Stocks could fight back after Tuesday’s drubbing, although the lack of any major Main Street reading clouds the market outlook for the day. Thursday’s inflation data could keep traders on tenterhooks. Economic data from China that suggested the world’s second-largest economy has fallen into deflation will likely stir anxiety among traders.
As Moody’s dropped another bombshell, this time regarding the banking sector, stocks swooned on Tuesday. After a sharply lower open, the major averages fell further in early trading only to claw back some of the losses over the course session. All three major averages as well as the Russell 2000 Index ended Tuesday moderately lower.
In the process, the Nasdaq Composite Index pulled back toward its lowest in about three weeks.
Among the sector classes, consumer discretionary, technology, financial, and material stocks found marked weakness, while utility, energy, and healthcare stocks gained ground.
Strong economic data has left the Federal Reserve with no option but to continue tightening, said Brad McMillan, chief investment officer for Commonwealth Financial Network. An improving consumer and business sentiment will likely prop up spending and investment, the analyst said.
But the analyst is not too worried about potential rate hikes. “If the underlying economy continues to grow, which is likely, any Fed actions will have some effect, but likely a limited one,” he said.
Even with the Fed headwind, any recession is likely some time away, which should keep markets healthy, he added.
A challenging August is likely after the good market performance in July, McMillan said, adding that despite the challenges, conditions remain favorable overall.
“And while volatility may show up during the month, the trend will likely remain positive over the longer term.”
The Mortgage Bankers Association will release its weekly mortgage application volume data at 7 a.m. EDT. The report for the week ended July 28 showed that mortgage loan applications fell 3% week-over-week on a seasonally adjusted basis. The drop came amid an increase in mortgage rates, with the 30-year fixed mortgage rate increasing to 6.93%.
The Treasury will auction 10-year notes at 1 p.m. EDT.
Stocks In Focus:
- Akamai Technologies, Inc. (NASDAQ:AKAM) climbed over 6% in premarket trading in reaction to its quarterly results.
- PENN Entertainment, Inc. (NASDAQ:PENN) climbed nearly 12% after it announced a partnership with Walt Disney Co.’s (NYSE:DIS) ESPN to launch a sports betting venture named ESPN Bet. PENN said it sold 100% of the Barstool Sports, to David Portnoy in exchange for certain non-compete and other restrictive covenants. Rival sports betting website DraftKings Inc. (NASDAQ:DKNG) fell about 4%.
- Among the other stocks reacting to their earnings news are Rivian Automotive, Inc. (NASDAQ:RIVN) (up over 1%), Twilio, Inc. (NYSE:TWLO) (up over 5%), Upstart Holdings, Inc. (NASDAQ:UPST) (down about 19%) and Lyft, Inc. (NASDAQ:LYFT) (down over 6%).
- Jack In The Box, Inc. (NASDAQ:JACK), Wendy’s Co. (NASDAQ:WEN), Roblox Corp. (NYSE:RBLX) and PENN Entertainment are among the notable companies reporting their earnings before the market open.
- Those reporting after the close include Disney, Sonos, Inc. (NASDAQ:SONO), Trade Desk, Inc. (NASDAQ:TTD), Wynn Resorts Limited (NASDAQ:WYNN), Plug Power, Inc. (NASDAQ:PLUG), Illumina, Inc. (NASDAQ:ILMN), Alarm.com Holdings, Inc. (NASDAQ:ALRM) and CarGurus, Inc. (NASDAQ:CARG).
Crude oil futures rose 0.72% to $83.52% in early European session on Wednesday, as they remain on track to climb to the highest level in about nine months. On Tuesday, the black gold overcame some early weakness seen in the Asian and European sessions, triggered by weak China trade data, before settling the session up 1.20%.
The benchmark 10-year Treasury note retreated and edged down 0.001 percentage points to 4.014%.
Asian markets ended Wednesday’s session on a mixed note, with the Japanese Nikkei 225, China’s Shanghai Composite, New Zealand’s NZ50 and Taiwanese Weighted Index ending in the red. Most other major markets posted uneasy gains as caution remained the undercurrent as traders in the region looked ahead to the U.S. inflation data due on Thursday.
Sentiment in China took a hit from the negative consumer price inflation data as economists and analysts deliberated potential options before the government to jumpstart the domestic economy.
European markets advanced solidly in late-morning trading on Wednesday, as Italy quelled investor fears by clarifying that the windfall tax to be levied on the banks will be limited to 0.1% of their assets.
Produced in association with Benzinga