Stocks Edge Lower, Walmart, Microsoft, Coinbase, Alibaba In Focus – Five Things To Know

Stock futures edge lower ahead of earnings parade; Walmart tumbles after surprise profit warning; Microsoft nudges higher ahead of q4 earnings; Coinbase shares slide amid reports of SEC probe and Alibaba shares leap after seeking primary Hong Kong listing

Here are five things you must know for Tuesday, July 26:

1. — Stock Futures  Edge Lower Ahead of Earnings Parade

U.S. equity futures moved lower Tuesday, while the dollar steadied and oil prices traded higher for a second consecutive session, as investors braced for one of the busiest earnings sessions of the year and the Federal Reserve kicked-off its two-day policy meeting in Washington. 

Stocks, alongside investor sentiment, were hit last night by a surprise profit warning from Walmart  (WMT) – Get Walmart Inc. Report, with the world’s biggest retailer slashing its near-term forecasts amid a pullback in discretionary spending from its price-conscious customer base. 

Walmart’s after-hours slump will likely clip around 70 points from the Dow, with downside moves from other major retailers, including Amazon AMZN, adding to the morning’s cautions tone.

A host of second quarter earnings are on tap for today’s session, as well, including updates from Coca-Cola  (KO) – Get Coca-Cola Company (The) Report, 3M  (MMM) – Get 3M Company Report, McDonald’s  (MCD) – Get McDonald’s Corporation Report, Visa  (V) – Get Visa Inc. Report and United Parcel Services  (UPS) – Get United Parcel Service Inc. Report. Microsoft  (MSFT) – Get Microsoft Corporation Report and Google parent Alphabet  (GOOGL) – Get Alphabet Inc. Report will report after the bell.

Collective S&P 500 earnings for the second-quarter are forecast to grow by around 6.2% from last year, to a share-weighted $467.2 billion, but that pace is largely the result of record profits for the energy sector. Stripping away that contribution leaves earning down 3.2% from last year, according to Refinitiv data.

The muted earnings season underscores the ongoing debate as to whether the U.S. economy, or indeed the world, is slipping into recession amid record high inflation, supply chain disruptions and a retrenchment in risk appetite from global investors. 

The Atlanta Fed’s GDPNow forecasting tool suggests the U.S. economy is contracting at a 1.6%, while data from the Commerce Department later this week is likely to indicate a second consecutive quarter of shrinkage,

Against that weakness, however, oil prices found their footing in overnight trading, with dealers citing supply tightness for the two-day bounce that could stall the six week run of declines in domestic U.S gas prices.

The AAA motor club noted that average pump costs have fallen another 3 cents overnight, to $4.327 per gallon, a 15.3% decline from the record highs reached in early June.

WTI futures contracts for September delivery, which are tightly-linked to gas prices, were marked $2.10 higher in overnight trading at $98.80 per barrel while Brent contacts for the same month rose $2.00 to $107.15 per barrel.

In overseas markets, Europe’s Stoxx 600 was marked 0.1% higher in early Frankfurt trading, supported by gains from the energy sector and better-than-expected second quarter earnings from brands giant Unilever UL. Overnight in Asia, reports of support for China’s property sector gave domestic stocks a boost, helping the region-wide MSCI ex-Japan index to a 0.46% gain heading into the close of trading.

In the U.S, benchmark 2-year note yields held at 3.024% following a mixed auction of $45 billion in new paper yesterday, while 10-year notes were pegged at 2.783% in overnight dealing.

On Wall Street, futures tied to the S&P 500 are indicating a 9 point opening bell dip while those liked to the Dow Jones Industrial Average are priced for an 120 point move to the downside. Futures linked to the tech-focused Nasdaq are indicating a 35 point pullback.

2. — Walmart Tumbles After Surprise Profit Warning

Walmart shares slumped lower in pre-market trading, potentially wiping more than $20 billion from the market value of the world’s biggest retailer, following its surprise profit warning late yesterday. 

Walmart noted that “increasing levels of food and fuel inflation are affecting how customers spend”, adding that a build-up in inventory from the previous quarter will likely mean deeper markdowns on clothes and other items to compensate for the extra cash customers are having to spend on food and gas.

