Morning Bid Tech time
Morning Bid Tech time
Fragile Market Sentiment Ahead of Tech Giants’ Reports and Fitch’s U.S. Credit Rating Downgrade
/cloudfront-us-east-2.images.arcpublishing.com/reuters/LLTABSIQTBK53G2YE2ZOQSJ7VE.jpg)
Aug 3 (ANBLE) – As we enter the day ahead in the U.S. and global markets, there is a prevailing sentiment of fragility and nervousness. Fitch’s U.S. credit rating downgrade has left markets feeling uneasy, while investors await the earnings reports from tech giants Apple and Amazon. Although the downgrade is not expected to significantly affect the real value of U.S. Treasuries, its impact on market sentiment cannot be ignored.
The recent turbulence in the market is evident, with U.S. Treasury yields and the dollar clinging to nine-month peaks while the VIX is headed for its biggest week-on-week gain since March. On Wednesday, the Nasdaq tumbled by 2.2%, erasing more than half of its gains from July. The futures market points to further potential losses, raising questions about the sustainability of the large tech rally that has been driving equity markets.
Apple is anticipated to report a dip in iPhone sales for the April-June quarter, as consumers held out for the release of new models amidst a sluggish economy. However, investor attention will now shift towards how artificial intelligence can augment Apple’s growth.
Meanwhile, Amazon.com is expected to deliver a growth of over 8% in second-quarter revenue, driven by a recovery in the advertising and e-commerce businesses. Weakness in its Amazon Web Services cloud unit may slightly offset these gains.
Both Apple and Amazon’s reports will also shed light on retail demand, which is closely tied to a series of labor market data being released. These include jobless claims, second-quarter productivity, and unit labor costs. These figures provide a precursor to the highly anticipated non-farm payroll release on Friday. Additionally, PMI data and final durable goods orders will round off the day’s economic releases.
- Moderna anticipates $8 billion in COVID vaccine sales in 2023 throu...
- GM’s Cruise achieves first union agreements in robotaxi indus...
- 21 Powerful Private Equity CFOs Every CFO Should Know
Across the Atlantic, the Bank of England is facing a crucial decision on whether to raise UK rates by 25 basis points or 50 basis points. With this potential 14th consecutive increase, policymakers aim to combat inflation without exacerbating the risk of a recession. Ahead of the Bank of England’s decision, the pound is trading near its lowest level in a month, and the FTSE 100 share index has fallen to a two-week low due to prevailing nervousness.
Adding to the market’s uncertainty, recent data from the euro zone reveals a deepening downturn in business activity. The manufacturing sector slump is accompanied by a further slowdown in the bloc’s dominant services industry.
Key developments that will provide more direction to U.S. markets later on Thursday include:
- U.S. corporate earnings reports from Apple, Amazon, Moderna, Hasbro, ConocoPhilips, Airbnb, Amgen, Livent, Regeneron, and Corteva.
- Labor Department’s preliminary unit labor costs and initial claims for state unemployment benefits.
- Commerce Department’s factory orders and durable goods data.
- ISM non-manufacturing PMI.
- S&P Global’s final reading of composite and services PMI.
- The Federal Reserve Bank of Richmond President, Thomas Barkin, is scheduled to speak on “Recession Revisited”.
To visualize recent trends, take a look at these charts:
Overall, while Fitch’s U.S. credit rating downgrade may not have a substantial impact on U.S. Treasuries’ real value, the downgrade has left markets in a fragile state. The upcoming earnings reports from Apple and Amazon, as well as the Bank of England’s rate decision, will provide further clues about the direction of markets. In the face of increasing uncertainty, investors eagerly await these key events to inform their investment strategies.
