Wall Street is on the defensive Tuesday as Treasury yields fall, the dollar finds safe-haven bids and Walmart revives consumer spending hopes.
U.S. equity futures were little-changed Tuesday, while the dollar hit a one-week high against its global peers in safe-haven trading and Treasury bond yields moved lower, as investors adopted a cautious stance ahead of retail earnings and sales data slated for the next two sessions.
A solid run of weekly gains for U.S. stocks, the best since November of last year, was extended yesterday as investors shrugged-off weak China data and slumping oil prices to add around 0.3% to the S&P 500 by the close of the session.
China’s stumbling growth, linked in part to its ‘zero Covid’ health policies, is clipping commodity prices in markets around the world and triggering a mini-rally for the dollar, which rose to a one-week high of 106.609 against its global peers in overnight trading.
Here at home, second quarter earnings from Walmart (WMT) – Get Walmart Inc. Report and Home (HD) – Get Home Depot Inc. (The) Report Depot will arrive before the bell, as well a key reading of July housing starts that follows a slump in homebuilders’ confidence reported last night by the National Association of Home Builders.
The data is unlikely to shake confidence in the broader economy, however, with the Atlanta Fed’s GDPNow forecasting tool showing third quarter growth advancing at a 2.5% clip following stronger-than-expected July jobs data and still-expanding manufacturing activity.
That optimism was evident in data from Bank of America’s closely-watching Global Fund Managers’ Survey, published Tuesday, which showed a big August rotation into U.S. stocks and, for the first time in two years, indicated that investors see growth stocks outperforming value stocks over the next twelve months.
Inflation concerns, however, remain at the forefront, particularly with minutes of the Fed’s July policy meeting due for release on Wednesday, as bets on a 75 basis point rate hike — the third in succession — hold at 40.5% heading into the Fed’s September decision, according to the CME Group’s FedWatch.
In other markets, oil prices were marked modestly higher in early New York trading, although U.S. crude remains firmly below the $90 per barrel, following Sunday’s disappointing industrial output data from China and a ramp-up in U.S. production that has domestic output pegged at around 12.2 million barrels per day.
WTI crude futures for September delivery were marked 41 cents higher at $89.92 per barrel while Brent contracts for October, the global benchmark, rose 6 cents to $95.16 per barrel.
Benchmark 10-year Treasury note yields fell 3 basis points in overnight trading to 2.797% while 2-year notes were 5 basis points lower at 3.201%.
In overseas markets, Europe’s Stoxx 600 added 0.33% in early Frankfurt trading while overnight in Asia the region-wide MCSI ex-Japan index fell 0.07%.
On Wall Street, futures tied to the S&P 500 are indicating a modest 4 point opening bell dip while those liked to the Dow Jones Industrial Average are priced for a 10 point slip. Futures linked to the tech-focused Nasdaq are indicating a 10 point decline.
Walmart were the most active pre-market stock, rising 3.6% after it posted stronger-than-expected second quarter earnings, while trimming its expected profit decline for the year, as the world’s biggest retailer appears to be shifting excess inventory and benefiting from the ongoing reduction in gas prices.
Home Depot, meanwhile, fell 0.6% after it topped Street earnings estimates, while reiterating its full-year profit forecast, as the retailer saw an unexpected surge in home improvement demand amid a slowing housing market.