Here are five things you need to know for Friday, July 15:
1. — Equity Futures Rise as Jumbo Rate Rise Bets Fade
US equity futures edged higher on Friday as stocks appeared to come to a halt on a five-day losing streak amid easing bets on a massive Fed rate hike later this month and potentially positive news for the tech sector.
Recession fears remain front and center, however, after a much weaker than expected second-quarter GDP reading from China showed the world’s largest economy narrowly avoided contraction with growth of just 0. .4%.
It’s the slowest – apart from the direct Covid hit in the first quarter of 2020 – for at least thirty years and raises big questions about the impact of its broader health policies as it approaches the second half of the year.
The data kept a ceiling on global oil prices in overnight trading, as investors cut bets on any short-term rebound in demand from the world’s largest energy importer and maintained shares in the region firmly in the red.
U.S. markets, however, are looking cautiously positive ahead of a key June retail sales reading ahead of the start of trading and some soothing remarks from Fed Governor Christopher Waller and St. Louis Fed Chairman James Bullard, who both indicated their preference for a 75 basis point rate hike at the next Fed meeting starting July 26.
The CME Group’s FedWatch, which put the probability of a 100 basis point hike at almost 90% after the shocking inflation reading of 9.1% in June, now only indicates a probability of 46.4%.
Still, Fed rate hikes are set to be large and ongoing as the central bank steps up its fastest fight against inflation in four decades, and bond markets are betting the cost of its control will tip the domestic economy in the recession.
Benchmark 2-year Treasury yields traded at 3.118% overnight, compared to a rate of 2.926% for 10-year notes, maintaining the so-called “inversion” of the yield curve – a accurate predictor of recession – highest since December of 2000.
On Wall Street, futures tied to the S&P 500 are pointing to an 8-point opening gain while those tied to the Dow Jones Industrial Average are priced for a 90-point upside move. Tech-focused Nasdaq futures are pointing up 27 points.
2. — Focus on Retail Sales Amid Gas Prices and Soaring Inflation
Record gasoline prices, which hit a record high of $5.107 a gallon last month, likely boosted headline reading for June retail sales, but their impact on core spending will be followed by close as investors gauge the broader strength of the US consumer heading into the summer months.
Overall retail sales are expected to rise 0.8% from the previous month, with the headline flattered by gasoline sales and the continued spike in inflation, which hit a 41-year high of 9.1 % last month. The impact of the two headwinds, however, will be crucial in understanding consumer strength – and the economy’s resilience to recession – after a much stronger-than-expected June jobs report.
“The consumer is in great shape right now,” JPMorgan CEO Jamie Dimon told investors yesterday after his bank’s second-quarter earnings report. “So even we go into a recession, they go into this recession with less leverage in much better shape than they were – in 2008 and 2009 and in much better shape than they were. have done even in 2020. And the jobs are plentiful.”
“Things happen. But they’re in great shape.”
3. — Citigroup and Wells Fargo gain on deck after JPMorgan’s failure
Citigroup C and Wells Fargo (WFC) – Get the Wells Fargo & Company report will continue the march of second-quarter banking profits on Friday after a disappointing report from its biggest rival JPMorgan.
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JP Morgan (JPM) – Get the JP Morgan Chase & Co. report.which has set aside more than $1.1 billion to cover possible bad loans as the economy flirts with recession, also saw a sharp drop in investment banking revenue and a 27% decline of its overall profits.
Citigroup analysts are looking for net income of $1.70 a share on revenue of $18.22 billion, with a focus on its loan loss reserves and global capital markets business. Wells Fargo is expected to earn 80 cents a share on revenue of $17.51 billion.
The financial sector as a whole, however, is expected to be a drag on the S&P 500 earnings season, with earnings falling 20.8% from a year ago to $66.4 billion stock-weighted.
Citigroup shares were down 0.27% in premarket trading at $44.02 apiece while Wells Fargo slid 0.34% to $39.61 apiece.
4. — Pinterest shares rise following report from activist Elliott Stake
pinterest (PINS) – Get Class A report from Pinterest Inc. shares surged in premarket trading after the Wall Street Journal reported that activist investors Elliott Management had amassed a more than 9% stake in the social media group.
The Journal said Elliot, who is now the company’s largest shareholder, is engaged in talks with its new management, although details of the overall goal were not immediately known.
Last month, longtime CEO and co-founder Ben Silbermann – who still controls 37% of the voting power – said he would step up to executive chairman, while retaining a board seat, to make way for former Google executive GOOGL. Invoice ready.
Ready, which has orchestrated major changes at Google in terms of shopping and search, is expected to make similar improvements to Pinterest as it seeks to better monetize its 433 million active users.
Pinterest shares rose 13.6% in premarket trading to show an opening price of $19.95 each.
5. — Biden kicks off controversial visit to Saudi Arabia amid falling oil market
President Joe Biden will meet the King of Saudi Arabia, Salman bin Abdulaziz, as well as Crown Prince Mohammed bin Salman on Friday as part of his broader visit to the Middle East, organized in part to discuss energy policy with the largest oil producer in the world.
Biden is expected to push the Kingdom – which he called a “pariah state” during his 2019 election campaign – to use his influence with the OPEC cartel to boost production and offset the impact of sanctions imposed on Russian crude exports. He is not, however, expected to raise the issue of Jamal Khashoggi, a Washington Post reporter who was murdered by Saudi Crown Price agents in 2018.
“My views on Khashoggi have been absolutely, positively clear and I have never been silent on human rights,” Biden told reporters Thursday in Israel. “The reason I’m going to Saudi Arabia is to promote American interests in a way that I think gives us an opportunity to reassert our influence in the Middle East.”
U.S. gas prices fell for more than a month, extending their longest streak of declines in two years, amid a broader pullback in global crude prices and growing recession fears.
Data from the AAA automobile club showed U.S. gasoline prices fell about 3 cents from yesterday to a national average of about $4.577 a gallon on Friday, the lowest since mid -May and around 10.4% south of the all-time high of $5.107 recorded last month. .
OPEC, however, has stuck to its production rate commitments and Saudi Arabia’s energy minister has long maintained that its industry is running at full capacity.