Stock futures slip on first trading day of August; Oil dips ahead of key OPEC meeting; Pinterest, Activation Blizzard, Starbucks, Airbnb and Block set to report earnings this week.
Here are five things you must know for Monday, August 1:
1. — Stock Futures Lower As Cloudy Earnings and Economic Outlook Dominate
U.S. stock-index futures slipped overnight after Wall Street finished its best month since 2020 amid ongoing uncertainty about the direction of the economy and whether earnings will continue to beat expectations amid still-rampant inflation and rising interest rates.
On Wall Street, futures tied to the S&P 500 are indicating a 10.75-point opening bell drop while those liked to the Dow Jones Industrial Average are priced for a 42 point decline. Futures linked to the tech-focused Nasdaq are indicating a 32.5-point drop.
The price of West Texas crude declined by $1.30 a barrel, while bitcoin and other major cryptocurrencies slid about 2%.
On Friday, the Dow Jones Industrial Average gained 315.50 points, or 1%, to close at 32,845.13, notching a third straight day of gains; the S&P 500 climbed 57.86 points, or 1.4%, to 4,130.29, rising for a third consecutive day; and the Nasdaq Composite rose 228.09 points, or 1.9%, to end at 12,390.69, its third straight day of gains.
For the week, the Dow gained 3%, the S&P 500 rose 4.3% and the tech-heavy Nasdaq advanced 4.7%. For July, the Dow advanced 6.7%, the S&P 500 jumped 9.1% and the Nasdaq surged 12.3%, according to Dow Jones Market Data. It was the best monthly results for the Dow and S&P 500 since November 2020, and the Nasdaq’s best month since April 2020.
Investors are paring bets on another jumbo Fed rate hike in September, with the CME Group’s FedWatch suggesting a near 80% chance of a 50-basis-point increase, following last week’s grim assessment of first-quarter growth.
Treasury bond yields, meantime, were up slightly, with the 10-year benchmark Treasury trading up 0.02% at 2.661%. The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.43% lower at 105.909.
In overseas markets, European stocks were muted on Monday to begin the new month, with investors digesting a fresh round of corporate earnings.
The region-wide Stoxx 600 index was marked 0.83% higher in early trading, putting the benchmark on pace for a July gain of around 7%.
2. — Oil Futures Fall Ahead of Key OPEC Meeting
Oil prices dropped early on Monday as investors braced for this week’s meeting of officials from OPEC and other top producers on supply adjustments.
Brent crude futures dropped 63 cents, or 0.6%, to $103.34 a barrel in overnight trading. U.S. West Texas Intermediate crude was at $97.87 a barrel, down 75 cents, or 0.7%, after hitting a session low of $97.55 when trading commenced in Asia.
Both contracts rebounded more than $2 a barrel on Friday as risk appetite improved among investors. However, both Brent and WTI ended July with their second straight monthly losses for the first time since 2020, as soaring inflation and higher interest rates raise fears of a recession that would erode fuel demand.
ANZ analysts say fuel sales to drivers in Britain are waning, while gasoline demand remains below its five-year average for this time of the year. Reflecting this, analysts in a Reuters poll reduced for the first time since April their forecast for 2022 average Brent prices to $105.75 a barrel, and to $101.28 for WTI.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, will meet on Wednesday to decide on September output.
The start of August sees OPEC+ having fully unwound record output cuts in place since the Covid-19 pandemic took hold in 2020.
The group’s new secretary general Haitham al-Ghais reiterated on Sunday that Russia’s membership in OPEC+ is vital for the success of the agreement, Kuwait’s Alrai newspaper reported.
Meanwhile, U.S. oil production continued to climb as the rig count rose by 11 in July, increasing for a record 23rd month in a row, data from Baker Hughes showed.
3. — Alibaba Looking to Keep U.S. Listing Intact
Chinese e-commerce giant Alibaba (BABAF) said it will comply with U.S. regulators and work to maintain its listings in New York and Hong Kong.
On Monday, Alibaba said it was added to the SEC’s list, indicating its audits for the fiscal year ended March 31, 2022 could not be fully reviewed by the U.S. Public Company Accounting Oversight Board.
Under the HFCAA, if the PCAOB cannot fully inspect audits of a U.S.- listed company’s financial statements for three consecutive “non-inspection” years, the SEC is required to bar the company’s securities from being traded on U.S. markets.
“Alibaba will continue to monitor market developments, comply with applicable laws and regulations and strive to maintain its listing status on both the NYSE and the Hong Kong Stock Exchange,” it said in a statement to the Hong Kong bourse on Monday.
The statement came after Alibaba was added to the U.S. Securities and Exchange Commission’s list of Chinese companies at risk of being delisted for not meeting auditing requirements on Friday. As a result, U.S.-listed Alibaba shares plunged 11% in the Friday trading session.
On Monday, the stock was down more than 5% in Hong Kong, but recovered to trade around 2.2%.
Under the Holding Foreign Companies Accountable Act, the SEC identifies public companies that have retained a registered public accounting firm to issue an audit report where the firm has a branch or office.
4. — Starbucks Set to Report Strong Second-Quarter Earnings
The coffee chain’s update on store closings, a growing unionization push, and read on consumer demand at the higher price points are all seen as key points that could have ripple effects across the consumer sector.
Evercore ISI is positive ahead of the report on the view that a faster-than-anticipated rebound in China during the quarter will support guidance for the back half. The firm also thinks the chain wields some pricing power that will help boost the bottom line.
“We believe that there remains a significant transaction growth opportunity for Starbucks,” previewed analyst David Palmer ahead of the report. Palmer and team envision more significant improvement in transaction trends occurring in 2023 as the company makes changes to the bar configuration and technology to bolster production capacity.
5. — Google Launches ‘Simplicity Sprint’ In Effort to Boost Worker Productivity
Google is launching a new effort called “Simplicity Sprint” in an effort to improve efficiency and boost employee focus.
The Alphabet (GOOGL) – Get Alphabet Inc. Report-owned company had its regular all-hands last Wednesday, and the tone was somewhat urgent as employees expressed concern over layoffs and CEO Sundar Pichai asked employees for input, according to attendees and related internal documentation viewed by CNBC.
Google’s productivity as a company isn’t where it needs to be even with the headcount it has, Google’s CEO Sundar Pichai told employees in the meeting, according to CNBC.
“I wanted to give some additional context following our earnings results, and ask for your help as well,” Pichai opened, referring to the company’s second-quarter earnings report released last Tuesday. “It’s clear we are facing a challenging macro environment with more uncertainty ahead.”
He added, “There are real concerns that our productivity as a whole is not where it needs to be for the headcount we have.” He asked employees to help “create a culture that is more mission-focused, more focused on our products, more customer focused. We should think about how we can minimize distractions and really raise the bar on both product excellence and productivity.”
It comes after the company reported its second consecutive quarter of weaker-than-expected earnings and revenue. Revenue growth slowed to 13% in the quarter from 62% a year earlier, when the company was benefiting from the post-pandemic reopening and consumer spending was on the rise.
It also comes after Pichai recently announced that it would slow the pace of hiring and investments through 2023, asking employees to work “with greater urgency” and “more hunger” than shown “on sunnier days.”