Editorial StaffStock futures flat as jobs data looms; Wage growth in focus as hiring slows, but remains firm; Starbucks taps Reckitt CEO to replace interim boss Schultz; Lululemon shares leap on Q3 earnings, 2022 outlook and Broadcom defies chip gloom with earnings beat, bullish forecast.
Here are five things you must know for Friday, September 2:
1. Stock Futures Flat As Jobs Data Looms
U.S. equity futures nudged higher Friday, while the dollar held onto gains against its global peers, as investors braced for a crucial August jobs report amid accelerating bets on another jumbo rate hike from the Federal Reserve.
With the dollar trading touching a fresh 20-year high against a basket of six global currencies this week, and benchmark 2-year Treasury note yields rising past 3.5% for the first time since 2007, investors appear to be heeding the Fed’s warnings on inflation, as well as its commitment to lift its benchmark Fed Funds rate close to, or possibly above, 4% by the end of the year.
The moves have taken the steam out of a summertime rally for stocks, which began in early June amid bets that the Fed would possibly pause its rate-hike path in the face of slowing domestic growth and data showing easing inflation pressures.
Since then, however, the job market has continued to improve and the Atlanta Fed’s GDPNow forecasting tool indicates third quarter growth if advancing at a 2.6% clip.
That puts a great deal of emphasis on today’s August payroll report, particularly with respect to wages, as investors seek to define the Fed’s ambitions between now and the end of the year.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 4 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 14 point bump. Futures linked to the tech-focused Nasdaq are indicating a 19 point gain.
In overseas markets, new China lockdowns and threats of foreign exchange intervention from Japan as the yen slumps to a 24-year low against the dollar pinned down gains for stocks in the region, with the MSCI ex-Japan benchmark falling 0.56% into the close of trading.
In Europe, stocks were 0.5% higher in early Frankfurt trading, paced by gains in the banking sector amid reports that Credit Suisse is planning to cut around 5,000 jobs from its global headcount and the Fed ending its decade-long oversight of HSBC following its record $1.92 billion money laundering fine from 2012.
2. Wage Growth In Focus As Hiring Slows, But Remains Firm
Wage growth is likely to be the focus of Friday’s August Employment report, as investors track both inflation pressures in the world’s biggest economy and the Fed’s resolve in taming them.
The pace of overall jobs growth is likely to ease from July’s torrid 528,000, analysts estimate, with Street forecasts hovering between 285,000 and 300,000 for the headline tally, a gain that would mark 20 consecutive months of hiring growth.
However, with the July JOLTs report showing big upticks in unfilled positions, which hit 11.2 million last month, and weekly applications for new jobless benefits falling, investors are concerned that average hourly earnings will need to rise sharply in order to tempt Americans back into the workforce.
“Wage growth appears to have nudged up a bit on a sequential basis in recent months,” said Ian Shepherdson of Pantheon Macroeconomics. “The upturn has been modest, but wage growth is too high and a sustained re-acceleration would be deeply unwelcome at the Fed.”
Economists are looking for average hourly earnings to rise 0.4% on the month, and 5.3% on the year, with any faster-than-expected reading likely to add to bets on a third consecutive 75 basis point rate hike from the Fed later this month in Washington.
3. Starbucks Taps Reckitt CEO To Replace Interim Boss Schultz
Starbucks (SBUX) – Get Starbucks Corporation Report shares edged higher in pre-market trading after it named Laxman Narasimhan, the former head of brands giant Reckitt RKT, as CEO of the world’s biggest coffee chain.
Narasimhan, who left London-based Reckitt, which makes everything from Durex condoms to Lysol disinfectant to Calgon dishwashing detergent, only yesterday after three years at the helm, will take over from interim CEO Howard Schultz on October 1.
“Laxman is an inspiring leader. His deep, hands-on experience driving strategic transformations at global consumer-facing businesses makes him the ideal choice to accelerate Starbucks growth and capture the opportunities ahead of us,” said Starbucks board chair Mellody Hobson.
His understanding of our culture and values, coupled with his expertise as a brand builder, innovation champion, and operational leader will be true differentiators as we position Starbucks for the next 50 years.”
Starbucks shares were marked 0.7% higher in pre-market trading to indicate an opening bell price of $86.00 each.
4. Lululemon Shares Leap On Q3 Earnings, 2022 Outlook
Lululemon Athletics (LULU) – Get lululemon athletica inc. Report shares surged higher in pre-market trading after the casual and sports apparel group posted stronger-than-expected third quarter earnings and boosted its full-year profit forecast.
The Vancouver-based retailer posted an adjusted bottom line of $2.20 per share, which was well ahead of Street forecasts, as revenues rose 29% from last year to $1.87 billion.
With CEO Calvin McDonald said the group was seeing any “meaningful variation in cohort behavior”, Lululemon boosted its 2022 profit outlook to by 40 cents per share, to a range of $9.75 and $9.90, with revenues expected between $7.87 billion and $7.94 billion.
“Lululemon remains predominantly a full-price business, and we have not changed our promotional cadence or markdown strategy and we have no plans to do so,” McDonald told investors on a conference call late Thursday.
Lululemon shares were marked 9.6% higher in pre-market trading to indicate an opening bell price of $322.70 each.
5. Broadcom Defies Chip Gloom With Earnings Beat, Bullish Forecast
Broadcom (AVGO) – Get Broadcom Inc. Report jumped higher in pre-market trading after the chipmaker’s stronger-than-expected third quarter earnings and robust near-term outlook.
Broadcom’s adjusted earnings of $9.73 per share topped Street forecasts by around 16 cents, while revenues rose 25% to an analyst-topping $8.464 billion.
With a broader exposure to growing markets such as data centers and networking equipment used in hybrid work environments, Broadcom said it’s seeing infrastructure demand that is “still very much holding” when compared to markets such as gaming and smartphones.
Looking into the current quarter, Broadcom said it sees revenues in the region of $8.9 billion, but noted that its smartphone segment, which includes Apple Inc. APPL as its top customer, is starting to note “early signals of supply outpacing demand.”
Broadcom shares were marked 1.9% higher in pre-market trading to indicate an opening bell price of $501.27 each.
Source: The Street
