Stocks lower as inflation shock triggers steeper Fed rate bets; JPMorgan kicks-off bank earnings amid Jamie Dimon’s ‘hurricane’ warning; TSMC sees ‘firm’ chip demand after solid Q2, robust global outlook; Celsius Network files for bankruptcy, won’t seek authority to allow withdraws and Tesla loses autopilot executive as Musk chases self-driving targets
Here are five things you must know for Thursday, July 14:
1. — Stocks Lower As Inflation Shock Triggers Steeper Fed Hike Bets
U.S. equity futures extended declines Thursday, while the safe-haven dollar consolidated gains against its global peers and oil prices slumped, as investors reacted to red-hot June inflation reading that has re-set expectations for Fed rate hikes.
U.S. inflation surged to a 41-year high of 9.1% last month, data indicated yesterday, with core prices rising 5.9% amid a leap in gas prices, airfares and rents. The faster-than-expected reading, set against fading domestic growth prospects, powered bets on a 100 basis point rate hike at this month’s Fed meeting while prompting a surge in near-term Treasury bond yields.
The CME Group’s FedWatch tool is now indicating an 81% chance of a 100 basis point rate hike from the Fed on July 27, with a 77.7% of a 75 basis point move in September.
Benchmark 2-year note yields were last seen trading at 3.211%, a full 23 basis points north of 10-year yields, a move that tipped the so-called “inversion” of the yield curve, the market’s go-to recession indicator, to the steepest since November of 2000.
As G20 ministers and central bank governors gather in Bali this week, they face a global economic outlook that has darkened significantly,” IMF Managing Director Kristalina Georgieva cautioned Thursday.
“The human tragedy of the war in Ukraine has worsened. So, too, has its economic impact especially through commodity price shocks that are slowing growth and exacerbating a cost-of-living crisis that affects hundreds of millions of people—and especially poor people who cannot afford to feed their families,” she added, “And it’s only getting worse.”
Adding China’s ongoing Covid struggles and a brewing energy crisis in Europe, and the odds of a global recession are starting to mount, pushing investors into safe-haven assets such as the U.S. dollar, which traded near the highest levels against a basket of its peers at 108.592 in overnight dealing.
Stocks were marked lower, as well, with Europe’s Stoxx 600falling 0.93% in early Frankfurt trading, and closely tracking U.S. equity futures, following on from a 0.3% slide for the Asia-region MSCI ex-Japan index.
On Wall Street, futures tied to the S&P 500 are indicating a 36 point opening bell pullback while those liked to the Dow Jones Industrial Average are priced for a 260 point slide. Futures linked to the tech-focused Nasdaq are indicating an 85 point decline.
2. — JPMorgan Kicks-Off Bank Earnings Amid Jamie Dimon’s ‘Hurricane’ Warning
JPMorgan Chase (JPM) – Get JP Morgan Chase & Co. Report will kick-off the unofficial start to the second quarter earnings season Thursday, leading a parade of bank-sector updates over the next three days that will likely set the tone for market performance over the coming months.
JPMorgan, one of the few major lenders that declined to boost its dividend payout ratio following a successful conclusion of Federal Reserve stress tests last month. is expected to post a bottom line of $2.90 per share on revenues of around $31.96 billion.
JPMorgan CEO Jamie Dimon cautioned in April on the impact of the Russia-Ukraine conflict on the bank’s profits, while also warning that rate hikes from the Federal Reserve “could be significantly higher than the market expects” between now and the end of the year.
Dimon’s foresight on rates, as well as his recent warning of an economic “hurricane”, could form part of his traditional outlook statement, published alongside JPMorgan’s earnings, that typically receive significant investor attention.
Morgan Stanley (MS) – Get Morgan Stanley Report will follow JPMorgan with its June quarter report later today, with Wells Fargo (WFC) – Get Wells Fargo & Company Report and Citigroup (C) – Get Citigroup Inc. Report on Friday and Goldman Sachs on Monday
JPMorgan shares were marked 0.8% lower in pre-market trading to indicate an opening bell price of $111.00 each.
3. — TSMC Sees ‘Firm’ Chip Demand After Solid Q2, Robust Global Outlook
Taiwan Semiconductor Mfg. Co. Ltd., (TSM) – Get Taiwan Semiconductor Manufacturing Company Ltd. Report the world’s biggest contract chipmaker and a lead supplier for Apple Inc. (AAPL) – Get Apple Inc. Report iPhones, posted its biggest quarterly profit jump in two years and said it was “highly confident” heading into the second half of the year.
TSMC said earnings for the three months ending in June surged 76.4% from last year to just under $8 billion, with revenues rose 36.6% to $18.16 billion. The industry bellwether said third quarter sales could come in between $19.8 billion and $20.6 billion, powered by sales of 5G and artificial intelligence chips amid what CEO C. C. Wei described as “firm” global demand.
Taiwan Semi’s outlook contrasts sharply with that of U.S.-based chipmaker Micron Technology (MU) – Get Micron Technology Inc. Report, which cautioned earlier this month that weakness in consumer markets, particularly computers and smartphones, would clip earnings growth over the coming months.
TSMC’s U.S.-listed shares were marked 1.02% higher in pre-market trading Thursday to indicate an opening bell price of $82.12 each.
4. — Celsius Network Files For Bankruptcy, Won’t Seek Authority to Allow Withdraws
Bitcoin lender Celsius Network filed for Chapter 11 bankruptcy protection late Wednesday, less than a month after freezing withdraws from its deposit base due to what the group called “extreme market conditions” in global cryptocurency markets.
Celsius noted it had around 100,000 creditors, with just $167 million in cash on hand, and estimated assets and liabilities as between $1 billion to $10 billion in its filing with the bankruptcy court in the Southern District of New York.
Celsius, which had attracted crypto depositors with high interest rates and lucrative loans, found itself pinched between the collapse of the Luna stable coin last month that sparked a global sell-off in digital asset markets.
Customer withdraws remain frozen, the filing indicated, with claims “addressed through the Chapter 11 process.”
Bitcoin prices, which have fallen more than 70% from their all-time highs in late November, were last seen 2.4% lower on the session at $19,735.50
5. — Tesla Loses Autopilot Executive As Musk Chases Self-Driving Targets
Karpathy’s departure comes as Tesla is finalizing the layoffs of around 200 people in its San Mateo, California office focused on driver-assist technology, and CEO Elon Musk’s self-described “overwhelming focus” on solving full self-driving.
Musk said the solution was “the difference between Tesla being worth a lot of money or worth basically zero.”. Musk has also said he wants to have 1 million drivers in the FSD Beta program by the end of the year.
Tesla shares were marked 1.26% lower in pre-market trading to indicate an opening bell price of $702.18 each.