September S&P 500 E-Mini futures (ESU25) are up +0.64%, and September Nasdaq 100 E-Mini futures (NQU25) are up +0.77% this morning, pointing to a higher open on Wall Street as investors placed their hopes on the Federal Reserve to step in with interest rate cuts following Friday’s weak U.S. payrolls data.
This week, market participants look ahead to a new round of corporate earnings reports and U.S. economic data, as well as remarks from Fed officials.
In Friday’s trading session, Wall Street’s major equity averages ended in the red. Amazon.com (AMZN) slumped over -8% and was the top percentage loser on the Dow after the tech and online retailing giant projected weaker-than-expected Q3 operating income. Also, chip stocks lost ground, with Marvell Technology (MRVL) sliding more than -7% and Micron Technology (MU) dropping over -3%. In addition, Eastman Chemical (EMN) plunged more than -19% and was the top percentage loser on the S&P 500 after the company posted downbeat Q2 results and issued below-consensus Q3 adjusted EPS guidance. On the bullish side, Reddit (RDDT) surged over +17% after the social media company posted better-than-expected Q2 results and issued upbeat Q3 revenue guidance.
The U.S. Labor Department’s report on Friday showed that nonfarm payrolls rose 73K in July, weaker than expectations of 106K. Also, the U.S. unemployment rate ticked up to 4.2% in July, in line with expectations. In addition, U.S. July average hourly earnings rose +0.3% m/m and +3.9% y/y, compared to expectations of +0.3% m/m and +3.8% y/y. Finally, the U.S. ISM manufacturing index unexpectedly fell to 48.0 in July, weaker than expectations of 49.5.
“What had looked like a Teflon labor market showed some scratches... A Fed that still appeared hesitant to lower rates may see a clearer path to a September cut, especially if data over the next month confirms the trend,” said Ellen Zentner at Morgan Stanley Wealth Management.
Ahead of the jobs data, Fed Governors Christopher Waller and Michelle Bowman released statements explaining their dissent from Wednesday’s decision to hold rates steady, citing concerns that delaying rate cuts could cause unnecessary damage to the labor market. Cleveland Fed President Beth Hammack, speaking on Bloomberg Television following the release of the numbers, said the labor market still appeared healthy, though she acknowledged it was a “disappointing report to be sure.”
U.S. rate futures have priced in a 79.7% chance of a 25 basis point rate cut and a 20.3% chance of no rate change at the September FOMC meeting.
Second-quarter corporate earnings season continues, and investors await new reports from notable companies this week, including Advanced Micro Devices (AMD), Palantir (PLTR), McDonald’s (MCD), Walt Disney (DIS), Uber Technologies (UBER), Caterpillar (CAT), Amgen (AMGN), Eli Lilly (LLY), Pfizer (PFE), Gilead (GILD), and Shopify (SHOP). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +4.5% increase in quarterly earnings for Q2 compared to the previous year, exceeding the pre-season estimate of +2.8%.
The U.S. economic calendar lightens up considerably following last week’s flurry of economic data releases. Investors will closely monitor the key ISM survey on U.S. services sector activity to assess the likelihood of interest rate cuts in the coming weeks. This data comes on the heels of the weaker-than-expected ISM manufacturing PMI, which, along with the soft jobs report, “amplifies concerns about economic slowdown,” according to FP Markets analyst Aaron Hill. Weakness in the services ISM could strengthen the case for a rate cut in September. Other noteworthy data releases include U.S. Trade Balance, the S&P Global Composite PMI, the S&P Global Services PMI, Initial Jobless Claims, Nonfarm Productivity (preliminary), Unit Labor Costs (preliminary), and Consumer Credit.
Market participants will also parse comments from several Fed officials following the disappointing jobs report and the central bank’s decision to leave rates unchanged. San Francisco Fed President Mary Daly, Boston Fed President Susan Collins, Fed Governor Lisa Cook, Atlanta Fed President Raphael Bostic, and St. Louis Fed President Alberto Musalem are scheduled to speak this week.
