Stock slide, week ahead, Tesla, Exxon and SAS – 5 things to know
Here are five things you need to know for Tuesday, July 5:
1. — Stock futures fall as recession worries
U.S. stock futures fell on Tuesday as the dollar traded at two-decade highs and Treasury bond yields sounded another recession warning as investors entered the shortened week of holidays, focused on the outlook for growth and inflation in the world’s largest economy.
The Atlanta Fed’s GDPNow growth forecasting tool suggests the economy is contracting sharply at the start of the third quarter, at -2.1%, after what is expected to be two consecutive quarters of contraction between January and June.
It won’t automatically define recession – that’s ultimately the job of the National Bureau of Economic Research – but all it takes is a downturn to trigger shifts in investing, finance and, perhaps, reaction from the Federal Reserve, which may choose to slow the pace of rate hikes needed to control inflation in order to limit their impact on economic growth.
Right now, however, markets are still betting on a 90% chance of a July 75 basis point rate hike from the Fed, with an 82.3% chance of a move. trailing 50 basis points in September.
This keeps the US dollar at a 20-year high against a basket of its global peers, but it also tips Treasury yields into a so-called inversion – where 2-year note yields are trading higher. than 10-year notes.
According to a study by the San Francisco Federal Reserve, a sustained inverted yield curve preceded all nine recessions the US economy has experienced since 1955, making it an extremely accurate barometer of financial market sentiment.
President Joe Biden’s comments yesterday that he could eliminate some Trump-era tariffs on Chinese-made goods to ease domestic inflationary pressures, provided at least some market relief, as did reports from constructive meeting between Treasury Secretary Janet Yellen and China Vice Premier Liu He.
The benchmark 10-year notes were last seen at 2.882% while the 2-year notes changed hands at 2.867%.
Still, growth concerns kept European stocks in the red this morning, with the Stoxx 600 falling 0.6% at the start of the Frankfurt session, after a modest gain of 0.07% for the MSCI index excluding Japan from Asia region.
On Wall Street, futures tied to the S&P 500 point to an opening bell drop of 115 points while those tied to the Dow Jones Industrial Average are priced for a retreat of 15 points. Futures linked to the technology-focused Nasdaq point to a slippage of 60 points.
2. — Week Ahead: Fed Minutes, Jobs Report in Brief
As the U.S. economy is on the verge of slipping into recession and the Fed’s favorite inflation gauge begins to show signs of a spike in consumer prices, investors are beginning to wonder if the central bank is ready to pause its rate hike path to support the domestic growth outlook.
Minutes from the Fed’s June policy meeting, slated for release on Wednesday, could provide insight into the Fed’s thinking on growth and inflation and will be watched closely for any suggestion that a loosening inflationary pressures or slowing job growth could trigger a rethink from Fed Chairman Jerome Powell and his colleagues.
Jobs data, in fact, will also be prominent on Wall Street this week, with the June jobs report scheduled for Friday at 8:30 a.m. EST. Analysts expect a weaker gain of 270,000 net new jobs for the month, with only a modest gain of 0.3% for the average hourly wage and an overall unemployment rate of 3.6%, unchanged from at the final May count.
Scroll to continue
3. — Tesla shares slide after second-quarter shipments tumble
You’re here (TSLA) – Get the report from Tesla Inc. Shares fell in premarket trading after the automaker posted a rare drop in quarterly shipments and reports suggest two of its four key factories will shut down for two weeks in July.
Supply chain disruptions, chip shortages and the 22-day shutdown of its Shanghai gigafactory caused second-quarter shipments to drop 17.7% from the first quarter to 254,695 new units weaker than expected, Tesla said on Saturday.
Production fell to 258,580 vehicles from 305,407 in the first quarter and 305,840 in the last three months of last year, Tesla said, but plans to idle factories in Shanghai and Berlin for work upgrades will put the clean-energy automaker to the test. ability to ramp up production in the September quarter.
Tesla also said it would release second-quarter results on Wednesday, July 20, with analysts looking for net income of $1.89 per share on revenue of $17.35 billion.
Tesla shares fell 0.8% in premarket trading to point to an opening price of $676.23 apiece, a move that would extend the stock’s year-to-date decline to around 43. %.
4. — Exxon shares jump on record second-quarter profit bet
Exxon Mobil (XOM) – Get Exxon Mobil Corporation report Shares jumped in premarket trading after the oil and energy giant indicated a likely record surge in second-quarter earnings.
In an update filed with the U.S. Securities and Exchange Commission on Friday evening, Exxon said operating profits are likely to rise $7.4 billion from the three months ending March, when they recorded profits of $8.8 billion.
Exxon said the bulk of the gains – about $4.5 billion – would come from improved margins on the sale of gasoline and diesel, a fact likely to draw further criticism from President Joe Biden .
Biden tweeted yesterday that ‘companies that operate gas stations and set prices at the pump’ should ‘lower the price you charge to reflect the cost you pay for the product’, a message that was mocked by the ‘US Oil & Gas Association, which claimed it was “written by a WH intern”.
“High energy prices are largely the result of many people underinvesting in the energy industry over the past several years and particularly during the pandemic,” Exxon said.
Exxon shares rose 1.25% in premarket trading to show an opening price of $88.65 each.
5. — Swedish airline SAS files for bankruptcy in the United States
SAS filed for bankruptcy protection in the United States on Tuesday following a pilots’ strike on Monday that crippled the Scandinavian airline.
SAS said it would continue to serve most of its routes during the Chapter 11 process, which could take up to a year, but noted that the pilots’ strike was blocking around half of its daily schedule, disrupting 30,000 passengers and costing him about $10 million a day. This would devour the group’s existing cash in less than two months.
“Through this process, SAS aims to reach agreements with key stakeholders, restructure the company’s debts, reconfigure its aircraft fleet and emerge with a significant injection of capital,” the carrier said in a statement. communicated.
SAS shares were last seen down 14% in the Stockholm session at 0.53 Swedish kronor apiece, a move that would extend the stock’s year-to-date decline to around 61%.