Stock Market Update

The S&P 500 futures are flat and are trading in line with fair value, the Nasdaq 100 futures are down one point and are trading fractionally below fair value, and the Dow Jones Industrial Average futures are down ten points and are trading fractionally below fair value.

Contracts linked to the S&P 500, the Nasdaq 100, and the Dow are flattish on the final day of this turbulent week. Pre-open gains in mega caps and chipmakers have provided a measure of support so far. The positive price action in semiconductor-related names is in response to TSMC (TSM) reporting a jump in sales in July.

The stock market could settle this week roughly unchanged with the Nasdaq Composite and S&P 500 sitting on declines of 0.5% and 0.7%, respectively, since last Friday. Meanwhile, the Treasury market looks poised to settle the week with losses. The 10-yr note yield is at 3.95%, which is 16 basis points higher than last Friday. The 2-yr note yield is at 4.04%, which is 17 basis points higher than last Friday. 

The selling in Treasuries this week has been a welcome indication that recession fears may have been overblown. There is no top-tier US economic data today that could shift that thinking. 

In corporate news:

• TSMC (TSM 170.00, +5.45, +3.3%): reports July revs increased 44.7% yr/yr
• Paramount Global (PARA 10.86, +0.65, +6.4%): beats by $0.41, misses on revs;  says it is reducing its US-based workforce by approximately 15%; these actions will take place in the coming weeks and will largely be completed by the end of the year; aggressively evaluating portfolio to improve balance sheet; linear assets under consideration for possible sale
• Gilead Sciences (GILD 76.20, +0.61, +0.8%): beats by $0.40, beats on revs; guides FY24 EPS in-line
• Expedia Group (EXPE 129.30, +11.33, +9.6%): beats by $0.33, reports revs in-line; gross bookings of +6%; Seeing some softness in travel demand and consumers trading down to lower price points; sees full year gross bookings at low end of prior guidance range
• DXC Technology (DXC 19.60, +1.27, +6.9%): beats by $0.16, beats on revs; guides Q2 EPS above consensus, revs mostly above consensus; guides FY25 EPS above consensus, revs in-line
• Take-Two (TTWO 147.78, +9.00, +6.5%): misses by $0.06, misses on revs; guides Q2 EPS below consensus, revs in-line; lowers FY25 EPS below consensus; reaffirms FY25 rev guidance
• Capri Holdings (CPRI 30.80, -1.30, -4.1%): misses by $0.56, misses on revs
• The Trade Desk (TTD 93.79, +5.52, +6.3%): beats by $0.03, beats on revs; guides Q3 revs above consensus; sees healthy trends across verticals
• Unity Software (U 14.34, -0.02, -0.1%): reports Q2 (Jun) results, beats on revs; lowers FY24 outlook; CFO Luis Visoso departing; appoints Mark Barrysmith, CAO, as interim CFO
• News Corp (NWSA 27.20, +0.42, +1.6%): beats by $0.01, beats on revs; mulling sale of Foxtel, according to Bloomberg 

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended the week on a mostly higher note. Japan's Nikkei: +0.6% (-2.5% for the week), Hong Kong's Hang Seng: +1.2% (+0.9% for the week), China's Shanghai Composite: -0.3% (-1.5% for the week), India's Sensex: +1.0% (-1.6% for the week), South Korea's Kospi: +1.2% (-3.3% for the week), Australia's ASX All Ordinaries: +1.3% (-2.2% for the week).
  • In economic data:
    • China's July CPI 0.5% m/m (expected 0.3%; last -0.2%); 0.5% yr/yr (expected 0.3%; last 0.2%). July PPI -0.8% m/m (expected -0.9%; last -0.8%)
    • Japan's July M2 Money Stock 1.4% yr/yr (expected 1.6%; last 1.5%)
  • In news:
    • Japan's Nikkei (+0.6%) narrowed this week's loss to 2.5%.
    • China's CPI was hotter than expected in July while PPI deflated for the 22nd consecutive month.
    • China sold 50-yr bonds at a record low yield.
• Major European indices are looking for a higher finish to the week amid a light flow of news. STOXX Europe 600: +0.6% (+0.4% week-to-date), Germany's DAX: +0.3% (+0.3% week-to-date), U.K.'s FTSE 100: +0.4% (+0.1% week-to-date), France's CAC 40: +0.4% (+0.3% week-to-date), Italy's FTSE MIB: +0.3% (-0.4% week-to-date), Spain's IBEX 35: +0.8% (-0.3% week-to-date).
  • In economic data:
    • Germany's July CPI 0.3% m/m, as expected (last 0.1%); 2.3% yr/yr, as expected (last 2.2%) o France's Q2 Unemployment Rate 7.3% (expected 7.5%; last 7.5%)
    • Italy's July CPI 0.4% m/m (expected 0.5%; last 0.1%); 1.3% yr/yr, as expected (last 0.8%). June trade surplus EUR5.065 bln (expected surplus of EUR5.550 bln; last surplus of EUR6.377 bln)
    • Swiss Q3 SECO Consumer Climate -19 (expected -36; last -24)
  • In news:
    • Italy's CPI was a touch cooler than expected in July (0.4%; expected 0.5%) while Germany's final CPI reading matched expectations (0.3%) with the yr/yr rate ticking up to 2.3% from 2.2%.
    • Italian banks may reportedly face some pressure to increase interest rates on deposits.