U.S. equity futures are pointing to a modestly weaker open on Wall Street Tuesday as investors prep for a trio of big bank earnings before the opening bell and a key reading of the health of the American consumer, in the form of June retail sales, at 8:30 am Eastern time. With markets at or near all-time highs, but also trading at historically lofty valuations, here are five things you need to know before the start of trading on Tuesday July 16.
1. -- Shop 'Till You Drop
Investors are keying on what could be a crucial reading of U.S. retail sales over the month of June in order to gauge the expected reaction of the Federal Reserve on interest rates in the coming months.
With June job gains coming in at a much stronger-than-expected 224,000, and inflation rising at the fastest pace in more than a year, any further evidence that the most important component of U.S. economic growth -- consumer spending -- is also extending into the longest expansion on record could prompt investors to reduce bets on near-term rate cuts from the Fed and take some of the steam out of the recent rally on Wall Street, which has taken all three benchmarks to record highs over the past week.
Analysts are looking for a June gain of 0.1% for headline retail sales growth, which is expected from the Commerce Department at 8:30 am Eastern time. Interest rate traders, meanwhile, are pricing in a 100% chance of Fed rate cut when the central bank meets later this month in Washington, but are quietly reducing bets on further moves as domestic data continues to show resilience in the world's biggest economy.
2. -- Bank on it!
Three of the country's biggest banks -- JPMorgan Chase (JPM - Get Report) , Well Fargo (WFC - Get Report) and Goldman Sachs (GS - Get Report) -- are expected to publish second quarter earnings Tuesday as the reporting season kicks into high gear and investors look to near-term outlooks on profits and sales from Wall Street's most powerful firms.
Citigroup (C - Get Report) got the ball rolling yesterday with stronger-than-expected second quarter earnings of $1.83 per share (adjusted for a gain linked to the bank's bond trading platform Tradeweb) thanks to robust consumer lending. Citi stock, however, fell into negative territory by the end of the session as investors worried that a weakening net interest margin of 2.67% -- a key measure of bank profitability -- could bleed into the bottom line of domestic rivals.
JPMorgan earnings will arrive first, at 6:45 am, with investors looking for $2.49 per share from revenues of around $28.52 billion. Goldman follows at 7:30 am, with Street forecasts set at $5.03 per share on revenues of $8.88 billion while Wells Fargo analysts are looking for earnings of 41.10 per she on revenues of $21.6 billion when the bank reports at 8:00 am Eastern time.
3. -- Nacho Libra
Facebook assured lawmakers and regulators late Monday that it will not launch its planned digital currency, known as Libra, until concerns about its safety, and its impact on the global financial system, are fully addressed.
"The Libra Association, which will manage the (Libra) Reserve, has no intention of competing with any sovereign currencies or entering the monetary policy arena," Facebook's David Marcus will tell Congress later today, according to his prepared remarks. ""Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals."
The concession followed a stinging critique of the upcoming digital coin launch yesterday from Treasury Secretary Steve Munchin, who told reporters in Washington that Libra would face "very high standards" in terms of U.S. regulation, and warned Facebook and other digital financial services providers that they'll need to "implement the same anti-money laundering safeguards in countering the financing of terrorism as traditional financial institutions."
4. -- Dancing on the (Debt) Ceiling
U.S. Treasury Secretary Steven Mnuchin told reporters in Washington Monday that a deal between Congress and the Trump administration to raise the U.S. debt ceiling is "getting closer" following estimates that the ability for the Treasury to continue borrowing will expire in early September.
Congress and the White House are also working on a two-year budget deal, which would fund the government through October 2021, even as debates over the country's rising deficit, which is set to top $1 trillion by 2022, continue to rage.
Total outstanding U.S public debt was pegged at just over $22.4 trillion last week, a figure that has risen by $2.45 billion since President Trump took office in January 2017 and " poses substantial risks for the nation", according to the non-partisan Congressional Budget Office's June assessment.
5. -- Keep on Truckin'
JB Hunt Transport Services (JBHT - Get Report) shares look set to open at a three-month high Tuesday after the second-largest U.S. trucking group posted stronger-than-expected second quarter revenues and pointed to a pick-up in overall volumes in the second half of the year.
Although earnings missed forecasts thanks to a one-off insurance settlement, a 6% rise in revenues, as well as an upbeat outlook into the second half of the year, has eased some investor concerns for a so-called 'freight recession' as imports from China slow amid the ongoing trade war and the impact of tariffs put in place by the White House.
The report also allowed investors to paint a stronger-than-expected picture for the transport sector ahead of earnings this week from rail operators Union Pacific Corp. (UNP - Get Report) and Kansas City Southern (KSU - Get Report)