Market Summary

Stock futures were mixed in the early morning trading hours today, following the significant sell-off in big tech stocks that occurred yesterday. Yet, investors continue to exhibit a propensity to purchase during periods of weakness, a trend that has been a boon for the broader market. This trend has primarily contributed to the outperformance of the Nasdaq 100 futures.

Treasuries were relatively unchanged from yesterday’s settlement levels, with the 2-year note yield holding steady at 4.84%, and the 10-year note yield slightly decreasing by one basis point to 3.84%.

The U.S. Dollar Index saw a minor surge of 0.2%, standing at 101.08, while the USD/JPY increased significantly by 1.2% to 141.73. This depreciation in the yen comes in the wake of a Bloomberg report that suggested the Bank of Japan (BOJ) officials currently do not see an urgent need to tackle the side effects of the yield curve control program.

Corporate News

Several significant corporate earnings reports were released:

• American Express (AXP) exceeded earnings estimates by $0.08 but missed revenue targets, leading to a 3.1% drop in stock price. They reaffirmed their FY23 EPS and revenue guidance.
• Knight-Swift (KNX) fell short on both earnings and revenues, causing a stock price dip of 3.3%. Their EPS guidance for FY23 also fell below consensus.
• CSX Corporation reported in-line EPS and revenues, yet saw a decrease of 3.9% in its share price.
• Capital One (COF) beat the expected earnings by $0.26, albeit missing on revenues. They also reported a 2% decrease in deposits.
• Sunnova Energy (NOVA) was downgraded from Outperform to Market Perform at BMO Capital Markets.
• Carvana (CVNA) was downgraded to Neutral from Overweight at Piper Sandler.
• Intuitive Surgical (ISRG) beat earnings expectations by $0.09, with revenues in-line. They also reported a 22% increase in da Vinci procedures, albeit negatively impacted by COVID-19 cases and increased hospitalizations.
• PPG Industries (PPG) exceeded earnings expectations by $0.11, with revenues in-line. Their Q3 EPS guidance is in-line with the FY23 EPS guidance.
• Digital World Acquisition Corp (DWAC) saw a rise in its stock price by 19.7% as SEC announces settled fraud charges.
• Schlumberger (SLB) reported earnings that slightly beat expectations by $0.01, but missed on revenues.
• Interpublic (IPG) exceeded both earnings and revenue estimates.
• AutoNation (AN) surpassed both earnings and revenue forecasts.

Forex & Commodities

The yen tumbled as much as 1.4% among the Group-of-10 currencies due to speculation that the BOJ will not alter its yield curve control program. The Bloomberg dollar gauge extended gains to a fourth day, marking its longest winning streak since May.

In commodities, wheat prices fell by about 3% as Ukraine continues its grain-export deal, a contract Russia opted out of earlier this week. However, the grain is still set for a weekly gain of 7%, following threats to ships arriving at Black Sea ports, which had previously caused a surge in prices.

Market Outlook

The focus remains on whether the rally in a handful of mega-cap stocks and the hype over artificial intelligence can maintain momentum. The S&P 500 has already surpassed most estimates for its year-end position, leaving strategists puzzled as they anticipated 2023 to be another challenging year for markets on the brink of recession.

The Nasdaq 100’s restructuring, designed to reduce the influence of mega-caps and enhance the presence of smaller members, coincides with a monthly options event, creating a nervous anticipation among traders. Corporate earnings and next week’s Federal Reserve policy meeting are key factors that could provide insight into the market’s trajectory.

Economic Data and Upcoming Events

There is no notable U.S. economic data scheduled for release today. However, traders are keenly observing the labor-market’s resilience, which strengthens the case for another Fed hike this year.

Investors withdrew $2.1 billion from equity funds for the week ending on July 19, according to a note from Bank of America citing EPFR Global data. In contrast, money markets added $7.5 billion, and bond funds gained $1.4 billion.

In the coming week, investors’ attention will be focused on earnings reports from Alphabet Inc., Exxon Mobil Corp., Meta Platforms Inc., and Microsoft Corp. The outcome of these reports could potentially sway market sentiment and shape the course of trading.

In conclusion, while stock futures have been mixed, the tech-heavy Nasdaq 100 has been able to outperform, backed by a continued inclination to buy on weakness. Despite mixed corporate earnings, investors are looking forward to significant earnings reports in the coming week and the Federal Reserve policy meeting, which could provide direction to the markets. The yen and the dollar’s movements and shifts in commodities like wheat also continue to make headlines.