Wednesday July 22nd

22-07-2020

Stock futures under pressure from U.S.-China tensions, earnings onslaught

U.S. stock index fell in early trading Wednesday amid renewed U.S.-China tensions and ahead of major technology earnings from Microsoft and Tesla after the closing bell. Dow Jones Industrial Average futures were down 58 points, or 0.2%. S&P 500 futures dipped 0.2% while Nasdaq 100 futures gained 0.2%. Futures briefly extended losses in premarket trading after the U.S. State Department abruptly ordered China to close its consulate in Houston. Foreign ministry spokesperson Wang Wenbin condemned the action and warned of firm countermeasures if the U.S. does not reverse its decision. Pfizer shares rose more than 3% after the government said it approved the company to produce millions of doses of coronavirus vaccines. A few disappointing company earnings after the bell Tuesday also weighed on investor sentiment. Shares of Snap dropped more than 9% in extended trading after the social media company reported fewer-than-expected daily active users. Shares of United Airlines dipped in extended trading after the company reported a net loss of $1.62 billion for the second quarter. The coronavirus pandemic’s impact on travel fueled an 87% year-over-year revenue decline for the Chicago-based airline. Earnings season continues on Wednesday with reports from Microsoft, Tesla, Chipotle Mexican Grill, CSX and Las Vegas Sands after the closing bell. All eyes will be on Tesla’s earnings, which could make the company qualify to become an S&P 500 constituent. Biogen, Baker Hughes and Nasdaq all report earnings before the bell on Wednesday. On Tuesday, the Dow Jones Industrial Average climbed more than 150 points, after rising more than 300 points at its high of the day. Chevron and Exxon Mobil fueled the 30-stock index, gaining about 7% and 5%, respectively, as oil rose to its highest level since March. The S&P 500 closed in positive territory with a modest gain of 0.2%. The Nasdaq Composite underperformed, dipping 0.8% as Facebook, Amazon Apple, Netflix and Google-parent Alphabet all closed lower. The Nasdaq gained more than 2.5% on Monday. “A major leadership shift dominated the day,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC. “Old leadership led by Large cap technology and comms gave way to strong upside moves in the broader market including most cyclical sectors.” “Overall Tuesday’s character illustrated an appetite to increase ‘risk-on bets’ in new areas of the stock market away from the Old leadership of FAANGs,” added Paulsen. Better-than-expected earnings from Coca-Cola and IBM boosted sentiment on Wall Street on Tuesday. Coca-Cola rose more than 2% but IBM closed in the red. Investors are also weighing company earnings against the backdrop of increasing coronavirus cases in the U.S. The virus has infected more than 3.8 million Americans and killed at least 141,118 as of Tuesday, according to data compiled by Johns Hopkins University. Texas and Florida hit a grim record Monday for daily coronavirus deaths based on a seven-day moving average, as hospitalizations continue to surge in 34 states across the United States. President Donald Trump warned Tuesday the coronavirus pandemic in the United States will probably “get worse before it gets better.” Existing home sales for June will be released at 10 a.m. on Wednesday. Economists polled by Dow Jones are expecting a rebound to 4.73 million sales. Stocks in Asia Pacific mostly declined in the afternoon, but mainland Chinese stocks bucked the trend. Gold prices soared to a nine-year high, while the dollar weakened after European Union leaders reached an unprecedented $2 trillion stimulus package. Mainland Chinese stocks shed some earlier gains but were still positive by the close. The Shanghai composite rose 0.37% to close at 3,333.16, while the Shenzhen composite was up 0.84% to 2,251.43. The Shenzhen component jumped 0.89% to 13,657.03. In Hong Kong, the Hang Seng index declined 0.48% by the afternoon. Japan’s Nikkei 225 lost 0.58% to close at 22,751.61, while the Topix edged down 0.49% to 1,572.96. Over in South Korea, the Kospi erased earlier gains to close flat at 2,228.66. Oil prices fell on Wednesday as industry data showed a bigger than expected inventory build in the United States, where a surge in coronavirus cases could further dent fuel demand in the world’s biggest oil consumer. Brent crude fell 52 cents, or 1.17%, to $43.80 a barrel. U.S. West Texas Intermediate crude dropped 56 cents, or 1.34%, to $41.36. Gold jumped more than 1% on Wednesday to its highest in nearly nine years, driven by a weaker dollar and as expectations of more stimulus to revive pandemic-hit economies lifted the metal’s appeal as an inflation-hedge. Spot gold was up 0.8% at $1,856.13 per ounce by 0501 GMT, after hitting its highest since September 2011 at $1,865.35 earlier in the session. U.S. gold futures rose 0.7% to $1,856.80.