After a Week of Losses Stocks Look Higher, Crude Oil at 4-month High

Barry Adams
07 Aug, 2023
New York City

Market averages attempted a rebound after global markets dropped 2% in the previous week and energy stocks led gainers but tech stocks lagged market gains.  

Investors reviewed more earnings and awaited consumer and wholesale inflation later in the week. 

Investors look for clues to future rate path direction amid growing consensus that the Federal Reserve is more likely to engineer a soft landing, meaning keep interest rates elevated and avoid sinking the economy into a recession.  

Market averages rebounded on the first day of a new week and Treasury yields edged slightly higher ahead of inflation reports. 

Tech stocks traded mixed and Microsoft, Amazon and Meta Platforms advanced 0.5% but Apple Inc declined 1.7%.

Chevron, Exxon, Valero, Hess, EQT,  Sunoco, Occidental Petroleum and Marathon Oil were in focus after crude oil traded at a new 4-month high on tighter supply conditions. 

On the merger front Campbell Soup Company declined 1.8% after the food products maker agreed to acquire pasta sauce maker Sovos Brands Inc for $2.33 billion. 

 

U.S. Indexes & Yields 

The S&P 500 index traded up 0.7% to 4,508.69 and the Nasdaq Composite rose 0.4% to 13,956.76. 

The yield on 2-year Treasury notes decreased to 4.77%, 10-year Treasury notes inched lower to 4.08% and 30-year Treasury bonds edged down to 4.25%. 

Crude oil decreased $0.66 to $82.13 a barrel and natural gas prices increased 15 cents to $2.76 a thermal unit. 

 

U.S. Stock Movers 

Berkshire Hathaway Inc Class A jumped 3% to a record high of $550,000 after the diversified conglomerate said its operating earnings jumped 6.6% to $10.04 billion or $6,928.40 per Class A share. 

Revenue in the second quarter jumped to $92.5 billion from $76.2 billion, largely driven by the recent acquisition of Pilot Travel Centers which generated $14.75 billion in revenue in the period. 

The company's cash hoard soared to $147.4 billion, from $130.6 billion in the first quarter and higher interest rates also helped the company to generate more cash. 

Berkshire repurchased $1.4 billion of its own stock, significantly lower than the $4.4 billion repurchase in the first quarter. 

Tesla Inc declined 3.2% to $245.70 after the company announced the departure of Zachary Kirkhorn as chief financial officer after 13 years at the company and spending last four years and six months in the position. 

In the second quarter, Tesla announced earnings per share of 91 cents and better-than-expected operating margins despite company incentives that lowered net sale price of vehicles. 

Sovos Brands soared 25% to $22.52 after the pasta sauce maker agreed to be acquired by Campbell Soup for $2.33 billion or $23 a share. 

Including the debt, the purchase price is $2.7 billion and Campbell said it plans to finance part of the deal with the help of new debt.  

Separately, Sovos reported organic sales in its latest quarter jumped 16.3% from a year ago. 

Three months ago,  Campbell Soup agreed to sell Emerald Nuts for an undisclosed amount to Flagstone Foods. 

 

European Markets Hovered Near Flatline 

European markets struggled and market indexes retained downward bias after the release of German industrial production and UK home sales data. 

Market averages declined on the first day of a new following losses in the previous week after bond yields rose and the euro dropped to a one-year low. 

German industrial production declined more than expected in June on weak auto production. 

Industrial output declined 1.5% from the previous month and fell 1.7% from a year ago in June, the Federal Statistics Office or Destatis reported Monday. 

In other news, the UK home prices fell for the third month in a row in July on rising borrowing costs and elevated home prices. 

The Halifax home price index declined 2.4% in July after falling 2.6% in June and average home price eased to £285,044, lower than the peak of £293,992 reached last August.

“The continued affordability squeeze will mean constrained market activity persists, and we expect house prices to continue to fall into next year. Based on our current economic assumptions, we anticipate that being a gradual rather than a precipitous decline. 

And one that is unlikely to fully reverse the house price growth recorded over recent years, with average property prices still some £45,000 (+19%) above pre-Covid levels,” said Kim Kinnaird, Director, Halifax Mortgages.

 

Europe Indexes & Yields

The DAX index decreased 0.01% to 15,950.76, the CAC-40 index rose 0.06% to 7,319.76 and the FTSE 100 index dropped 0.1% to 7,554.49.  

In the previous week, the DAX index declined 3%, the CAC-40 fell 2.8% and the FTSE 100 index dropped 2.2%. 

The yield on 10-year German bonds decreased to 2.58%, 8rench bonds traded lower to 3.15%, the UK gilts edged up to 4.45% and Italian bonds decreased to 4.28%.

The euro edged lower to $1.097, the British pound to $1.271 and the U.S. dollar fetched 87.69 Swiss cents.

Brent crude decreased $0.48 to $85.75 a barrel and the Dutch TTF natural gas increased €1.73 to €30.49 per MWh.

 

Europe Stock Movers

UK home builders declined after the release of the Halifax housing report. 

Barratt Developments PLC decreased 0.4% to 456.40 pence, Taylor Wimpey plc declined 0.8% to 118.0 pence and Persimmon Plc fell 0.6%. 

Weak base metal prices weighed on mining stocks on the market jitters ahead of the inflation and international trade balance data from China later this week. 

Anglo America, Antofagasta and Glencore fell between 1% and 3%. 

Clarkson Plc declined 2.7% to 2,795.0 pence after the shipping services provider reported price and volume softening trends in some sectors. 

UNITE Group Plc fell 2.2% to 941.50 pence after the student housing provider's debt rating was downgraded by a rating agency.  

LSL Property Services Plc dropped 10.6% to 252.50 pence after the mortgage and valuation services provider issues a profit warning citing mortgage market weakness in refinancing and new mortgage sale. 

Revenue in the first-half declined to £104 million from £160.9 million and operating profit plunged to £3.5 million from £14.2 million.    

Siemens Energy AG dropped 6.7% to €14.51 after the company reported a wider loss in the latest quarter and lowered its full-year outlook. 

Aurubis AG plunged 10.5% to €75.98 after the company reported weaker-than-expected results in the nine months of fiscal 2023.