Editorial StaffStock futures higher, dollar holds firm; week ahead: Powell speech, Apple launch in focus; CVS Health buys signify for $8 billion; Bed, Bath & Beyond tragedy sends shares sharply lower and California declares grid emergency as power crisis deepens.
1. — Stock Futures Higher, Dollar Holds Firm
U.S. equity futures moved higher Tuesday, while the dollar traded near its highest levels in two decades on foreign exchange markets, as investors eased into risk markets amid concerns over Europe’s escalating energy crisis and a hawkish Federal Reserve.
Russia’s decision to halt the flow of natural gas to Europe from its key Nordstream 1 pipeline, a move it first linked to repairs but acknowledged Monday was in retaliation for economic sanctions and would last “indefinitely”, threatens to add further pressure to the region’s cost of living crisis while ensuring that inflation continues to test all-time highs.
The move pushed the euro to a fresh 20-year low against the U.S. dollar yesterday, even with traders pricing in a 75 basis point rate hike from the European Central Bank later this week, and sparked a retreat from regional stocks during yesterday’s Labor Day holiday trading.
Tuesday’s recovery, however, tepid, will be tested by both the ongoing surge in the dollar, which hit a new 24-year peak against the Japanese yen in overnight trading and touched 2.5 year highs against both the British pound and the Chinese yuan.
The energy crisis concerns are so great, in fact, that new U.K. Prime Minister Liz Truss is considering a $170 billion support package to get through this year’s winter months, a figure that represents around 5% of U.K. GDP.
Still, European stocks edged modestly higher in early Frankfurt trading, with the Stoxx 600 benchmark rising 0.1% and the euro holding steady at 0.9954 against the greenback in overnight foreign exchange dealing.
In the U.S., last Friday’s ‘Goldilocks’ August jobs report, which showed 315,000 new hires but modestly slowing wage growth, looks set to give stocks an early Tuesday boost, although bets on a third consecutive 75 basis point rate hike from the Fed later this month are holding at around 68%, according to the CME Group’s FedWatch.
On Wall Street, futures contracts tied to the S&P 500 are indicating a 22 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 150 point advance. Futures linked to the tech-focused Nasdaq are indicating a 93 point gain.
2. — Week Ahead: Powell Speech, Apple Launch In Focus
Apple’s (AAPL) highly-anticipated iPhone launch, alongside a keynote address from Federal Reserve Chairman Jerome Powell, will highlight a quiet week for earnings and data on Wall Street as investors look to the central bank’s September policy meeting later in the month.
Powell, who delivered a surprisingly hawkish signal on interest rates and inflation to investors when he spoke late last month in Jackson Hole, will take part in a discussion on monetary policy at the Cato Institute’s 40th annual conference on Thursday.
His comments will come just minutes after European Central Bank President Christine Lagarde will begin speaking to reporters in Frankfurt following what is likely to be another big rate hike for the single currency area amid record inflation and soaring energy prices.
Apple’s ‘Far Out’ product launch event, scheduled for 10:00 am Pacific time in Cupertino, California, is likely to include new versions of both its flagship iPhone and Apple Watch, alongside previously-announced operating system upgrades and the expansion of its homemade A15 chip.
Other events of note in an otherwise tepid holiday-shortened week include third quarter earnings from GameStop (GME) and Kroger (KR) as well as ISM services data on Tuesday and weekly jobless claims on Thursday.
3. — CVS Health Buys Signify For $8 Billion
CVS Health (CVS) shares edged higher in pre-market trading after the pharmacy group agreed to buy healthcare services specialists Signify Health (SGFY) for around $8 billion.
CVS said the deal, which it expects to close early next year, will be “meaningfully” accretive to earnings as it tacks on Signify’s network of 10,000 physicians, nurse practitioners and physician assistants to its rapidly-expanding Aetna insurance business and its pharmacy benefits operations.
The group will pay the equivalent of $30.50 per share for Signify, valuing the Dallas-based company at $7.6 billion, with a further $400 million set aside for equity appreciation rights.
“Signify Health will play a critical role in advancing our health care services strategy and gives us a platform to accelerate our growth in value-based care,” said CVS CEO Karen Lynch. “This acquisition will enhance our connection to consumers in the home and enables providers to better address patient needs as we execute our vision to redefine the health care experience.”
CVS shares were marked 0.76% higher in pre-market trading to indicate an opening bell price of $100.20 each. Signify shares were marked 1.22% higher at $29.12 each.
4. — Bed, Bath & Beyond Tragedy Sends Shares Sharply Lower
Bed, Bath & Beyond (BBBY) shares were sharply lower in pre-market trading following a weekend tragedy that took the life of its recently-appointed CFO, Gustavo Arnal.
Arnal fell to his death from a high floor of a Manhattan skyscraper known as the Jenga Tower on Friday evening, police confirmed Sunday, with the New York Medical Examiner’s office determining the cause of death as suicide the following day.
Arnal, 52, joined Bed, Bath & Beyond in 2020, following stints with Procter & Gamble PG and Avon, and was named in a lawsuit filed in the U.S. District Court for the District of Columbia that alleged he had regulated the sale of Bed, Bath & Beyond stock for company executives, and conspired to keep prices inflated.
The struggling home retailer said last week that it planned to raise an undisclosed amount of capital from the sale of common stock, and unveiled a new $500 million loan agreement, as part of its closely-tracked turnaround plans under interim CEO Sue Gove.
Bed, Bath & Beyond shares were marked 15% lower in pre-market trading to indicate an opening bell price of $7.34 each.
5. — California Declares Grid Emergency As Power Crisis Deepens
California Governor Gavin Newsom issued an emergency proclamation over the weekend to free-up power supplies ahead of what could be record demand in the nation’s biggest state Tuesday.
California, which is suffering its worst drought in more than a century as well as a blistering heatwave that has brought temperatures well in excess of 110 degrees, issued a warning on Monday that its power grid may not be able to cope with the surge in demand expected from the end of a long Labor Day weekend and the return of students to classrooms.
Elliot Mainzer, who runs the state’s Independent System Operator, more commonly known as Casio, cautioned that “rotating outages are a possibility” as the grid copes with excess demand, adding that “we are now moving into the extreme part of this heat wave, and really stepping (power conservation) actions will be essential for maintaining reliability.”
The so-called flex alert asks state residents to voluntarily reduce their power consumption between 4:00 pm and 10:00 pm Pacific time.
Casio forecasts Tuesday demand to peak at 51,145 megawatts, topping the previous high of 50,270 megawatts recorded in 2006.
Source: The Street
