Market Overview

We open the day with stock futures tilting towards the red as investors react to an assorted plate of earnings news. Although the mixed price action did not favor the markets in general, the Dow components Merck (MRK), Caterpillar (CAT), and Uber (UBER) threw a lifeline to the market following their earnings reports. However, the market has been held in check by losses in JetBlue Airways (JBLU), Western Digital (WDC), and Norwegian Cruise Line (NCLH), casting a shadow on the bullish start of the year.

International Manufacturing PMI

In international developments, China’s Caixin Manufacturing PMI has recoiled back into contractionary territory after expanding slightly for the past two months. Manufacturing PMI readings from Germany, France, U.K., Spain, and Italy also remain in contractionary territory, highlighting the challenges for recovery in the manufacturing sector.

U.S. Economic Data

Keeping an eye on today’s U.S. economic data:

• 9:45 ET: Final July S&P Global U.S. Manufacturing PMI
• 10:00 ET: June Construction Spending, July ISM Manufacturing Index, and June JOLTS- job openings

Corporate News

In corporate news, we saw various shifts:

Positive Results:

• Merck (MRK 108.45, +1.80, +1.7%): topped by $0.12, beat on revs, and provided an above-consensus EPS guidance for FY23.
• Caterpillar (CAT 269.20, +4.03, +1.5%): surpassed by $0.98, beat on revs.
• Uber (UBER 51.37, +1.91, +3.9%): beat by $0.19, however, missed on revs.

Negative Results:

• BP (BP 37.70, +0.40, +1.1%): missed by $0.26, missed on revs, but raised the dividend and increased its share repurchase program.
• CVS (CVS 74.50, -0.19, -0.3%): reportedly planning to cut 5000 jobs according to the Wall Street Journal.
• Pfizer (PFE 35.73, -0.33, -0.9%): topped by $0.10, missed on revs, reaffirmed FY23 EPS guidance but slightly lowered top end of FY23 rev guidance.
• ZoomInfo (ZI 20.46, -5.11, -20.0%): surpassed by $0.03, reported revs in-line; guided Q3 and FY23 EPS in-line, revs below consensus, also announced a $500 million share repurchase authorization; downgraded to Hold from Buy at Deutsche Bank.
• Western Digital (WDC 41.50, -1.06, -2.5%): beat by $0.04, beat on revs; guided SepQ EPS and revs below consensus.
• JetBlue Airways (JBLU 7.30, -0.47, -6.1%): beat by $0.01, reported revs in-line; guided Q3 and FY23 EPS below consensus.
• Norwegian Cruise Line (NCLH 20.48, -1.58, -7.5%): beat by $0.04, beat on revs; guided Q3 EPS below consensus; guides FY23 EPS in-line.

Mixed Results:

• Stanley Black & Decker (SWK 100.50, +1.23, +1.2%): surpassed by $0.25, beat on revs; guided FY23 EPS in-line.
• SBA Comm (SBAC 223.61, +4.66, +2.1%): beat by $0.09, reported revs in-line; raised FY23 FFO above consensus, raised revs in-line; declared dividend.
• Eaton (ETN 210.29, +4.97, +2.4%): topped by $0.10, beat on revs; guided Q3 EPS above consensus; raised FY23 EPS above consensus.

Earnings & Market Outlook

The disappointing earnings reports from some key players, including BMW AG (BMW), logistics giant DHL Group, and ZoomInfo Technologies Inc. (ZI), have led to the recent loss of momentum in the stocks rally. Pfizer Inc. (PFE) also slipped after reducing its sales outlook. These results raise questions about the durability of corporate earnings and whether stocks can continue to rally after their significant gains in July.

However, some strategists like John Stoltzfus of Oppenheimer Asset Management, are maintaining a bullish outlook on the S&P 500. Despite recent turbulence, Stoltzfus predicts further strength in stocks as the Federal Reserve nears a pivot and the US economy remains resilient, suggesting the market rally can run higher into 2024.

We anticipate investors to tread carefully as we await crucial decisions this week, such as the Bank of England’s interest rate decision and US employment figures. The upcoming earnings reports from tech heavyweights Apple Inc. and Amazon.com Inc. also hold the potential to sway market sentiment significantly.

In global currency markets, Treasury 10-year yields nudged higher while a gauge of dollar (BBDXY) strength climbed by about 0.4%. The Australian dollar declined against the greenback after the nation’s central bank unexpectedly held interest rates unchanged, leading traders to pare bets on further tightening.

China’s economic scenario appears less positive with home sales plunging by the most in a year last month. Furthermore, the Caixin PMI figures showing factory activity contracting in July emphasize the challenges the Chinese economy faces.

Wrapping Up

As we step into the new month, the market teeters on the brink of caution and optimism. On one hand, disappointing earnings reports and global economic indicators hint towards a need for caution. On the other hand, bullish predictions and strong performance by some companies offer a ray of optimism. As we navigate this market roller-coaster, crucial economic and corporate announcements in the coming days are likely to shape the trajectory of market sentiment.