Market downside risk has reduced, says Nomura
U.S. equities are bouncing back after last week’s sell-off, according to Nomura. Macro hedge funds buying into the pullback has helped power the recent rebound; without them, the market would likely have remained soft throughout, said analyst Yoshitaka Suda.
“We think the downside risk posed to U.S. equities by systematic investors is much less serious now than it was before,” Suda wrote in a Tuesday note.
To be sure, Suda believes volatility levels will stay elevated due to an uncertain outlook on the U.S. economy until the presidential election in November.
“The event premiums the market assigns to economic indicators also look likely to rise, given the increased uncertainty over the outlook for the US economy,” Suda said. “Members of the FOMC are already signaling an emphasis on keeping the US economy healthy, which presumably means that indicators of inflation are seen as less important than before, but even so, the event premium assigned to this week’s CPI announcement is fairly high.”
— Hakyung Kim
Piper Sandler expects small to mid-cap stocks to outperform in second half of 2024
Piper Sandler’s technical research team expects the S&P 500 to resume a broadening rally.
“We anticipate the popular market averages will continue to back and fill around their 50-/200-day MAs as volatility remains relatively high,” chief market technician Craig Johnson wrote in a Tuesday note, adding that he expects small to mid-cap stocks to outperform as the market continues to broaden during the latter half of this year.
The firm maintained its S&P 500 year-end target of 5,800.
— Pia Singh
Stocks open higher
U.S. stocks opened higher on Tuesday following better-than expected wholesale inflation data.
The S&P 500 gained 0.7%, while the Nasdaq Composite advanced 1%. The Dow Jones Industrial Average added 138 points, or 0.3%.
— Brian Evans
Producer prices rise less than expected
Investors got more data that supports the case easier monetary policy down the road.
The producer price index, a gauge of what wholesalers pay for raw goods, rose 0.1% in July. Economists polled by Dow Jones expected PPI to have increased by 0.2% from the prior month. Excluding food and energy, PPI was unchanged — with economists expecting a 0.2%. increase.
— Fred Imbert
Starbucks announces hire of Chipotle CEO Brian Niccol
Coffee chain Starbucks announced a surprise CEO change on Tuesday morning, bringing in Brian Niccol from Chipotle Mexican Grill.
Niccol will start on Sept. 9, while Laxman Narasimhan is stepping down as Starbucks CEO and board member effective immediately, the release said.
Shares of Starbucks surged 10% in premarket trading after the announcement.
Shares of Starbucks rose Tuesday.
Chipotle, where Niccol has served as CEO since 2018, fell about 8%.
Shares of Chipotle fell on Tuesday.
Stocks making the biggest moves premarket
Check out the companies making headlines before the bell.
Home Depot — Shares fell more than 2% in the premarket after the home improvement retailer warned that sales would be weaker than anticipated in the second half of 2024. The company sees full-year comparable sales to fall by 3% to 4%. Earlier this year, Home Depot guided for a roughly 1% decline.
On Holding — Shares of the athletic apparel company dropped 6.5% after a second-quarter results that missed Wall Street expectations. The company reported earnings of 0.14 Swiss francs per share, or about $0.16, below the StreetAccount estimate of 0.16 Swiss francs. However, revenue of 567.7 million Swiss francs was better than the 562.1 million expected.
Tencent Music Entertainment Group — U.S.-traded shares of the Chinese streaming company fell nearly 7%. The company reported a 1.7% yearly decline in revenue. Monthly active users in the mobile categories also came in below analysts’ forecasts.
The full list can be found here.
— Hakyung Kim
China’s Huawei Technologies aims to introduce new chip by fall, challenging Nvidia
Chinese tech company Huawei Technologies is preparing to introduce a new chip for artificial intelligence use, which would challenge Nvidia in China amid U.S. chip export controls on the country, Wall Street Journal reported on Monday.
Huawei told potential clients that its new chip, Ascend 910C, is comparable to Nvidia’s H100 graphics processing unit, which isn’t directly available in China, the report said. The company has been testing its latest chip in recent weeks and aims to start shipping as soon as October, the Journal reported, citing people familiar with the matter.
— Pia Singh
Home Depot falls on sales warning
Shares of Home Depot fell more than 2% in the premarket after the home improvement retailer warned that sales would be weaker than anticipated in the second half of 2024.
The company sees full-year comparable sales to fall by 3% to 4%. Earlier this year, Home Depot guided for a roughly 1% decline.
HD year to date
Evercore’s Hyman says the economy is not in a recession but is slowing
Economic growth is trending toward recession but not there yet, according to Evercore ISI’s chair and head of research Ed Hyman.
The firm’s proprietary company survey of volume and prices fell to 47.6 over the past week, near traditional recession readings around 45. On the survey scale, 100 represents strong activity and zero represents weak.
“So we’re not there,” Hyman said of recession. He noted that state sales tax receipts are “suggesting both growth slowing and inflation cooling.”
—Jeff Cox
Retail sales data could be more important this week, investor says
The retail sales data could be more important this week than the inflation reports, given the revived fears around slowing growth, according to Cameron Dawson, investment chief at NewEdge Wealth.
“Because we think that there’s a greater risk for downside to growth than there is a risk for upside to inflation, we think retail sales is actually more important,” Dawson told CNBC’s “Closing Bell” on Monday.
“If retail sales falls off, then we might know that the labor market could be weaker than maybe some of the headline data suggests,” Dawson continued.
To be sure, a surprisingly hot inflation print in either consumer or producer prices could still result in a surge of volatility, particularly in the bond market, she noted.
— Sarah Min
Here’s what economists are expecting in the inflation data this week
A pair of inflation reports due out over the next two days, on consumer and producer prices, could give an uncertain market some direction.
The July producer price index — a measure of wholesale prices that’s set for release Tuesday — is expected to show a monthly gain of 0.2% last month, according to economists surveyed by Dow Jones. That’s in line with the previous month’s reading.
The consumer price index that’s expected out Wednesday is anticipated to show an increase of 0.2% last month, consensus estimates show. That’s up from a 0.1% decline in the prior month.
— Sarah Min
Stock futures open flat
U.S. stock futures opened little changed Monday night.
Dow Jones Industrial Average futures rose 26 points, or 0.07%. S&P 500 futures and Nasdaq 100 futures climbed 0.03% and 0.02%, respectively.
— Sarah Min
