Here are five things you must know for Friday, August 12:
1. — Stock Futures Higher Amid Inflation Debate
U.S. equity futures moved higher Friday, with the dollar clawing back gains against its global peers and Treasury bond yields edging north, as investors drew confidence from softer inflation data while parsing cautious comments from key Federal Reserve officials.
Slowing inflation figures earlier this week, including a flat month-on-month reading for July CPI and a pullback in factory gate prices, has clipped bets on another jumbo rate hike from the Fed when it meets next month in Washington.
However, San Francisco Federal Reserve Bank President Mary Daly warned yesterday that she didn’t want to be ‘head-faked’ but a single data series, telling Bloomberg Television that she would be “open to 75 (basis points) should the data evolve differently.”
Her comments followed a similar assessment from Minneapolis Federal Reserve Bank President Neel Kashkari, who told the Aspen Ideas Conference Wednesday hat the central bank is “”far, far away from declaring victory”, and still sees the need of a Fed Funds rate approaching 4% by the end of the year.
Rate bets remain tempered, with the CME Group’s FedWatch now suggesting on a 63.5% chance of a 50 basis point hike in September, up from just 32% last week, but Treasury bond yields are quietly retracting back to levels prior to the July inflation release.
Benchmark 10-year notes were pegged at 2.88% in overnight trading, while 2-year paper was changing hands at 3.215%. The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.27% higher at 105.367.
Global equity markets appeared far more optimistic, even after last night’s late-hour selloff on Wall Street, with the Nikkei 225 rising 2.62% in Tokyo to close at a seven-month high of 28,548.98 points following Thursday’s public holiday.
The region-wide MSCI ex-Japan index was marked 0.16% higher into the close of trading, while Europe’s Stoxx 600 rose 0.39% in Frankfurt.
On Wall Street, futures tied to the S&P 500 are indicating a 21 point opening bell gain while those liked to the Dow Jones Industrial Average are priced for a 160 point bump. Futures linked to the tech-focused Nasdaq are indicating a 75 point advance.
2. — Apple Shares Gain On iPhone Demand Confidence
Apple (AAPL) shares in pre-market trading following a report that the tech giant will likely sustain the pace of iPhone sales into the final quarter of its fiscal year.
A cautious outlook from its main assembler, Foxonn, earlier this week had raised concerns over waning smartphone demand over the second half of the year. Apple, however, expects is assembler base to make 220 million iPhones this year — on pace with 2021 levels — including 90 million of its newest iPhone 13, according to a report from Bloomberg.
Late last month. Apple declined to provide detailed September quarter revenue guidance following its better-than-expected third quarter earnings, but said overall revenue growth would likely outpace gains over the three months ending in June.
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Apple shares were marked 0.46% higher in pre-market trading to indicate a Thursday opening bell price of $169.27 each.
3. — Rivian Shares Slip On Wider Full-Year Loss Projection
Rivian Automotive (RIVN) shares slipped lower in pre-market trading after the upstart electric truckmaker forecast a wider-than-expected 2022 loss but stuck to its forecast of producing 25,000 vehicles by the end of the year.
Rivian’s first-half production tally came in just under 7,000, after delivering 4,467 over the three months ending in June, generating revenues of $364 million and a second quarter loss of $1.71 billion.
That figure will widen to $5.45 billion by the end of the year, Rivian said, even with 98,000 unfilled pre-orders for its pickup trucks and unsold inventory of around $655 million.
The supply chain continues to be the limiting factor in our production rates but we remain confident in our ability to achieve our target,” CFO Claire McDonough told investors on a conference call late Thursday. “On the delivery side, in July, we started a larger effort to move from truck to rail for our outbound freight, which should provide additional cost savings as we scale our operations.”
Rivian shares were marked 0.9% lower in pre-market trading to indicate a Thursday opening bell price of $38.60 each.
4. — Walmart and Target Keep Retail Stocks In Focus
Walmart (WMT) and Target (TGT) shares are likely to be in focus Friday as investors get set for a key slate of earnings next week following warnings on bloated inventories and pending discounts from the nation’s largest retailers.
Walmart and Home Depot (HD) will publish second quarter earnings on Tuesday, with Lowe’s Companies (LOW) and Target updating the following day. Walmart warned late last month that operating income will likely decline by between 13% to 14% over its fiscal second quarter, which ends in July, and between 11% and 14% for the full year.
Target has said that its bigger-than-expected 35% build-up in overall inventories would likely trigger price cuts, said in June that operating margins would narrow to around 2% over the current quarter before rebounding into the second half of the year.
Walmart shares were marked 0.34% higher in pre-market trading to indicate an opening bell price of $130.26 each while Target gained 0.17% to trade at $169.89 each.
5. — U. Michigan Survey Could Cap Big Week For Inflation Doves
Inflation data has dominated markets for much of the week, and a final reading on consumer expectations due later today could cement bets that price pressures have peaked in the world’s biggest economy.
The University of Michigan’s closely-watched series of sentiment data, due at 10:00 am Eastern time, is likely to show a sharp decline in inflation expectations for both this year and next, thanks in part to tumbling gasoline prices and improving job prospects.
Data from the New York Federal Reserve’s monthly survey earlier this week should the biggest pullback in inflation expectations, with consumers estimating a 6.2% rate for this year and 3.2% for 2023, down from 6.8% and 3.6% respectively in the New York Fed’s June survey.
Following on from a softer-than-expected headline July CPI reading, as well as a contraction on factory gate prices, investors are betting that peak inflation has passed and that the Fed will begin to slow the pace of its planned rate hikes between now and the end of the year.
