Stock Index Futures Steady After Yesterday’s Rally, U.S. Economic Data on Tap

September S&P 500 E-Mini futures (ESU24)are down -0.14%, and September Nasdaq 100 E-Mini futures (NQU24) are down -0.04% this morning, taking a breather after yesterday’s rally, while investors looked ahead to U.S. consumer confidence data and comments from a Federal Reserve official.

In yesterday’s trading session, Wall Street’s major indexes closed higher, with the benchmark S&P 500, blue-chip Dow, and tech-heavy Nasdaq 100 notching 2-week highs. Ulta Beauty (ULTA) surged over +11% and was the top percentage gainer on the S&P 500 after a 13F filing revealed that Warren Buffett’s Berkshire Hathaway purchased approximately 690,000 shares of the company, valued at around $266 million, during the second quarter. Also, Cisco Systems (CSCO) climbed more than +6% and was the top percentage gainer on the Dow after the company posted upbeat Q4 results, provided solid Q1 guidance, and announced plans to cut its global workforce by about 7%. In addition, Walmart (WMT) gained over +6% after the retail giant reported stronger-than-expected Q2 results and raised its FY25 guidance. On the bearish side, Dillard’s (DDS) plunged more than -10% after reporting weaker-than-expected Q2 results.

Economic data on Thursday showed that U.S. retail sales climbed +1.0% m/m in July, stronger than expectations of +0.4% m/m and the biggest increase in 1-1/2 years, while U.S. core retail sales, which exclude motor vehicles and parts, rose +0.4% m/m in July, beating the +0.1% m/m consensus. Also, the U.S. August Philadelphia Fed manufacturing index fell to a 7-month low of -7.0, weaker than expectations of 5.4. In addition, U.S. industrial production slumped -0.6% m/m in July, weaker than expectations of -0.3% m/m, while U.S. July manufacturing production fell -0.3% m/m, weaker than expectations of -0.2% m/m. Finally, the number of Americans filing for initial jobless claims in the past week fell -7K to a 5-week low of 227K, less than the 236K consensus.

“We’re back to an environment where good news is good news and bad news is bad news,” said Bret Kenwell at eToro. “Investors and consumers want inflation to go lower - but not at the expense of the economy. [Thursday’s] stronger-than-expected retail sales figure quiets some of the fears the U.S. may be slipping into a recession.”

Atlanta Fed President Raphael Bostic told the Financial Times in an interview released on Thursday that he is open to an interest rate cut in September, noting that the Fed cannot “afford to be late” in easing monetary policy. “I’m open to something happening in terms of us moving before the fourth quarter,” Bostic told the newspaper. Also, St. Louis Fed President Alberto Musalem stated that he believes the time is approaching when it will be appropriate for the central bank to lower interest rates. “From my perspective, the risk to both sides of the mandate seems more balanced. Accordingly, the time may be nearing when an adjustment to a moderately restrictive policy may be appropriate as we approach future meetings,” Musalem said.

Meanwhile, U.S. rate futures have priced in a 72.5% chance of a 25 basis point rate cut and a 27.5% probability of a 50 basis point rate cut at the next FOMC meeting in September.

Today, all eyes are focused on the preliminary reading of the U.S. Michigan Consumer Sentiment Index, set to be released in a couple of hours. Economists, on average, forecast that the Michigan consumer sentiment index will come in at 66.7 in August, compared to last month’s value of 66.4.

The U.S. Building Permits (preliminary) and Housing Starts data for July will also be reported today. Economists forecast Building Permits to be 1.430M and Housing Starts to be 1.340M, compared to the previous numbers of 1.454M and 1.353M, respectively.

In addition, market participants will be anticipating a speech from Chicago Fed President Austan Goolsbee.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.913%, down -0.54%.

The Euro Stoxx 50 futures are up +0.41% this morning, on track for a weekly gain of over +3%, fueled by optimism that the U.S. economy will avoid a recession. Automobile stocks led the gains on Friday. Data from the Office for National Statistics released Friday indicated that Britain’s monthly retail sales increased by 0.5% in July, suggesting potential for a continued consumer-led recovery in the economy. Meanwhile, encouraging U.S. data on inflation, jobless claims, and retail sales boosted investor confidence, indicating the economy is poised for stable growth without high inflation. This aided global stocks in rebounding from last week’s losses, which were driven by concerns about a recession in the world’s largest economy. In corporate news, Bayer Ag (BAYN.D.DX) surged over +10% following a major victory for the German company in prolonged cancer litigation over its Roundup weedkiller. Also, UBS Group Ag (UBSG.Z.IX) rose about +1% after the Swiss bank announced it would liquidate a $2 billion real estate fund acquired from Credit Suisse.

