U.S. retail sales data in June outperformed expectations, easing market concerns about an economic slowdown. Coupled with Citibank’s outstanding earnings report, it opened up nearly 5%, and U.S. stocks opened higher on Friday (15th).
Before the deadline,Dow Jones Industrial Averageup nearly 350 points or nearly 1.2%,Nasdaq Composite Indexrose more than 70 points or nearly 0.7%,S&P 500 Indexrose nearly 0.9%,Philadelphia SemiconductorThe index rose more than 0.2 percent.
U.S. retail sales climbed sharply in June, turning positive to 1% month-on-month from a revised -0.1%, beating market expectations of 0.8%, suggesting consumers are resilient despite decades of high inflation. Expanding the likelihood that the Federal Reserve will raise interest rates more significantly this month. Fed Governor Waller signaled on Thursday that he would lean toward a steeper rate hike in July if consumer spending doesn’t cool.
The New York Federal Reserve Bank manufacturing index also outperformed on the same day, at 11.10, far better than market expectations of -2.00, and better than the revised previous value of -1.20.
Traders are watching for signs of capitulation, which they hope will set the stage for a sustained recovery in stocks. U.S. stocks are likely to fall further as the U.S. economy faces the risk of a severe recession in the second half of the year and the dollar strengthens, according to a team of strategists led by Michael Hartnett at Bank of America.
Bank of America strategists also said in a report that although stocks and credit markets are close to reflecting the impact of the mild economic downturn, if the second-quarter earnings report falls short of expectations, the stock market may experience an outright capitulation sell-off.
The odds of a U.S. recession within the next year are now close to unchanged, as inflation continues to heat up, prompting the Fed to step up its efforts to raise interest rates. According to the latest monthly survey of market economists, the probability of a US recession in the next 12 months is 47.5%, much higher than 30% in June.
In terms of individual stocks, Citibank (C-US) beat Wall Street analysts’ expectations in its second-quarter earnings report before the market, with revenue of $19.64 billion and adjusted earnings of $2.19 per share, both worrying about analysts’ estimates of $18.35 billion and $1.65. The stock was blessed by the excellent financial report. The stock price rose by more than 1% before the market. After the opening, the rally rose again, up 4.83%, and the share price was temporarily reported at $46.27.
However, Wells Fargo, which announced its earnings on the same day (WFC-US) is two different things. The company’s revenue in the second quarter was reported at US$17.028 billion, down 16% year-on-year, which was lower than the market’s estimated US$17.631 billion. Net profit was reported at US$3.119 billion, down 48% year-on-year, compared with US$6.04 billion in the same period last year; diluted Earnings per share were reported at $0.74, down 46% year-on-year, not only lower than analysts’ estimates of $0.86, but also lower than the $1.38 in the same period last year.
But Wells Fargo Chief Executive Charlie Scharf remains optimistic about the outlook, saying the company will benefit from an environment of rising interest rates and that growth in net interest income will more than offset short-term pressure on non-interest income. While credit losses will gradually increase, there is no sign of deterioration yet.
Wells Fargo’s stock price fell due to the gloomy earnings news before the market, but after the opening bell, it reversed the decline and rose 3.58%, and it was temporarily reported at $40.12 per share.
As of 21:00 on Friday (15th) Taipei time:
Stocks in focus:
Pinterest(PINS-US) 17.77% to $20.68 a share in early trade
After the Wall Street Journal (WSJ) reported that activist shareholder Elliott Investment Management became the largest shareholder of social media company Pinterest, it already holds more than 9% of the shares.
BlackRock (BLK-US) rose 1.72X% to $598.77 per share in early trade
BlackRock, the world’s largest asset manager, reported last-quarter earnings before the bell today, with profits falling more than market expectations as retail investors redeemed their positions as global market turmoil reduced its fee income. BlackRock’s second-quarter (ended June 30) adjusted profit fell 30% to $1.12 billion, or $7.36 per share, below analysts’ estimates of $7.90 and below the $1.61 billion in the same period last year with $10.45.
UnitedHealth Group (UNH-US) rose 3.36% to $519.30 a share in early trade
UnitedHealth Group (UnitedHealth Group) announced eye-catching second-quarter earnings before the market, with revenue increasing 13% to $80.2 billion, and adjusted earnings per share increasing 13.6% to $5.34, both better than market expectations of 796.8 million and $5.2. Looking ahead to full-year 2022, UnitedHealth Group forecast adjusted earnings per share in the range of $21.40 to $21.90, up from a previous forecast of $21.20 to $21.70 per share.
Today’s key economic data:
- U.S. retail sales in June reported a monthly growth rate of 1%, expected 0.8%, the previous value – 0.1%
- U.S. retail sales in June is expected to report a monthly growth rate of 0.8%, expected 0.3%, the previous value – 0.3%
- U.S. core retail sales in June reported a monthly growth rate of 1%, expected 0.6%, the previous value of 0.6%
- US New York Fed July manufacturing index reported 11.10, expected – 2.00, the previous value – 1.20
- The U.S. University of Michigan’s consumer confidence index in July reported 51.1, expected 49.9, and the previous value of 50.0
Wall Street Analysis:
Although U.S. recession expectations may temporarily slow down the upward pace of the U.S. dollar, the Fed is more responsive than other central banks, coupled with geopolitical turmoil and the risk of a global recession, the U.S. dollar usually benefits from this. “The dollar is likely to stabilize around current levels, but the dollar has limited room for a downside correction and the risk balance remains tilted to the upside in the near term,” ING analysts said in a note.
EURIt has fallen more than 11% against the dollar so far this year. Dirk Schumacher, head of European macro research at Natixis, said:EURThe weakness reinforces the notion that the ECB is behind the curve in action, with inflation so high,EURStrengthening will go a long way towards lowering inflation. “
Gold prices hit an 11-month low, and US inflation broke 9, leaving the Fed with no turning back. Daniel Ghali, senior commodity strategist at TD Securities, pointed out that if gold prices fell below pre-pandemic levels of $1,650-$1,700 an ounce, it could spark a larger sell-off. “If gold falls below the entry level of the pandemic, pressure to capitulate is building,” he said. “These large positions are the most vulnerable in a liquidation vacuum, suggesting that gold still has a further downward bias.”