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Morning Briefing: July 13, 2023

Stock Futures

Stock futures are trending higher, riding on carryover momentum and continued buying interest in mega cap stocks. Speculators indicate a strong fear of missing out on potential gains, thereby driving continued strength. The broad ‘risk-on’ sentiment has led to an appreciable weakening of the dollar to a 15-month low.

International Trade

In China, June’s trade data shows a larger than expected year-over-year decline in both imports and exports. This is fueling speculation of potential policy stimulus in response to the economic downturn. In South Korea, the Bank of Korea kept its base rate steady at 3.50%, but left room for a possible rate hike in the future.

US Treasury & Dollar Index

U.S. Treasury yields are showing a downward trend this morning. The 2-yr note yield has dropped seven basis points to 4.67% while the 10-yr note yield is down three basis points to 3.82%. The U.S. Dollar Index has also decreased by 0.3% to 100.24.

Corporate Updates

In corporate news, Delta Air Lines and PepsiCo both beat expectations on revenues and EPS. Delta has raised its Q3 EPS guidance, while PepsiCo has raised its FY23 EPS. Tesla is reportedly in discussions with India regarding a potential factory location. Walt Disney’s Robert Iger has agreed to continue his tenure as CEO until the end of 2026. Cirrus Logic announced a workforce reduction of approximately 5% due to overall market conditions, with its CEO, John Forsyth, reducing his base salary by 10%. Negative news came from Carvana, Coinbase, SoFi Technologies, Cryoport, and Fastenal, which all underperformed relative to expectations.

European and Asian Markets

In Europe, stocks continue to rise following Wednesday’s rally. Swatch Group AG and Watches of Switzerland Group Plc saw significant jumps due to China’s reopening and a rise in profits. However, UK homebuilders faced declines due to rising interest rates impacting the housing market. In Asia, the MSCI Asia Pacific Index is heading for a high close, with Hong Kong stocks seeing notable gains.

Currency and Bond Yields

On the currency front, the British pound is rallying for a sixth day, after data indicated that the UK economy shrunk less than expected in May. Bond yields are lower as investors unwound bets on an imminent Fed rate hike.

Inflation and Fed Rates

Inflation in the US seems to be easing, with the consumer price index sliding to 3% YoY in June. Traders expect the Fed to go ahead with a rate hike this month, although the likelihood of further hikes appears to be receding.

Focus for the Week

The focus for the rest of the week is on the second-quarter earnings season, with reports from the big US banks due on Friday. Crude oil remains steady, and iron ore rises despite disappointing Chinese trade data.

Stay tuned for more updates at 8:30 a.m. ET, with the Producer Price Index for June and the weekly initial jobless claims report set to be released.




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