S. gas prices, were marked $2.30 higher at $99.89 per barrel while Brent crude contracts for September, the global pricing benchmark, rose $2.58 to $103.74 per barrel.
In overseas markets, Asia stocks got a boost from hints of monetary stimulus from the People’s Bank of China, where Covid infections continue to rise and the economy narrowly avoided contraction last quarter, with the MSCI ex-Japan benchmark rising 1.8% into the close of the session.
In Europe, the Stoxx 600 was marked 1.45% higher in early Frankfurt trading while the euro rebounded from last week’s fall below parity against the greenback to trade at 1.0131.
In the U.S., benchmark 2-year Treasury note were last seen trading modestly higher at 3.151% overnight, against 2.948% for 10-year notes, holding the so-called ‘inversion’ of the yield curve — an accurate predictor of recession — close to the steepest since December of 2000.
On Wall Street, futures tied to the S&P 500 are indicating a 36 point opening gain while those liked to the Dow Jones Industrial Average are priced for a 260 point move to the upside. Futures linked to the tech-focused Nasdaq are indicating a 140 point advance.
2. — Week Ahead: Earnings In Focus With Tesla, Netflix On Deck
Earnings are likely to provide the key market catalyst this week as a largely empty economic data calendar, as well as a blackout on Fed speakers, gives way to host of blue-chip quarterly updates across several major sectors.
Around 72 S&P 500 companies are expected to report June quarter earnings this week, with Bank of America (BAC) – and Goldman Sachs (GS) – rounding out the financial sector and Netflix (NFLX) – IBM (IBM) – and Twitter (TWTR) – getting things started on the tech side. Tesla will also provide June quarter details this week, with investors looking for both the impact of its Shanghai production shutdown in April and the likely multi-billion writedown of its bitcoin holdings.
Collective S&P 500 profits are expected to rise 5.6% from last year to a share-weighted $465 billion, according to data from Refinitiv, although stripping away what is expected to be a record season for the energy sector and that tally falls to -3.4%.
Apart from earnings, investors will see housing starts and building permits data for the month of June Tuesday, with existing home sales figures the following day.
3. — Twitter Shares Lower As Musk Seeks February Trial To Settler Takeover Battle
Twitter shares edged lower in pre-market trading as Tesla CEO Elon Musk stepped-up his fight in their $44 billion takeover battle by filing court papers against what he called an “unjustifiable request” for a speedy trial.
Musk, who is attempting to back-out of an agreement to merge entities that he controls into Twitter in what amounts to a $44 billion takeover, said the social media group’s attempt to schedule a trial in Delaware Chancery Court next month doesn’t give him enough time to mount his defence. Musk is seeking a hearing that begins in February of next year.
“Twitter’s sudden request for warp speed after two months of foot-dragging and obfuscation is its latest tactic to shroud the truth about spam accounts long enough to railroad defendants into closing,” the court filing from Musk’s team read.
Twitter is seeking to hold Musk to his merger agreement, which valued Twitter at $54.20 per share, while Musk is arguing that the number of so-called fake accounts on the platform represent a material change that gives him the right to walk away.
Twitter shares were marked 0.56% lower in pre-market trading to indicate an opening bell price of $37.53 each. Tesla shares jumped 2% to $734.64 each.
4. — Google Shares Set For Adjusted Debut After 20-For-1 Split
Alphabet (GOOGL) – shares moved higher in pre-market trading ahead of their split-adjusted debut on the Nasdaq.
Google unveiled its plans for a 20-for-1 stock split earlier this year, paying shareholders a special dividend of 19 shares for each one they owned, with the adjustments taking place after the close of trading on Friday.
The split means Alphabet will likely open at $113.56 each, a 1.7% advance on Friday’s split-adjusted close of $111.78, as lower 10-year Treasury bond yields provide a broader boost for the tech sector. Google shares are down around 19.8% so far this year, compared to a 27.7% slump for the Nasdaq benchmark.
The tech giant posted softer-than-expected first quarter revenues of $24.62 billion in late April amid a global pullback in ad sales linked in part to Russia’s war on Ukraine and increasing competition from China-based TikTok, with CFO Ruth Porat cautioning on “a tough comp” for search revenues over the three months ending in June.
5. — IBM Earnings On Deck With Cloud Growth In Focus
International Business Machines (IBM) – will kick-off the unofficial start to the tech earnings season after the close of trading with investors likely focused on the growth in the group’s expanding cloud division.
Analysts expected IBM to post June quarter earnings of $2.27 per share, a 2.6% decline from last year, on overall revenues of $15.185 billion, a 19% slump from the second quarter of 2021.
Still, Revenues from Red Hat, the cloud computing group that IBM purchased for $34 billion in 2019, are likely to provide the lion’s share of topline gains as IBM, which shed its legacy infrastructure business last year, continues to focus on cloud growth.
IBM said in late April that overall revenue gains will likely hit the upper end of its “high single digit” growth forecast even while taking a hit of a “few hundred million” from the suspension of its services in Russia, with free cash flow generation in the region of $10 billion to $10.5 billion.
IBM shares were marked 0.56% higher in pre-market trading to indicate an opening bell price of $140.71 each.
Source: The Street