That’s likely to narrow profit margins for the year, Walmart cautioned, and trim earnings growth. Adjusted earnings are forecast to slide between 8% and 9% for the second quarter, and 11% to 13% for the year, a sharp change from its May forecast of just a 1% pullback.

The retailer was still relatively bullish in terms of overall revenues, forecasting comparable store sales in the U.S. to rise by 6% in the second quarter, a 100 basis point increase from its previous estimate. Net sales will likely rise by 7.5% for the quarter, but slow to a pace of 4.5% for the full year owing to a $1.8 headwind linked to the strength of the U.S. dollar.

Walmart shares were marked 8.8% lower in pre-market trading to indicate an opening bell price of $120.41 each..

3. — Microsoft Nudges Higher Ahead of Q4 Earnings

Microsoft shares edged higher in pre-market trading ahead of the tech and cloud computing giant’s fourth quarter earnings after the closing bell.

Microsoft, which lowered its profit forecasts earlier this spring amid the ongoing surge in the U.S. dollar, is expected to post a top line of $2.29 per share on revenues of $52.45 billion. Microsoft earned just over half of its $168.1 billion in 2021 revenues from overseas markets, according to the group’s latest annual report, with international growth outpacing domestic by around 300 basis points.

The broader macro backdrop, however, could further blunt growth for its key cloud division as companies pull back on investment amid recession concerns. Azure is still expected to see revenues rise 47% from last year, on a currency neutral basis. 

Microsoft said in April that revenues for its Intelligent Cloud division, which houses Azure, would likely rise to $21.1 billion and $21.35 billion for the current quarter, with double-digit percentage gains in the group’s coming fiscal year.

Microsoft shares were marked 0.05% higher in pre-market trading to indicate an opening bell price of $259.00 each.

4. —  Coinbase Shares Slide Amid Reports of SEC Probe

Coinbase Global  (COIN) – Get Coinbase Global Inc Report shares moved lower in pre-market trading following a report from Bloomberg that suggested the crypto currency trading platform is being investigated by the U.S. Securities and Exchange Commission.

Bloomberg said the probe, which has not been made public, is focused on the listing of digital assets that should have been registered as securities. The SEC investigation follows insider trading charges brought last week against a former Coinbase product manager, Ishan Wahi. 

Coinbase has a rigorous process to analyze and review each digital asset before making it available on our exchange,” said the group’s chief legal officer Paul Grewal in a statement. “A process that the SEC itself has reviewed.”

Coinbase shares were marked 3.9% lower in pre-market trading to indicate an opening bell price of $64.46 each. 

5. —  Alibaba Shares Leap After Seeking Primary Hong Kong Listing

Alibaba Group Holdings  (BABA) – Get Alibaba Group Holding Limited American Depositary Shares each representing eight Report U.S. shares powered higher in pre-market trading after the China-based tech giant said it would pursue a primary stock listing in Hong Kong.

Alibaba, Asia’s most-valuable tech company, said Tuesday that it’s planning to list shares on the Stock Connect market in Hong Kong, a format that will allow for easier access from investors in mainland China. Hong Kong Stock Exchange officials altered their listing rules earlier this year to make it easier for companies to acquire a dual primary listing, as opposed to the secondary listing that Alibaba currently uses. 

“Hong Kong and New York are both major global financial centers, with shared characteristics of openness and diversity. Hong Kong is also the launch pad for Alibaba’s globalization strategy, and we are fully confident in China’s economy and future,” said CEO Daniel Zang. 

Alibaba, which has met the sharp end of a crackdown on big tech companies from Beijing, faced an additional probe into its growing cloud computing division over concerns linked to the security of its sensitive data earlier this spring.

The move could add further uncertainty to both its Hong Kong listing plans, as well as its 2023 fiscal year outlook, which the group declined to provide in late May following stronger-than-expected fourth quarter earnings that defied the country’s Covid challenges.  

Alibaba’s U.S.-listed shares were marked 4.6% higher in pre-market trading to indicate an opening bell price of $105.75 each. 

Related Posts

Union Capital Financial Group Ltd, registered in the British Virgin Islands, does not provide investment services inside the United States. The company only provides consulting, advisory and educational services.