MARKET WRAPS
Watch For:
ISM Report on Business Manufacturing PMI; Construction Spending; Canada Manufacturing PMI; earnings from Caterpillar, Merck, Pfizer, Starbucks, Uber
Today's Headlines/Must Reads
- Earnings Season Threatens Lofty Stocks
- BlackRock, MSCI Face Congressional Probes for Facilitating China Investments
- Carbon Offset Market Opens to Small Southern Timberland Owners
- DeSantis Super PAC Has $97 Million, Trump Committees Burning Cash on Legal Bills
Follow WSJ markets coverage here .
Opening Call:
Stock futures pulled back from 16-month highs on Tuesday as caution prevailed after a five-month winning streak.
News out of China--where data showed factory activity contracting and home sales plunging, and Country Garden, one of the biggest property developers, abandoning a share placement--was suppressing risk appetite.
Read China Caixin Manufacturing PMI Slips Into Contraction
Still, the S&P has gained 19.5% so far in 2023 as investors welcomed cooling inflation and hope that the Federal Reserve can soon stop interest rate rises having not badly damaged the economy.
The Fed may need to see evidence of easing inflationary pressures emanating from the labor market and so investors will be keenly eyeing jobs data over the rest of the week.
"The current economic conditions, including decreasing inflation, a pause in Federal Reserve tightening, and steady or increasing growth, could create an ideal situation for the stock market. For a while now, the market has responded positively to the idea of a smooth transition to a stable economic environment," SPI Asset management said.
Premarket Movers
Arista Networks posted better-than-expected second-quarter earnings and said it expects third-quarter revenue of between $1.45 billion and $1.5 billion, higher than analysts' forecasts of $1.39 billion. The stock rose 14%.
Avis Budget reported second-quarter profit that beat analysts' expectations. The stock rose 1.6%.
Harmonic was down 12% after it issued an outlook for the third quarter and year that were below analysts' estimates.
Shares of ZoomInfo Technologies fell 17% after it reduced its full-year revenue guidance. ZoomInfo
Forex:
The strength of the U.S. economy compared with the eurozone is expected to benefit the dollar in August and weigh on EUR/USD, Danske Bank Research said.
Danske Bank agrees on the market pricing with respect to the Federal Reserve's terminal rate--with no further rate rises priced--but it isn't convinced the Fed will cut rates early next year, as pricing currently suggests.
TD Securities said the dollar is likely to benefit from seasonal factors in August and the market should be "highly sensitive" to relative data that favors the U.S. economy in the short-term.
TD favors using any dollar rallies in the next few weeks as a selling opportunity, having lowered its conviction levels on the dollar over the next month after the Fed signalled rates could be at or near their peak in its last meeting.
Energy:
Oil prices paused after closing their best month in more than a year, with the rally built on "signs of tightening in the market together with China stimulus hopes offering some upside to the demand outlook," Saxo said.
Expectations that Saudi Arabia could extend its production cuts in September and Russia could continue reducing oil exports were also boosting prices.
Read Goldman Sachs Raises Oil Deficit Forecasts on Saudi, Russian Supply Cuts
Metals:
Base metals and gold were lower as an uncertain macroeconomic outlook and a rising dollar pegged back prices. This after Chinese manufacturing data this week indicated that industry is still contracting.
"The spluttering economic recovery has spurred measures from Beijing," ANZ said, adding that moves to support housing and car purchases are signs of positive stimulus.
Elsewhere, Chilean copper producer Codelco, the world's largest producer of the industrial metal, recently lowered its annual production guidance.
Read Investor, Central Bank Demand For Gold Wanes As Interest Rates Start to Peak
TODAY'S TOP HEADLINES
BP Profit Declines More Steeply Than Peers' as Lower Oil and Gas Prices Bite
LONDON-British oil giant BP said its second-quarter profit dropped almost 70% from its year-ago bonanza, as lower commodity prices and weak refining margins hit results.
The oil major's profit missed market expectations and fell more sharply compared with roughly 50% declines recorded by bigger rivals Exxon Mobil, Shell and Chevron. BP trimmed its quarterly share buyback to $1.5 billion from $1.75 billion announced last quarter while modestly boosting its dividend.
CVS to Shed 5,000 Jobs in Cost-Cutting Push
CVS Health said it is shedding about 5,000 jobs to help reduce costs as the retail pharmacy giant sharpens its focus on healthcare services.
