Signals Logo

Morning Briefing: July 20th, 2023

Market Overview

As the market swings open its doors for another trading day, stock futures are seen in a mixed state, fueled by an array of earnings news that blend strength and weakness. Anxiety grows among participants about the market being overbought and potentially due for a downward correction. Earnings surprises from stalwarts such as Tesla (TSLA) and Netflix (NFLX), which are recording significant declines post their second quarter reports, are causing ripples across the broader market, although the Dow Jones Industrial Average futures buoyantly outperform thanks to positive earnings news from Travelers (TRV) and Johnson & Johnson (JNJ).

In an uneventful turn, the People’s Bank of China holds its one-year and five-year loan prime rates steady, raising no dust in the central bank arena. Despite the calm, treasury yields show a northward movement with the 2-yr note yield adding five basis points to reach 4.81% and the 10-yr note yield gaining four basis points to arrive at 3.78%.

Economic Data & Corporate Earnings Releases

Today, market participants await the release of a few key economic data points:

  • At 8:30 ET, the Weekly Initial Claims ( consensus 240,000; prior 237,000), Continuing Claims (prior 1.729 mln), and the July Philadelphia Fed Survey ( consensus -9.0; prior -13.7) are slated for release.
  • At 10:00 ET, June Existing Home Sales ( consensus 4.25 mln; prior 4.30 mln) and June Leading Indicators ( consensus -0.6%; prior -0.7%) data will be revealed.
  • Weekly natural gas inventories data (prior +49 bcf) is scheduled for 10:30 ET.

An array of corporate earnings are also set to punctuate the trading day:

  • Tesla (TSLA): Despite beating estimates, shares are down 4.0% after reporting a GAAP gross margin of 18.2% and reaffirming FY23 guidance for deliveries of about 1.8 mln.
  • Netflix (NFLX): Shares are down 6.2% even though the company beats on EPS. However, NFLX missed revenue expectations and issued lower than expected Q3 revenue guidance.
  • United Airlines (UAL), Johnson & Johnson (JNJ), and D.R. Horton (DHI) all posted positive earnings surprises and have seen their stocks move higher.
  • Notable underperformers include Taiwan Semiconductor Manufacturing (TSM), down 3.5%, IBM, down 0.9%, and American Airlines (AAL), down 1.3%.

Tech Stocks Weigh Heavy

Tech heavyweights appear to be the spoilsports this Thursday as weaker than anticipated earnings cast a shadow over the stellar first-half performance of the Nasdaq 100 this year. Futures on the Nasdaq 100 are down 0.7%, mainly due to NFLX and TSLA’s performance, which in turn has caused traders to tread cautiously on the tech-dominated Nasdaq’s rally, currently up by 45% this year, significantly outpacing the S&P 500’s 19% rise.

Tech Earnings Cast a Pall Over Broader Market

Market strategist Cameron McCrimmon at Aegon Asset Management suggests these lofty returns driven by a select few tech stocks might be “overdone” and warns of an imminent downturn. He notes, “The breadth of returns on the S&P 500 has become increasingly narrow, driven by a few mega-cap tech stocks on AI optimism, which is a classic sign of an ageing bull.”

Market Risks & Opportunities

A US recession is being touted as a real possibility this year as central banks persist with policy tightening measures to get inflation back to their 2% targets.

In Europe, a slump in tech stocks, particularly ASML Holding NV after Taiwan Semiconductor Manufacturing Co. revised its outlook downward, was somewhat offset by Anglo American Plc’s second-quarter beat.

Investors are also mulling over the potential for agricultural commodities to drive inflation higher, with wheat prices extending their surge following Russia’s threat against ships headed to Ukraine.

Currency Market Movements

The dollar is currently declining against its Group-of-10 counterparts as the gauge of the greenback extends its month-to-date weakness. Meanwhile, the offshore yuan appreciates 0.7% against the dollar, standing out as the best performing currency in Asia today. This followed the People’s Bank of China’s intervention, setting its daily fixing of the yuan with the largest bias since last November.

However, China’s efforts to spur growth, including cutting rates and ending the regulatory crackdown on tech firms, have so far shown little effect on invigorating the world’s second-largest economy.




Get Daily Briefing Update

With our daily briefing updates, you can rest assured that you are making decisions based on the latest, most trustworthy information available.

Affiliate Application

Fill out the form below, and we will get you set up to start making money! 


Contact Information
Social Accounts
How much time do you have to do this?