Wall Street finished mixed on Monday as the upcoming big tech earnings and the Fed decision weighed on the equity markets. The growth sectors were under pressure, with all the big techs lower ahead of Alphabet and Microsoft’s earnings reports tomorrow. Walmart cut its profit prospect due to weakened consumer spending, dragging on other retailer stocks, including the e-commerce giant, Amazon, down 3.8% in after-hours trading. Investors were also cautious about the Fed rate decision on Thursday when the reserve bank is expected to raise the interest rate by another 75 basis points.
Despite caution ahead of the busy week, the broad sentiment is relatively positive, with the fear gauge, the CBOE volatility index (VIX) staying just above 23, which is at a lower level. However, the benchmark bond yields on the 10-year and the 2-year notes have been inverted since early July. A bond yield inversion illustrates an upcoming economic recession, though it does not usually occur until 12-18 months later.
AU and NZ day ahead
Both Australian and New Zealand equity markets followed the suit of the US session last Friday. Snapchat’s disappointing earnings led to a pause in tech earnings optimism. But at the same time, a weakened US dollar boosted the energy and materials sectors, which lifted the ASX on Monday.
The S&P/ASX 200 is set to open higher as indicated by the SPI futures, up 0.36%. The Australian dollar strengthened amid a rebound in global commodity prices. The iron ore price jumped on the positive outlook for China’s economic recovery in the third quarter, which also boosted the mining stocks. However, China’s plan to move away from Australian imports may have a long-term effect on the local mining companies, including BHP and Rio Tito.
The S&P/NZX 50 was flat in the first hour of trading. The NZ equity markets stalled the rebounding momentum last week as another jump in the domestic inflation data pressured the local markets, while the US earnings season and the upcoming Fed meeting weighed on the local markets. New Zealand dollar bounced off session lows against the US dollar but weakened against its peer, the Australian dollar in the overnight trading.
Dow Jones Industrial Average rose 0.28%, the S&P 500 was up 0.13%, and Nasdaq declined 0.43%.
The cyclical sectors outperformed the tech sectors, with growth stocks extending losses on Snapchat's disappointing earnings last Friday, while the energy stocks rose due to a rebound in oil prices. The bank shares were also higher as bond yields were up ahead of the Fed rate decision later this week.
Both Microsoft and the Google parent Alphabet slid slightly before the earnings reports tomorrow. Walmart cut profit guidance on softened consumer demands due to elevated inflation. The company’s shares plunged nearly 10% in after-hours trading, which pressed other retailers’ stocks, such as target and Amazon, down 5.3% and 3.8% in the extended trading hour.
The major companies’ performance overnight (26 July 2022)Source: CMC Markets NG
The European markets were resilient despite deteriorated economic data. The German IFO business climate index slipped to the lowest level in two years.
The Stoxx 50 (+0.21%), FTSE 100 (+0.41%), DAX (-0.33%), CAC 40 (+0.33%).
Crude oil prices rebounded as the US dollar softened, and the supply concerns again outweighed recession fears. Gold sank due to a rebound in the bond yields, while industrial metal was higher as the US dollar dropped. Agricultural products were also higher, despite a possible resumption of the Ukrainian grain exports.
WTI: US$96.70 per barrel (+2.11%), Brent: US$104.92 per barrel (+1.67%), Natural Gas: US$8.73 per MMBtu (+5.16%)
COMEX Gold futures: US$1,717.5 per ounce (-0.61%), COMEX Silver futures: US$18.33 per ounce (-1.55%), Copper futures: US$3.35 per ounce (+1.26%)
Wheat: US$770.00 per bushel (+1.45%), Soybean: US$1,346.00 per bushel (+2.30%), Corn: US$583.75 per bushel (+3.46%).
The US dollar declined as the odds of a soften Fed’s tone on rate hikes strengthened. The US dollar index dropped 0.27%, to 106.34. Both the Australian and Canadian dollars firmed against the greenback due to a rebound in the commodity prices, such as iron ore and crude oil.
The global bond yields were higher on Monday as traders are eyeing Thursday’s FOMC meeting result.
US 10-year: 2.807%, US 2-year: 3.018%.
Germany bund 10-year: 1.01%, UK gilt 10-year: 1.93%.
Australia 10-year: 3.35%, NZ 10-year: 3.57%.
Major cryptocurrencies fell as the sentiment seems to weaken after Tesla sold 75% of its holding last week.
(See below prices at AEST 8:41 am according to Coinmarketcap.com)
Bitcoin: US$21,618 (-5.50%)
Ethereum: US$1,474 (-9.61%)