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Morning Briefing: August 17th, 2023

Market Overview

Good morning! As we step into another trading day, stock futures are signaling a positive open, rebounding from yesterday’s downturn. This optimism is fueled by encouraging earnings reports from Dow giants Walmart and Cisco. Despite the ongoing strain from the escalating 10-yr Treasury note yield, which has now reached its zenith since 2008 at 4.29%, market enthusiasts continue to embrace the buy-the-dip strategy.

Global Economic Updates

  • Norges Bank’s Move: In a significant development, Norges Bank has upped its deposit rate by 25 bps, settling at 4.00%. The bank has also hinted at another potential rate hike coming next month.
  • Japan’s Export Woes: Japan has reported a year-over-year dip in exports for July, marking the first such decline in over two years. This 0.3% drop is attributed to dwindling demand from China.

Today’s Economic Data Release

  • 8:30 ET: Eyes will be on the Weekly Initial Claims, with the consensus at 240,000, down from the previous 248,000. Additionally, Continuing Claims and the August Philadelphia Fed survey will be in focus.
  • 10:00 ET: The July Leading Indicators are expected to be released, with predictions hinting at a -0.4% change.
  • 10:30 ET: The Weekly natural gas inventories report will be out, with the previous figure standing at +29 bcf.

Corporate Highlights

  • Walmart (WMT): The retail giant reported earnings that surpassed expectations by $0.13 and showed a slight edge on EPS. Their Q2 US comps stand at 6.4%, and they’ve raised their FY24 guidance.
  • Adobe (ADBE): BofA Securities has upgraded Adobe from Neutral to Buy, pushing its stock up by 1.9%.
  • Cisco (CSCO): After beating earnings expectations by $0.08 and reporting in-line revenues, Cisco’s stock has seen a 2.4% uptick.
  • Synopsys (SNPS): The company announced that Sassine Ghazi will take over as President and CEO from January 1, 2024. They’ve also reported earnings that beat expectations and provided an optimistic outlook for FY23.
  • CVS Health (CVS): In a significant shift, Blue Shield of California is reportedly parting ways with CVS as a pharmacy benefit manager, choosing to collaborate with Amazon and Mark Cuban instead.
  • Wolfspeed (WOLF) and Paycor (PYCR): Both companies reported mixed results, with Wolfspeed missing earnings expectations and Paycor beating them.
  • Ball Corp (BALL): The company has confirmed its plans to divest its Aerospace Business to BAE Systems for a whopping $5.6 billion.
  • Hawaii Electric (HE): The company faces challenges due to its delayed response to wildfire threats and is currently in talks with restructuring advisory firms.
  • Tapestry (TPR): The luxury fashion company reported earnings and revenues below expectations.

Bond Market Dynamics

US equity futures are hinting at a recovery from the previous day’s slump, even as bond markets worldwide experience intensified sell-offs. The 10-year Treasury yield has surged to 4.29%, nearing its highest point since 2007. In the UK, the equivalent maturity gilts touched 4.71%, a peak since the 2008 financial crisis. The rapid shifts in bond markets this week have been attributed to changing investor perceptions regarding the Federal Reserve’s interest rate policies.

China’s Real Estate Concerns

China’s real estate market slump might be more severe than official data suggests. Reports indicate a decline of at least 15% in prime neighborhoods of major cities like Shanghai and Shenzhen. Amidst this, China is ramping up efforts to curb losses in its currency.

Commodities Update

Brent crude oil prices have seen a 0.9% increase, trading at $84.20 per barrel, halting its three-day decline. Gold, on the other hand, has shown a slight increase after closing below the $1,900 mark for the first time since March.

Closing Thoughts

As we move forward, the market landscape remains dynamic, with various factors influencing investor sentiment. From corporate earnings to global economic shifts, it’s essential to stay informed and make well-informed decisions. Here’s to a productive trading day ahead!




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