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Morning Briefing for July 25, 2023

U.S. Stock Market Overview

With yesterday’s advancement marking the Dow Jones Industrial Average’s eleventh consecutive gain, the stock market is geared for a higher open. Investors are keenly observing as the earnings season gains momentum. Today, Alphabet (GOOG) and Microsoft (MSFT) are slated to release their key reports after the close of business. The overall market has benefited from some gains in mega-cap stocks and strong results from a number of blue chip companies.

Asian Markets and Stimulus

Chinese markets saw a significant surge with the Hang Seng Index growing by 4.3% and the Shanghai Composite Index by 2.1%. These gains are largely due to rumors of an increase in policy stimulus.

Bonds and Federal Reserve

In bond news, the 2-year note yield has decreased by a basis point to 4.87%, while the 10-year note yield increased by three basis points, standing at 3.89%. The FOMC begins its two-day policy meeting today, with a new policy directive to be announced on Wednesday at 2:00 p.m. ET, followed by Fed Chair Powell’s press conference at 2:30 p.m. ET.

Economic Data Release

Market participants can look forward to the release of the following economic data today:

  • 09:00 ET: May FHFA Housing Price Index (Prior 0.7%)
  • 09:00 ET: May S&P Case-Shiller Home Price Index ( Consensus -1.9%; Prior -1.7%)
  • 10:00 ET: July Consumer Confidence ( consensus 111.5; Prior 109.7)

Corporate News

In corporate news, several companies reported their earnings with varying results:

  • Goldman Sachs (GS 357.05, -1.88, -0.5%) was downgraded to Neutral from Buy at Citigroup.
  • General Motors (GM 39.99, +0.69, +1.8%) exceeded earnings estimates by $0.05, and reported higher revenues. It has also raised FY23 EPS above consensus, and increased its FY23 adjusted EBIT guidance.
  • 3M (MMM 106.45, +2.18, +2.1%) beat earnings estimates by $0.44 and reported higher revenues, raising FY23 EPS in line with expectations.

Pre-Market Analysis

US equity futures have been fluctuating as risks from upcoming earnings from technology megacaps and this week’s Federal Reserve meeting restrict movement. Contracts for the S&P wavered as investors are waiting for reports from Microsoft Corp. and Alphabet Inc., both of which saw premarket trading gains.

“As long as earnings continue to exceed expectations, the market can continue to move higher,” says Brad Bernstein, managing director at UBS Wealth Management. S&P 500 companies valued at a collective $16.3 trillion will be releasing earnings reports this week, among them General Motors Co., General Electric Co. and Kimberly-Clark Corp., who have already raised their earnings guidance after surpassing expectations. European shares also edged higher, with resource firms such as Anglo American Plc and Rio Tinto Plc benefiting from Chinese authorities’ latest stimulus pledge.

Investors appear hesitant to make significant moves amid uncertainties about potential signals from Federal Reserve and European Central Bank policymakers.

European Markets and Economic Indicators

European market sentiment took a hit from a Euro-area bank lending survey, which reported a record drop in loan demand from companies in the bloc. Concurrently, a gloomy business outlook reading from Germany raises questions over the ECB’s capacity to hike interest rates much beyond the 25 basis points priced for this Thursday’s meeting.

U.S. Economic Outlook

In contrast, in the US, expectations for the economy to evade a sharp recession are rising. Data due later this week is anticipated to show second-quarter annualized growth at 1.8%, only a slight decrease from the previous quarter. This optimism has boosted the Dow Jones Industrial Average by 5% this month, the longest winning streak in over six years.

Commodity Prices

Commodity prices were mostly up after Chinese leaders used this week’s Politburo meeting to signal more aid to the economy. Oil prices were steady near three-month highs, while copper and iron ore saw an increase, given their significance for China’s construction sector. US-listed Chinese stocks also extended their rally in premarket trading.

Currency Market

In currencies, the Bloomberg’s Dollar Spot Index was in the red, potentially ending five sessions of gains, while the euro hovered near a two-week low against the greenback. Investors are now looking forward to hearing about Chinese consumer trends from LVMH, Europe’s largest company, when it reports later in the day.




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