Stocks Higher, Week Ahead, Boeing, Volkswagen and Monkeypox – Five Things To Know

Stock futures higher as Fed decision looms; Week Ahead: earnings, fed, GDP and inflation data; Boeing edges lower following St. Louis strike vote; Volkswagen slides on first day trading following CEO Diess ouster and WHO declares global health emergency over monkeypox outbreak.

Here are five things you must know for Monday, July 25:

1. — Stock Futures Higher As Fed Decision Looms

U.S. equity futures edged higher Monday, while the dollar slipped lower and Treasury yields held steady, as investors braced for what could be the most important week of the trading year, capped by a crucial interest rate decision from the Federal Reserve. 

With global stocks blunted by the prospect of recession, and activity data in some of the world’s biggest economies indicating continued slowing, investors have been reluctant to embrace risk markets for much of the past few weeks, although U.S. stocks have had a surprisingly solid performance over the month of July — with a 4.66% gain for the S&P 500 — following the worst first half start in more than fifty years. 

U.S. corporate earnings, however, have thus far failed to provide the near-term support for a sustained market recovery, and with the 106 S&P 500 companies reporting so far this season, only around 75.5% have beaten Street forecasts, compared to the recent four-quarter average of 80.6%.

Activity data is also starting to wilt under the pressure of the Fed’s inflation fight, with S&P Global’s closely-tracked PMI index for the services sector — the lynchpin for U.S. economic growth — falling below the 50 point mark that separates growth from contraction for the first time in two years this month. 

Treasury Secretary Janet Yellen told NBC’s ‘Meet The Press’ Sunday that the economy isn’t in recession — despite having likely contracted for two consecutive quarters — but is rather “in a period of transition in which growth is slowing and that’s necessary and appropriate.”

Bond markets aren’t indicating that same optimism, however, with the U.S. Treasury yield curve remaining deeply inverted as growth slows and inflation continues to test multi-decade highs. Benchmark 2-year note yields were last seen trading at 3.001% and 10-year notes pegged at 2.796% in overnight dealing.

U.S. stocks are holding their ground this morning, however, despite weakness in both Europe and Asia, where a closely-watched index of business conditions in Germany, the region’s biggest economy, slumped to a two year low this month. 

The region-wide Stoxx 600 slipped 0.18% in early Frankfurt trading, following on from a 0.28% decline for the MSCI ex-Japan index in Asia. 

On Wall Street, futures tied to the S&P 500 are indicating a 19 point opening bell gain while those liked to the Dow Jones Industrial Average are priced for an 138 point move to the upside. Futures linked to the tech-focused Nasdaq are indicating a 68 point bump.

2. — Week Ahead: Earnings, Fed, GDP and Inflation Data

The Federal Reserve will begin its two-day policy meeting Tuesday, highlighting what could be a make-or-break week for U.S. markets amid a muted earnings seasons and faltering economic growth.

The CME Group’s FedWatch suggests a firm 77.5% chance of a 75 basis point rate hike Wednesday, a move that would take the Fed’s key rate to a range of between 2.25% and 2.5%, but with bets on a smaller follow-on move in September outweighing those for more large-sized moved, suggesting the Fed is beginning to worry about their impact of growth and employment in the world’s biggest economy. 

Both of those conditions will also be evident in this week’s earnings parade, the busiest of the year, with 172 S&P 500 companies set to report June quarter earnings between now and Friday, highlighted by the four of the market’s biggest stocks: Apple  (AAPL) – Get Apple Inc. Report, Amazon  (AMZN) – Get Inc. Report, Google  (GOOGL) – Get Alphabet Inc. Report and Meta Platforms  (META) – Get Meta Platforms Inc. Report

Second quarter earnings 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.

Also slated for this week is the Commerce Department’s first estimate of second quarter GDP growth, set for release at 8:30 am on Thursday, as well as the July reading of the core PCE Price index, the Fed’s preferred inflation gauge, on Friday.

3. — Boeing Edges Lower Following St. Louis Strike Vote

Boeing  (BA) – Get The Boeing Company Report shares edged lower in pre-market trading following a weekend vote from some 2,500 union members to begin strike action at three St. Louis area plants starting August 1.

The International Association of Machinists and Aerospace Workers voted to strike after rejecting a contract offer from Boeing that is said did not “adequately compensate our members’ 401(k) plan.” The plants, which largely produce military aircraft for the planemaker, are located in Missouri and Illinois.

Union leaders said Boeing’s three-year contract offer, put its members’ retirement plans in jeopardy, while the company said it had offered a $3,000 ratification bonus and called the offer “highly competitive.”

Boeing shares were marked 0.12% lower in pre-market trading to indicate an opening bell price of $157.97 each.

4. — Volkswagen Slides On First Day Trading Following CEO Diess Ouster

Volkswagen shares slumped lower in Frankfurt on the first trading day following the ouster of CEO Herbert Diess by the carmaker’s supervisory board late Friday.

Diess, 63 had been leading the world’s second-largest auto manufacturer for the past four years, steering it from both a complicated ownership structure that includes significant stakes held by the Porsche and Piech families as well as its ongoing transition in to electric vehicle production. 

His leadership style, however, was frequently criticized by government officials and union bosses, particularly with respect to potential job losses linked to Volkswagen’s EV transition, and reports of his pending departure accelerated when support from the Piech family began to waiver last week.

Oliver Blume, CEO of Porsche, will assume Diess’ role on August 1, the carmaker said, while keeping his position as head of Volkswagen’s luxury car division.   

Oliver Blume has proven his operational and strategic skills in various positions within the Group and in several brands and has managed Porsche AG from a financial, technological and cultural standpoint with great success for seven years running,” said chairman Hans Dieter Pötsch. “From the Supervisory Board’s point of view, he is now the right person to lead the Group and to further enhance its customer focus and the positioning of its brands and products.”

Volkswagen shares were marked 2.9% lower in early Frankfurt trading to change hands at €131.44 each, a move that would extend their year-to-date decline to around 26%.

5. — WHO Declares Global Health Emergency Over Monkeypox Outbreak

The World Health Organization declared a global health emergency over the weekend amid a worrying surge in monkeypox infections, a contagious disease carrying flu-like symptoms that recently spread to the United States. 

The WHO now considers monkeypox “public health emergency of international concern”, and is asking member states to being a coordinated response to the outbreak focused on funding, vaccine sharing and treatments.

WHO Director-General Tedros Adhanom Ghebreyesus said Saturday that the disease, which also includes skin lesions, has been largely confined to “men who have sex with men, especially those with multiple sexual partners”, although the U.S. Centers for Disease Control and Prevention reported new infections in children, including a young toddler living in California. 

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