Meanwhile, investors will look for any signals from the White House on a potential nominee to replace Adriana Kugler, after the Fed board member announced her resignation on Friday. President Trump told reporters on Sunday that he plans to announce a new Fed governor in the coming days.
In addition, investors will await further news on tariff agreements after President Trump announced steeper levies for dozens of trading partners last week, though the majority are set to take effect from August 7th. U.S. Trade Representative Jamieson Greer said that those tariffs are likely to remain in place rather than be reduced as part of continuing negotiations.
Today, investors will focus on U.S. Factory Orders data, which is set to be released in a couple of hours. Economists expect this figure to drop -4.9% m/m in June following a +8.2% m/m jump in May.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.244%, up +0.33%.
The Euro Stoxx 50 Index is up +1.14% this morning, clawing back some losses following Friday’s sharp selloff. Bank stocks outperformed on Monday after U.K. lenders secured a significant victory in a key U.K. car finance case. A survey released on Monday showed that investor sentiment in the Eurozone unexpectedly fell in August, marking one of the earliest signs that the business community is underwhelmed by the European Union’s new trade deal with the U.S. Meanwhile, European Central Bank Governing Council member Christodoulos Patsalides said in an interview published Sunday that “the euro-zone economy appears resilient, despite difficulties internationally.” Separately, his Irish counterpart Gabriel Makhlouf said borrowing costs have reached a point where the ECB can adopt a “wait-and-see” approach on future rate decisions. Investor focus this week is on the Bank of England’s monetary policy decision. The central bank is widely expected to cut its benchmark rate by 25 basis points to 4.00%, as tax increases and cautious consumers weigh on the British economy and lead companies to scale back hiring. Investors will also pay close attention to Tuesday’s Eurozone services PMI data for early signals on how consumers were reacting to the U.S.-EU trade deal.
Eurozone’s Sentix Investor Confidence Index was released today.
The Eurozone August Sentix Investor Confidence Index stood at -3.7, weaker than expectations of 6.2.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.66%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.25%.
China’s Shanghai Composite Index ended higher today, rebounding from last week’s losses. Defense and semiconductor stocks led the gains on Monday. The rebound followed the benchmark index’s sharpest weekly decline since April. Meanwhile, investors are watching for new developments on the U.S.-China trade truce that is set to expire on August 12th. U.S. and Chinese officials wrapped up their latest round of trade talks in Stockholm last week, but U.S. President Donald Trump is set to make the final decision on whether to extend the truce. U.S. Trade Representative Jamieson Greer struck a cautiously optimistic tone on talks with China regarding rare earth flows during an appearance on CBS’s Face the Nation, which aired Sunday. On Friday, U.S. Treasury Secretary Scott Bessent said that Washington had the makings of a deal and was “optimistic” about the path ahead. With China’s Politburo, the ruling Communist Party’s top decision-making body, offering no major stimulus signals at its July meeting, investor focus now turns to a series of economic data due this week, including trade and inflation, for further insight into the economy’s health. Inflation figures are anticipated to show another month of heightened downward pressure on prices. On the back of this, investors await further measures to tackle excess capacity in key industries after Chinese authorities reiterated pledges to curb “disorderly” competition, which has triggered intense price wars. In corporate news, New Oriental Education and Technology Group rose over +6% in Hong Kong after reporting a 59% increase in quarterly profit.
Japan’s Nikkei 225 Stock Index closed sharply lower today, posting its steepest one-day drop since June 2nd, as the latest U.S. jobs data sparked concern over the health of the world’s largest economy. Bank stocks led the declines on Monday as the weak U.S. employment report triggered a sharp drop in Japanese government bond yields. JGB yields tracked Friday’s tumble in U.S. Treasury yields. Lower government bond yields result in lower interest rates on commercial loans provided by banks and lower yields on their bonds and other investments. Also, export-oriented stocks slumped after the yen strengthened against the dollar on Friday amid speculation that the Fed would soon cut interest rates. Meanwhile, speculation intensified that Japanese Prime Minister Shigeru Ishiba could step down following last month’s election loss. Ishiba has repeatedly denied plans to resign after his ruling coalition lost its majority in the upper house of parliament, but pressure from his Liberal Democratic Party continues to grow. Ishiba said on Monday that the government is prepared to compile an extra budget to soften the economic impact of U.S. tariffs, a move that would further burden the country’s already deteriorating finances. In corporate news, Nintendo climbed over +5% after reporting quarterly results that showed robust sales of its Switch 2 console. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +12.41% to 26.18.
