Here are five things you must know for Wednesday, August 10
1. — Stock Futures Edge Higher As July Inflation Reading Looms
U.S. equity futures nudged higher Wednesday, while the dollar held steady against its global peers, as investors braced for a key July inflation reading that could either cement the Federal Reserve’s monetary tightening agenda or trigger a pullback in rate-hike bets.
Headline CPI is expected to have eased last month from the 41-year peak rate of 9.1% it reached in June, potentially triggering a series of slower accelerations over the months ahead. U.S. economic data of late has been mixed, however, and last week’s blowout jobs report ,which included 528,000 new hires alongside wage growth of 5.2%, could add to inflationary pressures heading into the autumn.
The CME Group’s FedWatch is pricing in a 66.5% chance of a 75 basis point Fed rate hike in September, which would take its target rate to between 3% and 3.25% , with the bulk of expectation pointing to a range of between 3.5% and 3.75% by the end of the year.
That’s kept the U.S. dollar index, which tracks the greenback against a basket of six global currency peers, within touching distance of the two-decade highs it reached last month, a move that has added significant headwinds to corporate earnings prospects as companies find it increasingly expensive to bring home overseas profits.
The dollar index was marked 0.12% lower in overnight trading at 106.247 while benchmark 10-year Treasury notes yields were stable at 2.768% heading into the July inflation reading.
In overseas markets, European stocks were essentially flat amid the traditional August holiday lull, with the Stoxx 600 down 0.04% in early Frankfurt trading, while overnight in Asia the region-wide MCSI ex-Japan index fell 1.07% amid a pullback in China stocks following data showing factory gate inflation fell to the lowest levels in 17 months amid a pullback in demand for raw materials in the world’s second largest economy.
On Wall Street, futures tied to the S&P 500 are indicating a 14.5 point opening bell gain while those liked to the Dow Jones Industrial Average are priced for a 90 point bump. Futures linked to the tech-focused Nasdaq are indicating a 60 point advance.
2. — Gas Prices Key For July Inflation Pullback
Gas prices may hold the key to a big decline in headline inflation last month, with analysts now debating whether the June CPI will ultimately represent a ‘peak’ in domestic consumer price pressures.
The national average cost for a gallon of gas looks set to fall below the $4 mark for the first time since early March this week, pulling prices more than 21% lower from their early June record highs amid a 50-day decline in pump prices. The year-on-year costs remain 25.8% higher, however, but the month-on-month declines should clip a full percentage point from the July headline reading.
Economists still expected a year-on-year headline rate of 8.7%, which remains close to the highest levels in 41 years, but the ongoing slump in global commodities prices, as well as easier ‘base effects’ from last year’s measurements, will likely pull inflation back towards 5% by the end of the year. The monthly figure is forecast at 0.2%.
That will still leave headline prices pressures well about the Federal Reserve’s 2% target, however, and will likely keep the central bank on course for at least three more rate hikes between now and December, when the Fed Funds rate is expected to reach between 3.5% and 3.75%.
3. — Tesla Holds Gains As Musk Unloads $6.9 Billion In Shares
Tesla (TSLA) – Get Tesla Inc. Report shares held onto pre-market gains Wednesday following news from late last night that CEO Elon Musk had sold around $7 billion worth of stock in order to set aside funding for his disputed takeover of Twitter. (TWTR) – Get Twitter Inc. Report
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Securities and Exchange Commission filings show Musk sold 7.92 million shares, netting around $6.9 billion, between August 5 and August 9. He still owns around 155 million shares, of 15% of the clean energy carmaker.
Musk said he wanted to avoid an “emergency sale” of Tesla stock if, “Twitter forces this deal to close *and* some equity partners don’t come through” on the $44 billion transaction, and took advantage of a 47% rally in Tesla shares from late May to August 5, when the first sale was made.
He added that he would buy the stock back if the Twitter deal, which goes before a Delaware court judge in October, ultimately collapses.
Tesla shares were marked 1.83% higher in pre-market trading to indicate an opening bell price of $868.00 each.
4. — Coinbase Slumps After Wider Q2 Loss Amid Bitcoin Slump
Coinbase Global (COIN) – Get Coinbase Global Inc Report shares moved lower in pre-market trading after the crypto trading platform posted a wider-than-expected second quarter loss amid the ongoing slide in bitcoin and other digital tokens.
Overall trading volumes were down 53% from last year to $2107 billion, Coinbase said, amid what it described as ‘behaviour that mirrors that of past down markets’. That movement essentially hived nearly a third from the group’s overall revenues, which came in at $803 million, while rising expenses and a $450 million markdown on its bitcoin holdings lead to a wider-than-expected loss of $4.98 per share.
“Q2 was a test of durability for crypto companies and a complex quarter overall,” the company said in its quarterly letter to shareholders. “Dramatic market movements shifted user behavior and trading volume, which impacted transaction revenue, but also highlighted the strength of our risk management program.”
Coinbase shares were marked 6.4% lower in pre-market trading to indicate an opening bell price of $82.10 each.
5. — Walt Disney Edges Higher With Q3 Earnings In Focus
Analysts are looking for a big jump in the group’s bottom line, to $1.19 per share, as accelerating theme park attendance helps overall revenues rise to just over $20 billion. Full focus on the report, however, is likely to center on Disney’s streaming service figures, given both the two consecutive quarterly declines in users reported by rival Netflix (NFLX) – Get Netflix Inc. Report and Disney’s decision to boost the price of its ESPN+ subscription by 43%, to $9.99 per month, starting in late August.
Disney added 7.9 million subscribers over its fiscal second quarter, which ended on April 2, taking ESPN+ to 22.3 million paid subscribers and Hulu to 45.6 million. Overall subscriber totals for its Disney+ streaming services hit 137.7 million, topping analysts’ estimates by around 2 million.
Last month, Disney also said it had secured a record $9 billion in ad spending commitments for its coming fiscal year. Known as “up fronts”, the advertising purchases suggest faith in both the group’s expanding digital platforms, including ESPN and Hulu, as well as its plans to introduce a tiered service for its Disney+ streaming platform.
Disney shares were marked marked 0.1% in pre-market trading to indicate an opening bell price of $108.15 each.