OPENING CALL
Stock futures were falling on Wednesday with tech down sharply as investors continued to move away from stocks like Nvidia and into beaten-down smaller companies.
The small-cap Russell 2000 Index has risen for five straight sessions, and confidence that the Federal Reserve will cut rates as soon as September has underpinned the rotation.
Falls in equity futures helped underpin demand for U.S. government paper, though overall moves were meagre as traders awaited further guidance on the chances of Fed rate cuts in coming months.
Overseas Markets
Overseas stocks were mostly lower. Indexes fell in Europe, the U.K. and Japan. Hong Kong's Hang Seng Index was up 0.1%.
Premarket Movers
ASML 's upbeat results were overshadowed by a Bloomberg News report that the Biden administration is considering new restrictions on ASML's China business. Shares in ASML and Japan-listed rival Tokyo Electron both fell.
Five Below replaced its longtime chief executive and cut its outlook for the second quarter amid slower consumer spending. Shares fell more than 10%.
J.B. Hunt Transport Services reported a drop in quarterly profit due to lower freight revenue and higher insurance and equipment costs. Shares fell 2.9%.
Nvidia fell more than 3% as investors continued to move away from the big tech stocks that have dominated markets this year. Shares of Micron and Advanced Micro Devices also retreated.
Spirit Airlines fell 5.4% after the carrier reduced its sales forecast for the second quarter, saying it expects revenue of about $1.28 billion, below previous expectations, "due to lower-than-expected non-ticket revenue."
Post Close Movers
Aehr Test Systems said it is taking over Incal Technology, a manufacturer of computer peripheral equipment. Shares of Aehr rose 14%.
Bloom Energy partnered with CoreWeave, a cloud-infrastructure platform, to generate power at an artificial-intelligence-enabled data center. Shares rose 14%.
Watch For:
Housing Starts for June; Industrial Production and Capacity Utilization for June; EIA Weekly Petroleum Status Report; Johnson & Johnson earnings
Today's Top Headlines/Must Reads:
- Top Official Suggests Fed Is Closer-But Not Yet Ready-to Cut
- A New York City Pension Makes Renters' Rights an Investment Priority
- Wall Street Wants In on America's Battery Storage Boom
MARKET WRAPS
Forex:
The dollar could perform well over the summer as bets on Donald Trump winning the election offset prospects of interest-rate cuts, ING said.
The above-forecast retail sales data hasn't dented the chances that the Federal Reserve will cut rates in September, with money markets fully pricing this in, ING said.
"The reason why the dollar has been resilient despite the rise in dovish [rate-cut] bets is undoubtedly the emergence of 'hedges' for higher inflation, tariffs, and geopolitical risks ahead of a Trump re-election."
Periods of dollar outperformance this summer are therefore more likely, ING added.
Sterling extended earlier gains, rising to a one-year high above $1.30 against the dollar and a two-year peak against the euro, after U.K. inflation data threw prospects of an interest-rate cut in August "into yet more doubt," Monex said.
"A cut next month is likely to be a difficult sell having seen overall disinflation progress appear to stall this month."
U.K. annual inflation remained at 2% in June, against expectations for a slight fall, while core and services inflation stayed elevated.
Bonds:
Weak demand is likely for Wednesday's 20-year Treasury bond auction due to political uncertainties, lower liquidity, and less favorable yield curve positioning, while Thursday's 10-year Treasury Inflation-Protected Securities auction is expected to be more balanced due to attractive real yields and potential interest-rate cuts, Saxo said.
"Political uncertainty, particularly the potential for a Trump victory reigniting inflation fears, could deter investors."
If demand for the 20-year bonds increases, it could signal the onset of a short-term bond rally ahead of the Fed's anticipated interest rate cuts, despite continuing economic and political uncertainties, Saxo said.
Energy:
Oil edged higher, rebounding from earlier losses, as reports that U.S. crude stockpiles fell last week countered concerns over the demand outlook in China.
Prices were also supported by growing expectations that the Federal Reserve will start cutting rates in September, with the latest U.S. retail sales figures also damping fears of a slowdown in the economy.
Metals:
Gold futures reached a new all-time high as rate-cut hopes grew, Treasury yields fell and geopolitical tensions mounted.
Precious metals were gaining momentum as the market became increasingly certain that the end of this quarter will bring the first interest rate cuts from the Fed, Sucden Financial said.
Comex gold futures are likely to extend recent gains to test year-to-date resistance at $2,477/oz, based on the daily chart, RHB Retail Research said.
