U.S. Stocks Waver Ahead of Rate Decision and GDP Data

Barry Adams
25 Jul, 2022
New York City

U.S. stocks lacked direction ahead of the Fed's rate decision and the GDP data later in the week. 

Investors have been battling worries of inflation, corporate earnings growth and the path of the economic growth. 

About 450 companies including one-third of the companies listed in the S&P 500 index are scheduled to release quarterly results this week.   

The S&P 500 index increased 2.46 to 3,963.91 and the Nasdaq Composite index declined 0.4% or 49.06 to 11,781.94.  

Benchmark indexes in volatile trading hugged flat line and traders avoided bets ahead of the Fed's rate decision at the end of two-day meeting on July 27. 

Economists are anticipating at least 50 basis points increase in the key lending rate and many are rooting for a larger 75 basis point hike in the rate helping the policymakers in front-loading inflation containment. 

Inflation has stayed above the Fed's target rate of 2% for 18 months in a row and surged as high as 8.6% in the last two months. 

The Bureau of Economic Analysis is set to release the second quarter GDP estimate at 8:30 a.m. on July 28, 

Futures of crude oil increased $1.56 to $96.24 a barrel and natural gas rose 36 cents to $8.66 a unit. 

The yield on 10-year Treasury notes edged up 3 ticks to 2.82%. 

The euro traded at $1.0216 and the Japanese yen dropped to 136.71 against one U.S. dollar. 

Energy stocks traded higher after crude oil prices rebounded from the lows of last week. 

Hess, Marathon Oil, Valero Energy, and Diamondback Energy gained more than 4%.  

Newmont Corporation dropped 12.8% to $44.86 after the resource company reported flat sales of $3.06 billion and net income declined to $387 million from $650 million a year ago. 

Diluted earnings per share fell to 49 cents from 81 cents a year ago. 

The gold mining company also trimmed its annual capital expenditure plan to $1.1 billion from the previous $1.4 billion released at the end of 2021.  

World Wrestling Entertainment Inc increased 7.3% to $71.21 after the company said its chief executive Vince McMahon retired on Friday amid an internal investigation of sexual misconduct. 

The company also disclosed previously unrecorded $14.6 million expenses paid personally by McMahon. 

The company also said it "is facing or may face additional investigations from regulatory agencies and other entities" in a regulatory filing with the SEC. 

Philips NV declined 7.9% to $20.80 after the medical equipment maker swung to a quarterly loss and said comparable sales fell 7% in its latest quarter ending in June. 

Ryanair gained 4.6% to $74.22 after the discount airline operator reported better-than-expected earnings and estimated passenger traffic to rebound to the pre-Covid 2019 levels either this or the next year. 

 

Germany's Business Confidence at 25-month Low 

European markets lacked direction in volatile trading as investors digest another batch of corporate earnings in the region. 

A private survey showed confidence in the business community dropped to the lowest level in the last 25 months. 

The business confidence index declined to 88.6 in July from a revised 92.2 in June.

Higher energy prices and uncertainties linked to the natural gas deliveries and rising wage pressures are worrying business leaders. 

The DAX index declined 0.3% to 13,210.46, the CAC-40 index inched up 0.3% to 6,237.55, and the FTSE 100 index increased 0.4% to 7,306.30. 

Volkswagen AG declined 3.9% to 183.0 euros after the automaker said that the chief executive Herbert Diess will be replaced by Oliver Blume, head of Porsche. 

In another management shake up, the company appointed chief financial officer Arno Antlitz as chief operating officer.

Under Diess, VW accelerated its investment and migration to electric vehicle production and in 2021 sold 450,000 units, surpassing Tesla sales in Europe. 

Schaeffler AG declined 1.2% to 5.52 euros and the German industrial products maker signed an agreement with an affiliate of Triton Fund V for the acquisition of the Ewellix Group for 582 million euros and assume debt of 120 million euros. 

In 2018, Triton acquired the linear actuators maker Ewellix Group from the Swedish bearings maker SKF. 

Philips AG declined 7.7% to 20.08 euros after the medical equipment and systems maker reported sharply lower-than-expected earnings. 

Revenues in the second quarter declined 1% or 7% on a comparable basis to 4.2 billion euros. 

In the quarter, the company swung to a net loss of 20 million euros from 153 million profit a year ago. 

Sales in Western Europe declined 6% to 873 million euros and in North America increased 11% to 1.7 billion euros. 

Telefonica S.A. increased 1.9% to 4.42 euros after the company agreed to sell its rural fiber network in Spain to a consortium for around 1 billion euros. 

Orange S.A. increased 1.5% to 10.27 euros after the French telecom operator agreed to merge its unit in Spain with MasMovil. 

The equally-owned joint venture values Orange's Spain business at 7.8 billion euros and Masmovil at 10.9 billion euros.  

 

China Worries Hobble Asian Markets 

Asian markets traded lower and indexes in China led the declines in the region after real estate and banking crises.deepen in China 

Investors also awaited the restructuring plan from the troubled China Evergrande Group. 

At least four smaller banks in Henan and three additional banks in Anhui are restricting customer withdrawals. 

Moreover, mortgage boycotts are spreading in central and southern China as investors await the fate of completion of 249 real estate projects reflecting over 1 million apartment units. 

The Shanghai Composite index fell 0.60% to 3,250.39 and the Hang Seng index in Hong Kong closed down 0.22% to 20,562.94.

In Tokyo, benchmark indexes lower ahead of the U.S. Fed's rate decision and the release of the U.S. GDP data later in the week

The Nikkei average fell 0.77% to 27,699.25 to snap a seven-day advance while the broader Topix index dropped 0.65% to 1,943.21.

The Sensex index in India declined 0.6% to 55,766.20 after the industrial, telecom, and retail conglomerate Reliance Industries reported a 40% surge in earnings on the back of a 65% jump in crude oil prices.

In addition, tech service companies Infosys and Tech Mahindra reported sharply lower-than-expected earnings in the latest quarter ending in June.