The Wednesday Market Minute
- Global stocks edge lower in cautious trade as investors eye the U.S. earnings season while digesting the impact of stronger-than-expected retail sales data on Fed rate bets
- President Donald Trump's remarks on China tariffs, as well as a WTO ruling on subsidies for state-owned enterprises, puts investors on edge as trade talks appear to have stalled yet again.
- Bank of America posted stronger-than-expected second-quarter profits Wednesday as the second-biggest U.S. lender increased loans and deposits, boosting interest income.
- Netflix kicks-off FAANG sector earnings after the close of trading today with markets focused on the outlook for subscriber additions amid intensifying competition in online streaming.
- Global oil prices edge higher as U.S. crude inventories drop for a fifth consecutive week and more than half of Gulf of Mexico production remains offline in the wake of storm Barry.
- U.S. equity futures suggest another flat open on Wall Street Wednesday ahead of June housing starts data at 8:30 am Eastern time and earnings from Abbott Laboratories and Progressive. Netflix and IBM will report after the closing bell.
U.S. equity futures edged higher, potentially lifting Wall Street to fresh record peaks again Wednesday, as investors await the first of six major tech sector earnings reports later today that could make-or-break the recent stock market rally.
Netflix (NFLX - Get Report) , the first of the six major tech companies -- along with Microsoft (MSFT - Get Report) -- in the so-called FAANG complex of stocks will report second quarter earnings after the close trading today, with analysts likely keying on it outlook for online streaming subscriber additions in a suddenly competitive market. Microsoft will follow with its earnings report Thursday, while Facebook (FB - Get Report) , Amazon (AMZN - Get Report) , Google parent Alphabet (GOOGL - Get Report) and Apple (AAPL - Get Report) will all update investors will quarter reports over the next two weeks.
The FAANG stock earnings -- which comprise nearly a fifth of the S&P 500's $26 trillion market cap --are expected to be a crucial test for Wall Street as benchmark test fresh record highs, thanks in part to hopes of deeper monetary support from the Federal Reserve, even as broader corporate profits suggest slowing growth in the months ahead as the U.S.-China trade war takes its toll on American businesses.
And with President Donald Trump suggesting only yesterday that talks between Washington and Beijing have stalled yet again, while warning that he could apply new tariffs on $325 billion worth of China-made goods in the comping months, investors are looking to the FAANG earnings season to support the markets 20% year-to-date rally into the autumn and beyond.
U.S. equity futures suggest caution on Wall Street ahead of the Netflix numbers -- along with IBM (IBM - Get Report) -- after the close of trading today, as well as second quarter updates from Bank of America (BAC - Get Report) , Abbot Laboratories (ABT - Get Report) and Progressive (PGR - Get Report) prior to the start of trading.
Contracts tied to the Dow Jones Industrial Average are indicating a 40.3 point advance while those linked to the S&P 500 suggest a 4.4 point bump higher for the broader benchmark, which drifted lower last night but still managed to close above the 3,000 mark for the third consecutive session amid a year-to-date advance of 19.83%.
Bank of America posted stronger-than-expected second-quarter profits Wednesday as the second-biggest U.S. lender increased loans and deposits, boosting interest income, but shares dipped 0.14% in pre-market trading as broader banking sector concerns held down gains.
CSX Corp. (CSX - Get Report) shares were another early mover of note, falling 7.5% after the third-largest U.S. rail operator slashed its full-year revenue forecast amid slowing freight volumes linked to the ongoing trade dispute between Washington and Beijing.
Overnight in Asia, however, investors were slightly more rattled by the President's remarks on China trade, as well as a World Trade Organization ruling that could allow Beijing to impose sanctions on the U.S. as part of a long-standing dispute over subsidies for state-owned enterprises.
The region-wide Asia ex-Japan benchmark, the broadest measure of regional share prices, slipped 0.3% into the final hours of trading while Japan's Nikkei 225 closed 0.31% lower at 21,469.18 points as the yen held gains against the U.S. dollar, blunting the value of export stocks.
European stocks were little-changed at the start of trading Wednesday, with the Stoxx 600 drifting 0.05% higher in Frankfurt and Britain's FTSE 100 falling 0.23% in London even as the pound fell to a 27-month low of $1.2392 against the U.S. dollar.
Ericsson (ERIC - Get Report) shares skidded to the bottom of the European bluechip market after the network equipment maker posted solid second quarter earnings but said it would likely face weaker near-term profit margins as it moved to win bigger 5G contracts from rivals such as Finland's Nokia (NOK - Get Report) and China's Huawei Technologies.
Global oil prices were marked modestly higher in the European session, with traders citing yesterday's reading from the American Petroleum Institute which showed domestic crude inventories fell by 1.4 million barrels in the week ending July 12. If confirmed later today by the Energy Information Administration, the declines will stretch to a fifth consecutive week, the longest in at least 18 months.
Prices were further pressured by the slow return of production capacity in the Gulf of Mexico, where more than half of the area's output, or around 1.1 million barrels per day, remains offline in the wake of storm Barry, which hammered the Louisiana coast this past weekend.
Brent crude contracts for September delivery, the global benchmark, were seen 58 cents higher from their Tuesday close and changing hands at $64.94 per barrel in early European trading while WTI contracts for August, which are more tightly linked to U.S. gas prices, were marked 35 cents higher at $57.97 per barrel.