With Focus On Earnings, Investors Turn Cautious, Gradual Cooling In Job Market

Barry Adams
01 Aug, 2023
New York City

Market indexes on Wall Street traded down and investors reviewed a flood of earnings releases and critical updates on the labor market. 

The S&P 500 index and the Nasdaq Composite index declined and Treasury yields advanced after crude oil prices advanced to a 3-month high. 

The S&P 500 index advanced more than 3%, the Nasdaq Composite index jumped 4% and the Russell 2000 index soared 6.1% after small cap companies rebounded in July. 

Earnings dominated news flow  and Caterpillar, Pfizer, Uber, HSBC, BP, Gap, CNA, Loews Corporation, ZoomInfo and SoFi were in focus. 

On the economic front, manufacturing activities declined for the ninth month in a row in July but at a slower pace than in the previous month.  

The ISM Manufacturing Purchasing Managers' Index edged up to 46.4 from a nearly a three-year low of 46.0 in June. 

New orders, production, inventories and backlog shrank indicating ongoing weakening demand. 

The number of job openings declined 34,000 from the previous month to 9.582 million in June, the JOLT report released by the U.S. Bureau of Labor Statistics showed Tuesday.  

Job market has been cooling off gradually after peaking near 12 million in early 2022. 

Job openings fell in transportation, warehousing, and utilities by 78,000, state and local government education by 29,000, and federal government by 21,000. 

However, job openings increased in health care and social assistance by 136,000 and in state and local government, excluding education by 62,000. 

Over the month, the number of hires and total separations fell to 5.9 million and 5.6 million, respectively.

 

U.S. Indexes & Yields 

The S&P 500 index traded down 0.2% to 4,577.69 and the Nasdaq Composite declined 0.6% to 14,263.99. 

The yield on 2-year Treasury notes increased to 4.90%, 10-year Treasury notes inched higher to 4.90% and 30-year Treasury bonds edged down to 4.07%. 

Crude oil increased $0.35 to $81.35 a barrel and natural gas prices decreased 8 cents to $2.55 a thermal unit. 

 

U.S. Stock Movers 

Caterpillar Inc soared 7.2% to $283.09 after the heavy equipment maker reported higher sales on rising demand in the second quarter. 

Uber Technologies declined 4.6% to $47.11 after the company said gross bookings rose 16% to $33.5 billion and reported quarterly profit of 18 cents a share. 

Pfizer Inc increased 0.9% to $36.27 after the pharmaceutical company reported mixed quarterly results in the second quarter and revenue of $12.7 billion and adjusted earnings per share of 67 cents. 

Lower Covid related vaccine sales negatively impacted overall sales. 

 

European Markets Hovered Near Recent Highs

European markets traded down after investors reviewed latest unemployment data in the region and corporate earnings releases. 

Market indexes in London, Paris and Frankfurt turned lower on the first day of a new month after the DAX gained about 1.5% in July and CAC-40 added 0.8% and the FTSE 100 index jumped 2.2%. 

Looming recession worries coupled with the expected rise in interest rates have kept investors on the sidelines following the market rally of the last seven months. 

Market indexes are hovering near record highs and investors are debating the future path of indexes in the face of rising rates and restrained consumer spending because of elevated prices. 

 

Euro Area Jobless Rate Held Stable In June 

In the region's economic news, the seasonally adjusted unemployment rate in the Euro Area held stable at 6.4% in June matching the rate in the previous month, Eurostat reported Tuesday. 

The number of unemployed declined by 62,000 from the previous month to 10.814 million and the jobless rate among people younger than 25 years old fell to a record low of 13.8% from 14.0% in the previous month. 

Among the economies of the Euro Area, the jobless rate was highest in Spain with 11.7%, followed by Italy with 7.4% and France with 7.1%. 

Germany recorded the lowest unemployment rate of 3%. 

Separately, the German bureau of labor statistics said the jobless rate fell to 5.6% in July from 5.7% in the previous month. 

The agency reported demand for labor remained cautious because of weak economic conditions and summer break. 

The unemployment declined by 4,000 to 2.604 million, but excluding Ukrainian nationals, the total unemployed would have been higher, the government report said.   

From a year ago, the total unemployed rose by 147,000.  

 

Weak Manufacturing Activities In Euro Area and UK 

In other economic news in the region, the HCOB Eurozone Manufacturing PMI declined to 42.7 in July from 43.4 in the previous month, the lowest in three years.

Manufacturing activities were also under pressure in the Euro Area. and declined for twelve consecutive months in a row because higher interest rates and higher prices negatively impacted demand for manufactured goods. 

The HCOB Eurozone Manufacturing PMI declined to 42.7 in July from 43.4 in the previous month, the lowest in three years. 

UK factory output fell at the fastest pace in July after higher interest rates and inflation kept demand weak. 

The S&P Global/CIPS UK Manufacturing PMI was revised higher to 45.3 in July from the preliminary estimate of 45.0. 

The latest reading was the lowest in the year and the weakest since May 2020. 

 

Europe Indexes & Yields

The DAX index decreased 0.9% to 16,307.64, the CAC-40 index fell 0.9% to 7,433.94 and the FTSE 100 index declined 0.3% to 7,666.25.  

The yield on 10-year German bonds increased to 2.46%, French bonds traded lower to 3.02%, the UK gilts edged down to 4.32% and Italian bonds decreased to 4.10%.

The euro edged lower to $1.09, the British pound to $1.281 and the U.S. dollar fetched 87.58 Swiss cents

Brent crude decreased $0.48 to $84.94 a barrel and the Dutch TTF natural gas increased €1.24 to €27.12 per MWh.

 

Europe Stock Movers

JD Sports Fashion Plc declined 2.5% to 153.60 pence after the U.K.'s Competition and Markets Authority said the retailer and Leicester City Football Club broke competition law 

HSBC Holdings Plc increased 1.1% to 654 pence and the UK and Kong-based bank said second quarter profit increased 12% to $6.64 billion from $5.49 billion a year ago, ahead of market expectations on higher interest rates. 

Revenue rose 37% to $16.7 billion in the second quarter and net interest income advanced 35% to $9.31 billion.

The bank announced its plan to pay a quarterly dividend of 10 U.S. cents and announced stock buyback of $2 billion. 

The bank resumed paying quarterly dividends in the first quarter, following the suspension of dividend payment in 2020. 

“We have delivered a strong first half performance and are confident of achieving our revised mid-teens return on tangible equity target in 2023 and 2024,” CEO Noel Quinn said in a stock exchange filing. 

Fresnillo Plc declined 3.5% 596.50 pence after the silver mining company forecasted weaker-than-expected 2023 outlook. 

BP Plc rose 1.7% to 491.38 pence after the energy company hiked its quarterly dividend. 

TeamViewer SE soared 7.4% to €16.59 after the software company reported higher earnings in the second quarter supported by higher sales and lower financing costs.