Pre-Market U.S. Stock Movers
Tesla (TSLA) gained over +2% in pre-market trading after the company’s board approved a new pay package for CEO Elon Musk.
CommScope (COMM) jumped more than +39% in pre-market trading after the Wall Street Journal reported that Amphenol was nearing a deal to buy the company’s broadband connectivity unit for about $10.5 billion, including debt.
Blade Air Mobility (BLDE) surged over +18% in pre-market trading after Bloomberg reported that Joby Aviation was exploring an acquisition of the company.
Spotify (SPOT) rose more than +2% in pre-market trading after Phillip Securities upgraded the stock to Neutral from Reduce.
Berkshire Hathaway Cl B (BRK.B) fell about -0.7% in pre-market trading after Warren Buffett’s conglomerate posted a 4% year-over-year drop in Q2 operating profit.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - August 4th
Palantir (PLTR), MercadoLibre (MELI), Vertex (VRTX), Williams (WMB), Axon Enterprise (AXON), Simon Property (SPG), ONEOK (OKE), IDEXX Labs (IDXX), Diamondback (FANG), BioNTech (BNTX), SBA Communications (SBAC), Equity Residential (EQR), ON Semiconductor (ON), Corebridge Financial (CRBG), Loews (L), Tyson Foods (TSN), Coterra Energy (CTRA), Waters (WAT), Aecom Technology (ACM), Hims Hers Health (HIMS), BWX Tech (BWXT), CNA Financial (CNA), Biomarin Pharma (BMRN), Encompass Health (EHC), Kyndryl Holdings (KD), Wayfair Inc (W), Sterling Construction (STRL), Allison Transmission (ALSN), Vornado (VNO), JBTMarel (JBTM), MSA Safety (MSA), Bellring (BRBR), Trex (TREX), Lattice (LSCC), Air Lease (AL), Ryman Hospitality Properties (RHP), Bruker (BRKR), TG (TGTX), Axsome Therapeutics Inc (AXSM), Tower (TSEM), Primoris (PRIM), Icahn Enterprises (IEP), Viper Energy Ut (VNOM), NewJersey Resources (NJR), Krystal Biotech (KRYS), Sabra (SBRA), Oddity Tech (ODD), Golub (GBDC), Cabot Corp (CBT), Mueller Water Products (MWA), Inspire Medical Systems (INSP), Dorman (DORM), Paymentus (PAY), Palomar (PLMR), ZoomInfo (GTM), Tanger Inc (SKT), Freshpet Inc (FRPT), Otter Tail (OTTR), IAC/InterActiveCorp (IAC), Black Stone Minerals (BSM), Transocean (RIG), Marriot Vacations Worldwide (VAC), Tidewater (TDW), Crescent Energy (CRGY), Siriuspoint (SPNT), National Storage Affiliates Trust (NSA), Addus (ADUS), Olo (OLO), UFP (UFPT), Danaos (DAC), BioCryst (BCRX), Energizer (ENR), LTC Properties (LTC), Atlas Energy Solutions (AESI), Navitas Semiconductor (NVTS), Ingevity (NGVT), V2X Inc (VVX), Foreign Trade Bank of Latin America (BLX), Semrush Holdings (SEMR), Alexanders (ALX), The Andersons (ANDE), Helios Tech (HLIO), New Mountain Finance (NMFC), Praxis Precision (PRAX), Ardelyx Inc (ARDX), ThredUp (TDUP).