TODAY'S TOP HEADLINES
HSBC Names Georges Elhedery as Chief Executive
HSBC Holdings named Georges Elhedery as its new chief executive after the bank's current leader unexpectedly announced his retirement earlier this year.
Elhedery, HSBC's chief financial officer, will start his new position on Sept. 2, the bank said Wednesday. The 50-year-old, who was educated in France, has spent almost two decades at the bank and has experience working in Asia, the Middle East and Europe.
Roche Obesity Pill Achieves Positive Results in Early-Stage Trial
Roche Holding said a new weight-loss pill under development achieved positive results in an early-stage clinical trial, bolstering the company's efforts to enter the booming obesity market after another of its drugs showed weight-loss efficacy in May.
The Swiss pharmaceutical company is trying to get a slice of the market for drugs to treat obesity and diabetes currently dominated by Novo Nordisk and Eli Lilly. It entered the race through its $3 billion-plus purchase of Carmot Therapeutics, which gave Roche access to both oral and injectable drug candidates.
Charles Schwab Hints It's Time to Fix Its Hurting Bank Business
Charles Schwab may be best known for its brokerage platform, but it's the company's bank that is giving investors headaches-again.
Shares tumbled 10.2% after second-quarter earnings fell short on key metrics. Bank deposits fell and supplemental borrowings rose during the second quarter, dashing the hopes of investors who were seeking confirmation that Schwab had turned a corner on cash-sorting woes that bedeviled it last year.
Asia Economic Growth Outlook Steady But Risks Persist, ADB Says
Asia's economies seem to be on track for a solid year, as growth holds steady and inflation slows, even with risks tilted to the downside, the Asian Development Bank said in its latest report.
Resilient demand at home and strong exports are helping offset risks from trade and geopolitical tensions for Asia's developing economies, the multilateral bank said Wednesday. It nudged up its forecast for the year, projecting gross domestic product growth of 5.0% versus the 4.9% predicted in April. That compares with an expansion of 5.1% last year.
Musk Turbocharges Silicon Valley Support for Trump
Big names in tech are turning Donald Trump's way, a shift likely to be accelerated by excitement over Elon Musk's nine-figure commitment and former venture capitalist JD Vance joining the ticket.
Those two developments have punctuated a brewing cultural change in traditionally liberal Silicon Valley, as investors and executives announce their support for Trump over issues including the Biden administration's stance on artificial-intelligence regulation and crackdowns on acquisitions by big tech. Some say following Biden's poor debate performance and Trump's response to this weekend's assassination attempt, there is more momentum and permission to support the Republican.
Heightened Iranian Threat Against Trump Prompted More Security Ahead of Assassination Attempt
WASHINGTON-The Biden administration in recent weeks determined there was an increased threat from Iran against former President Donald Trump that was serious enough to prompt additional security measures for the former president, a U.S. national security official said on Tuesday.
The threat had no apparent connection to the attempted assassination of the former president in Pennsylvania on Saturday by a gunman identified as Thomas Matthew Crooks, U.S. officials said. Instead, it was part of ongoing attempts by Iran to retaliate for the January 2020 U.S. drone strike that killed Qassem Soleimani, feared leader of Iran's Quds Force, which is responsible for Iran's covert military operations abroad.
Security Detail for Ex-Top Trump Official Denied by Biden Administration
WASHINGTON-The Biden administration has declined for almost a year to provide security to Robert O'Brien, a former national security adviser in the Trump White House, despite behind-the-scenes pressure from lawmakers and what they describe as continuing threats against his life.
Rep. Mike Turner of Ohio, the Republican chairman of the House Intelligence Committee, wrote two letters to President Biden over the past year or so requesting that the administration reinstate O'Brien's Secret Service protective detail, which was ended with no explanation on Aug. 1, 2023. Turner also met with the Secret Service and national security adviser Jake Sullivan on the matter, to no avail.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
None Scheduled
Economic Indicators (ET):
0830 May International Transactions in Securities
Stocks to Watch:
Birks Group FY24 Sales C$185.3M; FY24 Loss/Shr C$0.24
Chesswood Group: Waiver Under Credit Facility, Which Was to Expire on July 15, Has Been Extended to Aug 2
StorageVault to Buy C$71.5M of Assets; Updates Previously Announced Transactions
(MORE TO FOLLOW) Dow Jones Newswires
07-17-24 0625ET