U.K.’s Retail Sales, U.K.’s Core Retail Sales, and Eurozone’s Trade Balance data were released today.

U.K. July Retail Sales came in at +0.5% m/m and +1.4% y/y, compared to expectations of +0.6% m/m and +1.4% y/y.

U.K. July Core Retail Sales arrived at +0.7% m/m and +1.4% y/y, compared to expectations of +0.8% m/m and +1.4% y/y.

Eurozone June Trade Balance stood at 22.3B euros, stronger than expectations of 13.3B euros.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.07%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +3.64%.

China’s Shanghai Composite Index closed just above the flatline today as mixed economic data from the country kept sentiment subdued. Real estate and consumer services stocks underperformed on Friday after July data indicated that the economy is struggling to gain momentum. At the same time, shares of Chinese antimony producers surged following Beijing’s decision to restrict exports of the strategic mineral, of which it is the predominant supplier. China will impose export restrictions on antimony and related elements for national security reasons, its commerce ministry announced on Thursday, starting from September 15th. Meanwhile, sentiment remained weak even after Beijing hinted at additional supportive measures. People’s Bank of China Governor Pan Gongsheng told state-run CCTV in an interview on Thursday that the central bank will intensify efforts to effectively implement monetary and financial policies introduced this year, and additional measures will be taken as required by the State Council. Pan added that the PBOC will also prepare “incremental policy measures” to support the country’s economy in reaching its full-year growth target. In corporate news, JD.com Inc. climbed nearly +9% in Hong Kong after the Chinese online shopping giant reported stronger-than-expected quarterly net profit.

Japan’s Nikkei 225 Stock Index closed sharply higher today, tracking an overnight rally on Wall Street as better-than-expected U.S. economic data alleviated concerns about a recession in the world’s largest economy. Electronics and financial stocks led the gains on Friday. The Ministry of Economy, Trade and Industry reported Friday that Japan’s Tertiary Industry Index unexpectedly declined in June compared to the previous month. Sentiment towards Japan improved this week after data revealed that the nation’s economy grew more than anticipated in the second quarter, outweighing concerns about the Bank of Japan’s hawkish shift. Meanwhile, the Japanese yen dropped 1.3% against the dollar on Thursday and was trading around the 148.6 level on Friday, poised for its worst week since May. Nomura Holdings, Japan’s largest brokerage, stated that the renewed weakness of the yen could potentially attract some hedge funds back to the carry trade that collapsed two weeks ago. In other news, foreign investors heavily purchased Japanese stocks in the week ending August 10th, motivated by policymakers’ signals to stabilize the market after recent turmoil. According to finance ministry data, cross-border investors acquired a net 521.9 billion yen ($3.51 billion) of Japanese shares in the week, reversing three straight weeks of net outflows. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -2.61% to 26.54.

The Japanese June Tertiary Industry Activity Index arrived at -1.3% m/m, weaker than expectations of +0.3% m/m.

Pre-Market U.S. Stock Movers

H&R Block (HRB) climbed over +9% in pre-market trading after the tax preparation company reported upbeat Q4 results, issued above-consensus FY25 guidance, boosted its quarterly dividend by 17%, and announced a new $1.5 billion share repurchase program.

Microchip Technology (MCHP) gained more than +2% in pre-market trading after Piper Sandler upgraded the stock to Overweight from Neutral with a price target of $100.

Fox Corp. (FOXA) advanced over +2% in pre-market trading after Wells Fargo upgraded the stock to Overweight from Underweight with a price target of $46.

Bumble (BMBL) slid more than -3% in pre-market trading after TD Cowen downgraded the stock to Hold from Buy.

Estee Lauder (EL) fell over -1% in pre-market trading after BofA downgraded the stock to Neutral from Buy.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Friday - August 16th

Flowers Foods (FLO), Madison Square Garden Entertainment (MSGE), Sunlands Tech (STG).

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