Stock Market Update

The S&P 500 futures are down 55 points and are trading 1.0% below fair value, the Nasdaq 100 futures are down 315 points and are trading 1.5% below fair value, and the Dow Jones Industrial Average futures are down 89 points and are trading 0.2% below fair value.

There's a negative bias in early trading. Pre-open declines in semiconductor-related names have contributed to the action after Bloomberg reported that President Biden is considering using more severe trade restrictions on chip imports from China. Weakness in semiconductor names also follows below-consensus guidance from ASML (ASML). 

Treasury yields are slightly higher, keeping pressure on equities. The 10-yr note yield is up one basis point to 4.18% and the 2-yr note yield is up three basis points to 4.47%.

The weekly MBA Mortgage Applications Index jumped 3.9% after last week's 0.2% decline. Other data include: 

• 8:30 ET: June Housing Starts (Briefing.com consensus 1.310 mln; prior 1.277 mln) and Building Permits (Briefing.com consensus 1.391 mln; prior 1.386 mln)
• 9:15 ET: June Industrial Production (Briefing.com consensus 0.3%; prior 0.9%) and Capacity Utilization (Briefing.com consensus 78.6%; prior 78.7%)
• 10:30 ET: Weekly crude oil inventories (prior -3.44 mln)

In corporate news:

• Five Below (FIVE 86.49, -15.58, -15.3%): lowers Q2 EPS and revenue guidance; now expects Q2 comps to be -7% to -6%; CEO Joel Anderson steps down to pursue other interests; Board launches search for permanent CEO
• ASML (ASML 984.40, -83.79, -7.8%): beats by €0.31, beats on revs; guides Q3 revs below consensus; reaffirms FY24 revs guidance
• Johnson & Johnson (JNJ 150.90, -0.11, -0.1%): beats by $0.11, reports revs in-line; lowers FY24 EPS below consensus, reaffirms FY24 revs guidance
• J.B. Hunt Transport (JBHT 171.50, -4.50, -2.6%): misses by $0.16, misses on revs
• Omnicom (OMC 92.10, -3.25, -3.4%): reports EPS in-line, revs in-line
• Spirit Airlines (SAVE 3.00, -0.16, -5.1%): lowers its Q2 revenue outlook; reduces other targets
• Elevance Health (ELV 551.99, -1.15, -0.2%): beats by $0.12, reports revs in-line; reaffirms FY24 EPS guidance
• U.S. Bancorp (USB 43.81, +0.52, +1.2%): beats by $0.03, reports revs in-line
• Interactive Brokers (IBKR 122.09, -1.57, -1.3%): beats by $0.02, grows adjusted revs by 21%; customer accounts up 28%
• VanEck Semiconductor ETF (SMH 263.91, -9.80, -3.6%): President Biden considering using more severe trade restrictions on chip imports from China, according to Bloomberg 

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the midweek session on a mixed note while India's Sensex was closed for a holiday. Japan's Nikkei: -0.4%, Hong Kong's Hang Seng: +0.1%, China's Shanghai Composite: -0.5%, India's Sensex: HOLIDAY, South Korea's Kospi: -0.8%, Australia's ASX All Ordinaries: +0.7%.
  • In economic data:
    • Japan's July Reuters Tankan Index 11 (last 6)
    • Singapore's June trade surplus $3.078 bln (last surplus of $4.282 bln). June non-oil exports -0.4% m/m (expected 4.1%; last -0.7%); -8.7% yr/yr (expected -1.2%; last -0.7%)
    • Australia's June MI Leading Index 0.0% m/m (last 0.0%)
    • New Zealand's Q2 CPI 0.4% qtr/qtr (expected 0.5%; last 0.6%); 3.3% yr/yr (expected 3.5%; last 4.0%)
  • In news:
    • Chip names struggled after it was reported that the Biden administration is planning additional restrictions on sales of these products to China.
    • Cooler-than-expected Q2 inflation in New Zealand has pulled rate cut expectations to October/November.
    • The Bank of Japan likely intervened to support the yen on Friday, a day after a widely-reported intervention took place as the market was responding to the June CPI reading for the U.S.
    • BHP Billiton extracted a record amount of iron ore in Q4.
• Major European indices trade in the red. STOXX Europe 600: -0.6%, Germany's DAX: -0.8%, U.K.'s FTSE 100: -0.3%, France's CAC 40: -0.6%, Italy's FTSE MIB: -0.5%, Spain's IBEX 35: -0.5%.
  • In economic data:
    • Eurozone's June CPI 0.2% m/m, as expected (last 0.2%); 2.5% yr/yr, as expected (last 2.6%). June core CPI 0.4% m/m (expected 0.3%; last 0.4%); 2.9% yr/yr, as expected (last 2.9%)
    • U.K.'s June CPI 0.1% m/m, as expected (last 0.3%); 2.0% yr/yr (expected 1.9%; last 2.0%). June Core CPI 0.2% m/m (expected 0.1%; last 0.5%); 3.5% yr/yr (expected 3.4%; last 3.5%). Input PPI -0.8% m/m (expected 0.1%; last -0.6%) and Output PPI -0.3% m/m (expected 0.1%; last -0.1%). June House Prices 2.2% yr/yr (expected 1.5%; last 1.3%)
  • In news:
    • Eurozone's final CPI report for June did not contain any surprises while inflation readings from the U.K. showed unexpected deflation in producer prices. However, headline CPI remained elevated, reducing expectations for a rate cut in August.
    • Chip equipment manufacturer ASML reported solid results for Q2, but soft guidance for Q3 has weighed on the industry group.
    • Adidas raised its outlook.