The company on Monday said in a statement that the jobs affected are primarily corporate positions. CVS said it doesn't expect customer-oriented roles in stores, pharmacies and clinics will be affected in the layoff plan.
Elon Musk's X Sues Nonprofit That Accused It of Allowing Hate Speech
Elon Musk's social-media company is suing a nonprofit that has accused the platform of allowing the proliferation of hate speech, escalating a continuing clash between the billionaire and the research group.
X Corp., formerly Twitter, alleges in a lawsuit filed Monday in federal court that the group, the Center for Countering Digital Hate, prepares its research using flawed methodologies to censor viewpoints it disagrees with.
The Allure of Beauty Stocks Is Fading
Beauty stocks are losing their glow.
The cosmetics industry historically has been more resilient than other discretionary categories during inflationary periods because consumers are reluctant to alter their grooming habits. Yet companies are now grappling with challenges including changes in consumer tastes and spending patterns, a slower-than-expected rebound in demand from China and a rise in theft.
Some Companies Shun Long-Awaited Trans-Atlantic Data Agreement
Some businesses are holding off on signing up for a long-awaited new data agreement between the U.S. and the European Union, waiting to see whether the benefits outweigh the risks.
After three years of negotiations, the EU gave final approval in July to a new deal that allows companies to store data about Europeans on U.S. soil. Companies can sign up to use the new framework, potentially simplifying how they handle personal data. Still, some corporate privacy officers said they are in no rush to do so, waiting to see whether the new agreement will be challenged in court and whether continuing to use existing privacy contracts, although it is more work, might make more sense.
Fast Fashion Aims to Mend Its Image With Repairs
Fast-fashion retailers including H&M, Uniqlo and Zara have for years enticed shoppers to buy more and more new clothes. Now these brands are pushing consumers to repair their old ones, too.
The moves come as the fashion industry works to burnish its green credentials amid pressure from consumers and regulators to lessen its environmental impact. Repairing clothes rather than throwing them away reduces waste and means fewer resources are used to make replacements.
RBA Extends Rate Pause for Second Month as Inflation Cools
SYDNEY-The Reserve Bank of Australia left its official cash rate on hold Tuesday, extending its policy pause for a second month, but it left the door open to tightening further if inflation remains sticky and the job market stays tight.
The OCR was maintained at 4.10%, with economists largely split on the RBA's verdict ahead of the policy meeting.
'Anti-woke' fallout? BlackRock, Fidelity and other asset managers soften climate-change efforts, report says
The world's largest asset managers remain far off track to meet their commitments to claim net-zero carbon emissions by 2050, according to a global study released by FinanceMap during European hours Tuesday.
It's arguably a softening of the financial fight to slow climate change that happens to coincide with select U.S. states' actions to limit what some claim is "woke" investing, or using a screen on investments that includes environmental, social and governance (ESG) considerations, report authors stressed.
DeSantis Super PAC Has $97 Million, Trump Campaign Committee Burning Cash on Legal Bills
Political groups supporting Republican presidential contenders on Monday reported having tens of millions of dollars in the bank to help their favored candidates, while also footing the bill for expensive advertising, polling operations and-in the case of former President Donald Trump-millions more in legal fees.
Never Back Down, the super PAC supporting Florida Gov. Ron DeSantis, reported nearly $97 million on hand at the end of June. Make America Great Again, Trump's super PAC, reported cash of about $31 million. The two super PACs topped the field of presidential-hopeful committees reporting fundraising and expense totals to the federal government.
Why the Nation's Gun Laws Are in Chaos
The Supreme Court last summer sought to clarify its expansive reading of the Second Amendment. Instead, it set off chaos.
The decision in New York State Rifle and Pistol Association v. Bruen decreed that gun-control laws of today must have a clear forerunner in weapons regulations around the time of the nation's infancy, regardless of the modern public-safety rationale behind them.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings [2Q unless stated otherwise]:
5N Plus
Altius Renewable Royalties
Andlauer Healthcare
Dundee Precious Metals
EQB
First National Financial
Hammond Power Solutions
International Petroleum
Neighbourly Pharmacy [1Q]
OceanaGold
Thinkific Labs
Trican Well Services
Economic Calendar (ET):
0930 Jul Manufacturing PMI
Stocks to Watch:
(MORE TO FOLLOW) Dow Jones Newswires
08-01-23 0616ET
