Stocks Edge Lower, Jackson Hole, Dell, Gap And Marvell Technology In Focus – Five Things To Know

Stock futures slip ahead of key Jackson Hole speech; Fed inflation gauge may give Powell more evidence of peak price pressures; Dell shares tumble after muted PC demand outlook; Gap shares surge after Banana Republic drives solid Q2 sales and Marvell shares move lower on supply chain caution in chip market

Here are five things you must know for Friday, August 26:

1. — Stock Futures Slip Ahead of Key Jackson Hole Speech

U.S. equity futures extended edged lower Friday, while the dollar held steady against its global peers and Treasury bond yields held steady, as investors braced for what could be further interest rate hike signaling from Federal Reserve Chairman Jerome Powell later in the session. 

Powell’s keynote address to the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming is expected to begin at 10:00 am Eastern time, with markets now expecting the Fed Chair to echo recent comments from his colleagues in cementing the case for continued rate hikes in order to ensure that inflation pressures don’t become embedded into the world’s biggest economy. 

Esther George, the Kansas City Fed President, as well as her opposite numbers in Philadelphia and Atlanta, have effectively said this week that the Fed Funds rate, which currently sits in a range of 2.25% to 2.5%, will need to rise notably over the coming months, and remain at restrictive levels, in order to be effective. 

Bets on another 75 basis point move next month in Washington are holding at around 62.5%, according to the CME Group’s FedWatch, but with PCE price index data due today, a fresh jobs report next week and August CPI data after that, Fed officials will have plenty of information to sift through before their September 21 decision.

Atlanta Fed President Raphael Bostic told the Wall Street Journal yesterday that “at this point, I’d toss a coin between” opting for a 50 basis point or a 75 basis point hike.

Heading into today’s speech, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.11% higher at 108.593 while rate-sensitive 2-year Treasury note yields were holding at 3.391% 

In overseas markets, Europe’s Stoxx 600 was marked 0.14% lower following a weakened reading for consumer confidence out of German, the region’s largest economy, following on from 0.5% overnight gain for the region-wide MSCI ex-Japan index in Asia.

On Wall Street, futures tied to the S&P 500 are indicating a 13 point opening bell decline while those liked to the Dow Jones Industrial Average are priced for a 65 point move to the downside. Futures linked to the tech-focused Nasdaq are indicating a 60 point dip.

2. — Fed Inflation Gauge May Give Powell More Evidence Of Peak Price Pressures 

Fed Chairman Jerome Powell will get one last look at the central bank’s preferred inflation gauge Friday as he preps for his much-anticipated speech at the Jackson Hole summit later this morning. 

The core PCE Price Index, a measure of inflation that is designed to adapt to changes in consumer habits and the availability of goods, is likely to show further slowing in core price pressures when the data is released at 8:30 am Eastern time, although recent gains in both non-farm payrolls and average hourly earnings are likely to boost personal incomes and spending.

Still, with core inflation receding — by some estimates it peaked in March — gas prices tumbling and the housing market rolling over at a worrying pace, Powell may find enough evidence to suggest at least a modest softening of his inflation-fighting stance. 

“Powell can make no promises today,” said Ian Shepherdson of Pantheon Macroeconomics of the Fed Chair’s address in Jackson Hole. “But we expect he will say that the path of rates is now data-dependent, which we would take to mean that if the August CPI and PPI number are decent, and the wages data are no stronger than in July, the Fed can pivot to a 50 basis point hike next month.”

3. — Dell Shares Tumble After Muted PC Demand Outlook

Dell Technologies  (DELL) – Get Dell Technologies Inc. Class C Report shares slumped lower in pre-market trading after the PC and laptop maker posted stronger-than-expected second quarter earnings but cautioned that weakening business and consumer demand would clip near-term sales. 

Dell earned an adjusted $1.68 per share over the three months ending in July, topping Street forecasts by around 4 cents per share, as sales climbed 9% to a record $26.43  billion, thanks in part to extended demand from companies looking to promote hybrid workspaces, which offset a 9% slide in consumer sales.

Looking into the current quarter, however, Dell echoed warnings from PC-making rival Intel  (INTC) – Get Intel Corporation Report with a softer-than-expected revenue forecast of between $23.8 billion and $25 billion, with earnings in the region of $1.57 and $1.79 per share.

Dell shares were marked 4.4% lower in pre-market trading to indicate an opening bell price of $45.78 each

4. — Gap Shares Surge After Banana Republic Drives Solid Q2 Sales 

Gap Inc.  (GPS) – Get Gap Inc. (The) Report shares moved firmly higher in pre-market trading following a surprise second quarter profit that offset a muted near-term outlook linked to bulging inventories and softer clothing demand.

Gap, which also operates the Old Navy and Banana Republic brands, pulled its full-year guidance of earnings between 30 cents and 60 cents per share amid what it called a “testing” macro environment paired with “shifts in consumer behavior” that favors formal attire over many of its casual alternatives. 

For the three months ending in July, Gap said revenues fell 3.3% from last year to a Street-beating $3.68 billion, helped in part by stronger-than-expected sales from Banana Republic, while earnings were pegged at 18 cents per share, well ahead of forecasts for a 5 cents per share loss. 

Gap shares were marked 6.4% higher in pre-market trading to indicate a split-adjusted opening bell price of $10.65 each.

5. — Marvell Shares Move Lower On Supply Chain Caution in Chip Market 

Marvell Technology  (MRVL) – Get Marvell Technology Inc. Report shares moved lower in pre-market trading after the chipmaker posted modestly firmer-than-expected second quarter earnings but cautioned that supply chain disruptions would continue to pressure near-term sales.

Marvel said current quarter revenues would likely hit $1.56 billion, with gross margins in the region of 51.1%, and non-GAAP profits of around 59 cents per share, with the muted figures linked to what CEO Matt Murphy said were supply chain challenges that would “impact our ability to fully meet the demand on a sequential basis.”

For the three months endings in July, Marvel posted adjusted earnings of 57 cents per share, topping Street forecasts by a penny, on record revenues of $1.52 billion. 

“For our high complexity products with long manufacturing cycle times, such as in our data center end market, the supply chain for leading-edge technology and advanced packaging remains very tight,” Murphy told investors on a conference call late Thursday.

Marvell shares were marked 3.4% lower in pre-market trading to indicate an opening bell price of $53.20 each.

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