Stocks Waver Ahead of CPI and Warsh as IBM Sinks: Markets Wrap
(Bloomberg) — US stocks struggled for direction as traders refrained from taking on risk on a busy day that kicked off with Wall Street earnings. Kevin Warsh’s testimony before Congress and inflation data are due later.
S&P 500 futures fluctuated. Technology stocks got a lift, with South Korea’s memory giants rebounding and Nasdaq 100 contracts rising 0.5%. Brent crude climbed above $86 a barrel to the highest level in a month as the US and Iran grew increasingly hostile over the status of the Strait of Hormuz. International Business Machines Co. slumped in premarket trading on a revenue miss.
Higher crude prices kept bets on a July US interest rate increase in place, with swap markets signaling a nearly 40% chance of a hike when the Federal Reserve meets later this month. The yield on two-year UK gilts touched the highest level since May. Treasuries edged higher and the dollar fell.
The event-filled calendar began with a mixed reaction to Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co.’s earning. Citigroup Inc. is also due to report before the US market opens.
June consumer price data is expected to show some relief after inflation accelerated rapidly from March through May. Federal Reserve Chair Warsh is scheduled to testify before House members hours later.
“Geopolitics on the margin is a negative, but the oil price has not spiked dramatically,” said Richard Flax, chief investment officer at Moneyfarm. “I expect Warsh will give a sort of data-driven speech rather than say too much about forward guidance. For us, it’s more about the inflation data.”
In Europe, Ericsson AB’s shares fell as much as 10% after warning that margins in its main networks business will come under pressure. The Stoxx 600 slid 0.4%, dragged down by the travel and leisure sector, alongside weakness in media and retail shares.
Money markets see at least one Bank of England and one European Central Bank rate hike this year, while leaning strongly toward a second in December.
In a sign of confidence that the artificial-intelligence buildout will keep on fueling demand for chips, people familiar said Samsung Electronics Co. is exploring a potential offering of American depositary receipts. Semiconductor stocks bounced in early US trading after Monday’s rout.
“This suggests that the Nasdaq could break its short-term negative correlation with the oil price, and rise alongside energy prices if this continues,” wrote Kathleen Brooks, research director at XTB.
While economists surveyed by Bloomberg expect the consumer price index to notch its first monthly decline since the onset of the pandemic in 2020, the trajectory could reverse if the current bump in crude is sustained. The annual reading is expected to remain far above the Fed’s target of 2%.
In an escalation of the standoff between the US and Iran over the Strait of Hormuz, President Donald Trump reinstated the blockade of Iranian ships transiting the waterway and demanded a 20% reimbursement for all other cargo. US forces also completed another round of strikes against the Islamic Republic.
“We know the market can sustain far higher oil prices and US stocks keep rising,” said Alpesh Patel, managing partner at RootBridge Capital. “The only thing that matters is any indication rates are going to rise.”
Corporate News:
Goldman Sachs Group Inc. blew past its own Wall Street stock-trading records, posting $7.42 billion for a quarter that saw indexes rip higher and ongoing market volatility around artificial intelligence and war in the Middle East. JPMorgan Chase & Co. reported its highest quarterly profit ever as stock traders blew past analysts’ estimates and a long-held Visa Inc. stake paid off to the tune of $4.6 billion. Bank of America Corp.’s stock traders notched a record during the second quarter, benefiting from market volatility, while its investment bankers capitalized on a dealmaking resurgence. Wells Fargo & Co. reported second-quarter earnings that beat Wall Street estimates on higher fees from wealth management and investment banking. International Business Machines Corp. reported preliminary quarterly sales results that missed analysts estimates with Chief Executive Officer Arvind Krishna saying customers were holding back spending. The shares dropped. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.1% as of 7:41 a.m. New York time Nasdaq 100 futures rose 0.5% Futures on the Dow Jones Industrial Average fell 0.5% The Stoxx Europe 600 fell 0.4% The MSCI World Index was little changed Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1400 The British pound rose 0.2% to $1.3378 The Japanese yen rose 0.1% to 162.22 per dollar Cryptocurrencies
Bitcoin rose 1% to $62,782.03 Ether rose 1.7% to $1,796.28 Bonds
The yield on 10-year Treasuries declined one basis point to 4.61% Germany’s 10-year yield advanced one basis point to 3.12% Britain’s 10-year yield advanced three basis points to 5.00% Commodities
West Texas Intermediate crude rose 2% to $79.74 a barrel Spot gold rose 0.6% to $4,027.67 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from James Hirai.
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