Market Snapshot
As the last day of the second quarter arrives, the stock market is projected to head higher at the open, in line with the trend observed throughout Q2. With modest gains in other mega-cap stocks more than offsetting some weakness in Nike (NKE) post its earnings report, US equity futures gained while Treasuries extended a selloff, fueled by strong US economic growth and jobs data. The Treasury two-year yield rose about four basis points to 4.91%, and the 10-year yield increased three points. Swap markets now indicate a nearly 50% chance of a second US hike by year-end.
Market Movers
Apple (AAPL) is leading the way with shares trading 0.9% higher, pushing the company’s market cap above $3 trillion after Citigroup began coverage of the stock with a Buy rating and $240 price target. On the flip side, shares of Nike (NKE) are trading lower following its earnings report. Notable moves were also observed in stocks like Progress Software (PRGS), Adobe (ADBE), Dominion Energy (D), Smart Global Holdings (SGH), and Bausch & Lomb Corp. (BLCO).
Corporate Updates
Apple (AAPL): Citigroup initiates coverage with a Buy rating and $240 price target.
Nike (NKE): Misses earnings estimate by $0.02, but beats on revenue; gross margin decreased 140 bps year/year, inventories remained flat, and Greater China revenue up 25% in constant currency.
Progress Software (PRGS): Beats estimates on both earnings and revenues and provides an upbeat forecast for Q3 and FY23.
Adobe (ADBE): UK’s CMA refers case involving Adobe’s acquisition of Figma to phase two.
Dominion Energy (D): Lowers Q2 EPS guidance due to the impact of mild weather, unplanned outages at the Millstone Power Station, and other factors.
Smart Global Holdings (SGH): Beats on earnings and revenues, guides Q3 in-line with expectations.
Bausch & Lomb Corp. (BLCO): The company is reported to pay $1.75 billion for eye drug from Novartis (NVS).
Economic News
The May Personal Income and Spending Report is the featured economic release at 8:30 a.m. ET, which will also include the PCE Price Index and Core-PCE Price Index, the Fed’s preferred inflation gauge. The numbers are expected to show some softening while still indicating inflation remains sticky.
Overnight, China’s June Manufacturing PMI checked in at 49.0, as expected, yet that remains below the expansion line of 50.0. Separately, headline inflation in the eurozone improved to 5.5% YoY in June from 6.1%, but core inflation moved up to 5.4% YoY from 5.3%.
Inflation and Interest Rate Outlook
Analysts believe the Federal Reserve may be faced with more difficult decisions in July, given the tightening already put in the system that still has to play out. Meanwhile, the European Central Bank may be inclined to raise interest rates next month, given that core prices in the eurozone re-accelerated.
Global Markets
Contracts for the S&P 500 rose about 0.3%, and Nasdaq 100 futures added 0.5%. The Stoxx Europe 600 index climbed more than 1%. Yields on European bonds retreated from session highs and the euro pared a decline after inflation data in the eurozone slowed more than expected. However, the yen weakened
against the dollar for the first time since November.
Commodities
Brent crude oil is set for the worst quarterly run of losses in three decades, given persistent concerns over the demand outlook and robust supplies.
Conclusion
As the second quarter concludes, markets are weighing in the impacts of inflation, central bank actions, and corporate earnings. Investors are keenly watching for upcoming economic data, specifically inflation measures, and their potential impact on market dynamics.
