Treasury yield data to show if more FED cuts are likely
Stocks for Alphabet drop 2% despite strong Q2, Tesla down 8% on weak margins, UPS down 12%, Spotify up 12%. S&P 500 futures fall 0.6%
US Tech Stocks Decline
Alphabet (GOOGL.O) saw its stocks fall by 2% despite a strong second quarter, mirroring the market’s lukewarm response to similar earnings beats from Netflix (NFLX.O) and TSMC (2330.TW). Tesla (TSLA.O) dropped 8% after reporting its lowest profit margin in over five years, attributed to price cuts aimed at boosting demand and increased spending on AI projects. UPS (UPS.N) shares plummeted 12%, whereas Spotify (SPOT.N) surged 12%. The S&P 500 futures declined by 0.6% as broader growth concerns resurfaced, influenced by another disappointing home sales report. The VIX volatility index nudged higher to 15.5.
US Election Impact
Vice President Kamala Harris’ likely nomination for the upcoming presidential election has influenced market sentiments. Her current poll ratings surpass Donald Trump’s, affecting the so-called Trump trades and stabilizing the markets in anticipation of her policies being similar to the current administration’s.
US Bond Market
The bond markets have benefited from the equity market’s uncertainty and a notable drop in crude oil prices, which fell nearly 7% over the past week. The yield on 2-year Treasury notes slid to 4.43%, following strong investor demand in the recent $70 billion auction. The upcoming 5-year Treasury auction is expected to draw significant interest.
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European Markets with Mixed Stocks Performance
European stocks presented a mixed picture. Deutsche Bank (DBKGn.DE) and BNP Paribas (BNPP.PA) faced declines, with Deutsche Bank particularly hard-hit. LVMH (LVMH.PA) dropped nearly 5% due to disappointing sales, primarily driven by weakened Chinese demand. The overall euro zone business activity showed a surprise contraction, further pressuring European markets.
Euro Zone Business Activity
Early July surveys indicated a contraction in euro zone business activity, adding to market anxieties. The impact was evident in the STOXX Europe 600 index, which was under pressure along with the euro.
Asian Markets: China and Hong Kong Stocks
Stocks of Asian markets were generally lower, with China’s CSI300 and Hong Kong indices declining. Concerns over China’s economic performance influenced market sentiment negatively across the region.
Currency Movements
The dollar index (.DXY) saw a slight increase, while the dollar/yen dropped to its lowest since May. Speculators have been closing profitable yen-funded “carry” trades, anticipating another interest rate hike in Japan. The Bank of Japan is set to review its policy next week.
Oil Market Price Decline
Crude oil prices experienced a sharp decline, falling nearly 7% over the past week. This marked the first year-over-year negative change since March, influenced by broader economic concerns and slowing global demand. This decline has contributed to easing inflation calculations, which could impact future monetary policies.
Corporate Earnings and Major Companies Stocks
Several major companies are scheduled to report their earnings, including AT&T, IBM, Ford, General Dynamics, Ameriprise Financial, CME, Fiserv, Boston Scientific, Allegion, Align Technology, Newmont, Nextera, Otis, Chipotle, Teradyne, International Paper, United Rentals, Westinghouse, Molina Healthcare, Thermo Fisher Scientific, Edwards Lifesciences, and Universal Health. AT&T saw a 3.9% rise in its stocks after meeting profit expectations, while Visa fell 3.6% after missing revenue forecasts.
Treasury Yields
The yield on the 10-year Treasury dropped to 4.23% from 4.25%, driven by weaker-than-expected business activity data and an unexpected drop in new home sales. This easing in Treasury yields has provided some stocks prices support.
Key Economic Data and Upcoming Reports
Key reports to watch include US flash business surveys for July, June new home sales, June trade balance, and June wholesale and retail inventories. Canada’s June house prices and the Bank of Canada’s policy decision are also significant. Dallas Federal Reserve President Lorie Logan and European Central Bank chief economist Philip Lane are scheduled to speak, providing further insights into economic outlooks.
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