U.S. and Global Markets Brace for Volatile Road Ahead

Alexander Garcia
06 Aug, 2024
Miami

In volatile trading, market indexes on Wall Street staged a sharp reversal following losses in the previous trading session. 

The S&P 500 index and the Nasdaq Composite advanced 2% as investors searched for bargains in mega-cap stocks. 

Nvidia, ASML Holding, Broadcom, Qualcomm, TSMC, Arm Holdings, and Sanmina Corp. jumped between 3% and 6%. 

Meta Platforms, Amazon.com, Microsoft, and Alphabet were among the winners, with a rise between 1% and 6%; however, Apple extended losses to the second day in a row after Berkshire Hathaway trimmed its position by half. 

Investors returned to buy more stocks in the hopes that the previous three-session sell-off was overdone and underlying economic fundamentals are solid, despite the recent moderation in labor market conditions. 

The yield on 10-year Treasury notes rebounded above 3.8% after dropping to a one-year low of 3.67% in the previous session. 

The U.S. international goods and services trade gap shrank in June, the Commerce Department reported Tuesday. 

The trade gap shrank to $73.1 billion from the revised 20-month peak of a $75 billion deficit in the previous month. 

Exports increased 1.5% from the previous month to $265.9 billion, and imports rose at a slower pace of 0.6% to $339 billion. 

Exports advanced to the second-highest on record, driven by strong demand for aircraft, automotive vehicles, and petroleum energy products. 

Trade deficit with China fell by $1.6 billion to $22.3 billion as more Chinese companies shipped goods from Vietnam, Mexico, and Malaysia to avoid punitive tariffs. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index gained 2.0% to 5,292.95, the Nasdaq Composite advanced 2.2% to 16,561.43, and the Russell 2000 index rose 1.4% to 2,066.50. 

The yield on 2-year Treasury notes edged higher to 3.95%, 10-year Treasury notes increased to 3.83%, and 30-year Treasury bonds advanced to 4.12%.

WTI crude oil increased $0.51 to $73.52 a barrel, and natural gas prices edged up 2 cents to $1.96 a thermal unit.

Gold decreased by $14.55 to $2,390.06 an ounce, and silver declined by $0.09 to $27.17. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 102.52.

 

U.S. Stock Movers 

Caterpillar advanced 4.2% to $329.97, and the earth moving equipment maker reported better-than-expected quarterly results. 

Palantir Technologies soared 11.5% to $26.79 after the data analytics company lifted its annual revenue outlook. 

The company estimated annual revenue between $2.74 billion and $2.75 billion, higher than the previously estimated range between $2.68 billion and $2.69 billion. 

Uber Technologies increased 7.7% to $62.99 after the ride-hailing service provider reported better-than-expected second quarter results. 

Revenue increased 16% to $10.7 billion from $9.2 billion, net income attributable to shareholders soared 158% to $1.0 billion from $394 million, and earnings per share rose to 47 cents from 18 cents a year ago. 

Uber delivery segment, which includes delivery of food from restaurants and stores, saw gross bookings increase 16% to $18.1 billion from $15.6 billion, and revenue rose 8% to $3.3 billion from $3.1 billion a year ago. 

The company also said gross bookings are likely to increase in the current quarter from the previous quarter on solid demand for its services. 

Yum China increased 12.8% to $33.58 after the Shanghai-based franchisee of Pizza Hut and Taco Bell fast food stores reported better-than-expected quarterly results. 

Revenue in the second quarter increased to $2.68 billion and fell short of market expectations, and adjusted earnings per share rose to 55 cents and surpassed market expectations of at least 49 cents. 

The company also said its chief financial officer is planning to step down. 

 

European Markets Hovered Near Flatline

European markets struggled to advance following losses in the previous session amid rising Middle East tensions, lukewarm corporate earnings, and mounting concerns about the U.S. economic slowdown. 

Benchmark indexes in Paris, London, and Frankfurt traded around the flatline after investors reviewed eurozone retail sales and German factory orders. 

 

Eurozone Retail Sales Fall In June 

Retail sales in the eurozone decreased 0.3% on the month and on the year in June, Eurostat reported Tuesday. 

Retail sales declined on a monthly basis for the fourth time in the last seven months, and food, drink, and tobacco sales declined 0.7%, compared to a 1% rise.

Non-food product sales decline slowed to 0.1%, following a 0.3% decrease in the previous month. 

On the other hand, sales of auto fuel increased 0.5%, extending a 0.3% rise. 

 

German Factory Orders Rebounded in June 

German factory orders adjusted for season and calendar factors rebounded in June after falling in five previous months in a row, the Federal Statistics Office, or Destatis, reported Tuesday. 

Orders for manufactured goods were less volatile on a quarterly basis and decreased 1.4% in the second quarter ending in June from the previous quarter. 

Automotive orders increased 9.3%; orders for ships, trains, and aircraft soared 11.7%; however, orders for electronic and optical equipment declined 7.9% from the previous month. 

Orders for capital goods increased by 9.2%, but intermediate goods fell by 1.5%, and consumer goods dropped 7.1%.

Domestic orders rose 9.1% and foreign orders inched up 0.4%, with orders from the eurozone declining 0.3% and outside the currency union rising 0.9%. 

 

Europe Indexes and Yields

The DAX index increased by 0.1% to 17,354.32; the CAC-40 index fell by 0.3% to 7,130.04; and the FTSE 100 index rose by 0.2% to 8,026.69. 

European bond yields dropped to six-month lows as investors sought safety in government securities amid growing worries about the global economic slowdown and rising geopolitical tensions. 

The yield on 10-year German bonds edged higher to 2.17%, French bonds inched higher to 2.95%, the UK gilts inched higher to 3.90%, and Italian bonds increased to 3.66%.

The euro edged down to $1.09; the British pound inched lower to $1.269; and the U.S. dollar weakened to 85.40 Swiss cents.

Brent crude decreased $0.32 to $76.61 a barrel, and the Dutch TTF natural gas fell by €0.82 to €36.62 per MWh.

 

Europe Stock Movers

Abrdn jumped 2.2% to 165.76 pence after the UK-based asset management company reported better-than-expected first-half results. 

Adecco Group increased 1.1% to CHF 28.12 after the Swiss staffing company's second-quarter results surpassed market expectations. 

Monte dei Paschi di Siena soared 7.3% to €4.66 after the Italian bank raised its profit outlook.

SIG Group AG decreased 1.4% to CHF 17.09 after the Swiss construction material company reported a loss in the first half. 

Domino's Pizza decreased 6.5% to 288.80 pence after the pizza delivery company estimated its annual profit to hover near the lower end of market expectations. 

 

Volatile Japan Indexes Rebound 10% Following Historic Plunge In Monday's Trading 

After a day of tumultuous trading, benchmark indexes in Tokyo recouped losses in the previous session as market sentiment stabilized. 

The Nikkei 225 and the Topix indexes jumped around 10% as investors searched for bargains after three-day losses totaled nearly 20%. 

In fact, the surge in Tuesday's trading was the largest-ever increase in points in the Nikkei 225's history, surpassing its previous increase of 2,676.55 points in October 1990. 

The Nikkei 225 stock plunged more than 12% in Monday's trading as currency traders unwound the so-called "carry trade." 

Carry trade had dominated currency market speculation for more than a decade, where investors borrowed money in the Japanese yen and invested in U.S. or European assets that yielded a higher annual return. 

However, that currency arbitrage became far more risky after the Bank of Japan unexpectedly increased its policy rate for the second time in a row since March and signaled additional rate hikes. 

Benchmark indexes accumulated nearly 20% of losses over the three days to Monday, amid rising market anxieties after currency traders unwound the carry trade, investors walked away from frothy valuations of the artificial intelligence-linked stocks, and the strong rebound in the yen dented the earnings growth outlook of exporting companies. 

On Tuesday, the yen weakened to 145.34 from 141.43 against the U.S. dollar in Monday's trading. 

On the economic front, average cash earnings increased 4.5% in June, accelerating from an upwardly revised 2% in May, the Ministry of Health, Labor, and Welfare reported Tuesday. 

Japan's nominal wage increase outpaced the core inflation rate of 2.6%, leading to the first gain in real wages in 27 months. 

The average of household spending in Japan was up a seasonally adjusted 0.1% on month but fell 1.4% in real terms on the year in June, the Ministry of Internal Affairs and Communications said on Tuesday. 

Household spending in June was 280,888 yen and the real average of monthly income per household increased 3.1% from a year ago to 957,457 yen.

 

Japan Stock Movers 

The Nikkei 225 stock average soared 10.2% or 3,217.04 points to 34,675.46, and the Topix index advanced 9.3% to 2,434.21. 

Widely followed advanced chipmaking equipment makers rebounded, and Tokyo Electron, Advantest, and Screen Holdings jumped between 10% and 15%. 

Leading banks also participated in the market's rebound. 

Mitsubishi UFJ gained 5.8% to ¥1,318.0, Sumitomo Mitsui Financial declined 2% to ¥8,000.0, and Mizuho Financial Group jumped 5.6% to ¥2,596.50. 

Honda Motor, Toyota Motor, and Nissan Motor gained between 10% and 12%. 

Kikkoman soared 21% to ¥1,744.0 after the food products maker reported a surge in net income in the June quarter. 

Revenue increased 12% to 178.22 billion yen, and net income soared 70% to 18.1 billion yen. 

The company also reiterated its annual net income outlook of 57.60 billion yen and its net sales estimate of 685 billion yen. 

 

Indexes In Shanghai and Hong Kong Fail to Stay Above Flatline 

Stocks in Hong Kong and Shanghai rebounded after market sentiment stabilized, and investors looked forward to the release of corporate results. 

The Hang Seng and the CSI indexes rebounded in early trading after Japan's Nikkei 225 stock average recouped most of the historic losses in the previous session amid panic selling. 

But market indexes turned lower after a weak domestic economic outlook and earnings growth uncertainty overshadowed market sentiment in Hong Kong and Shanghai. 

Investors looked forward to the release of official consumer price inflation and producer price inflation data on Friday. 

Economists are estimating consumer price inflation to rebound by 0.3% in July, but wholesale deflation will persist for the 22nd month in a row and show a decline of 0.9%. 

The Hang Seng index has erased about 15% of its gains from the peak in May, and the benchmark is struggling near a three-month low as foreign investors lighten their holdings and domestic investors stay on the sidelines. 

In addition, China's policymakers are struggling to devise market reform amid weak consumer confidence and prolonged residential market decline as the world's second-largest economy labors under record-high government debt. 

Across wider Asia, market indexes in Mumbai advanced 0.7%, in Tokyo rebounded 9.6%, in Seoul gained 4.5%, and in Sydney jumped 0.4%. 

 

China Stock Movers 

The Hang Seng index fell 0.2% to 16,668.21, and the CSI 300 index declined 0.5% to 3,327.05. 

Property developers were in focus ahead of the release of their quarterly results. 

China's top 100 residential real estate developers reported home sales of 1.85 trillion yuan, a 40% decline in sales in the first half, according to China Real Estate Information Corp. 

But the supply of new homes is still rising at a pace faster than the rate in 2016, indicating that the industry may take more than a decade to rebound from the current slump. 

China Vanke increased 1.2% to HK $4.08, China Resources Land gained 1.1% to HK $22.70, Longfor Group was unchanged at HK $9.07, and China Overseas Land & Investment inched higher 0.3% to HK $12.56. 

Alibaba Group jumped 2% to HK $75.65, Meituan Holding declined 0.4% to $106.30, Baidu decreased 1.4% to HK $79.90, and Tencent Holdings dropped 1.6% to HK $350.80.