MARKET WRAPS
Watch For:
State Employment and Unemployment for July; Canada Retail Trade
for June.
Opening Call:
Stock futures pointed to a lower start for Wall Street Friday as
investors contended with mixed signals from the Federal Reserve on
the pace of future interest-rate hikes and signs of a resilient
economy.
Stocks closed with modest gains Thursday after jobless claims
unexpectedly fell during the week ended Aug. 13, the first decline
since late July, suggesting the labor market remains strong. The
Philadelphia Federal Reserve's monthly manufacturing index also
surprisingly accelerated in August.
The gains Thursday followed the release on Wednesday of the
minutes from the Fed's July 26-27 meeting, at which Fed officials
agreed they need to keep raising interest rates to cool inflation,
but indicated the pace of those hikes could slow if economic data
supported such a move.
St. Louis Fed President James Bullard on Thursday said he
favored a three-quarters point hike at the Fed's next meeting in
September. The Fed has boosted rates at that pace the last two
times it has met. Bullard told The Wall Street Journal in an
interview that the central bank "should continue to move
expeditiously to a level of the policy rate that will put
significant downward pressure on inflation."
Kansas City Fed President Esther George, however, said the "case
for continuing to raise rates remains strong," but added that the
"question of how fast that has to happen is something my colleagues
and I will continue to debate, but I think the direction is pretty
clear."
George told a Kansas City economic group that the Fed has "done
a lot, and I think we have to be very mindful that our policy
decisions often operate on a lag. We have to watch carefully how
that's coming through."
Both Bullard and George are voting members of the Federal Open
Market Committee, the central bank's rates-setting committee.
The comments from both Fed officials come before the Fed's
annual Jackson Hole conference in Wyoming next week at which Fed
Chairman Jerome Powell will be speaking. His comments will be
closely monitored by Wall Street.
"After a weeks-long rally, the market is looking for its next
catalyst, especially as earnings season winds down and there is
still about one month remaining until the next Fed meeting," said
William Huston, chief investment officer at Bay Street Capital
Holdings in Palo Alto, Calif.
"Investor focus will now shift to the upcoming Jackson Hole
meeting, where central bankers will have another opportunity to
address how it plans to adjust monetary policy over the coming
months."
Overseas, European markets were mostly in negative territory
while stocks in Asia were mixed.
Forex:
The dollar rose to a one-month high in early European trading
against a basket of currencies and the euro, though this may
reflect difficulties facing European and Asian economies rather
than U.S.-specific news, ING said.
"It is hard to pin down the exact reason for dollar strength...
However, the move suits our generally positive stance on the dollar
at a time when European and Asian growth prospects remain
challenged," the Dutch bank said.
Barring "very poor" upcoming data, the dollar is likely to
"consolidate near the recent highs."
---
The current strong gains for the dollar may start to fade as the
Fed could slow the pace of policy tightening, Insight Investment
said.
"With the U.S. economy having experienced a 'technical'
recession in the first half of 2022 it is clear that monetary
tightening is working," it said.
This makes it unlikely that the Fed will need to increase rates
meaningfully beyond what markets are already pricing in, and the
pace of interest-rate rises is likely to become less aggressive,
Insight Investment said.
Bonds:
DZ Bank continues to forecast rising spreads in almost all bond
segments, but particularly in bank and non-financial corporate
bonds. "Compared with their history, spread levels in the riskier
bond segments are too low for a recession scenario in our view," it
said.
DZ Bank finds it difficult to fathom the current risk-on
sentiment with a recession on the horizon. But it has lowered its
spread forecasts in the banking, sovereign bond and agency segment
somewhat to reflect the levels at which spreads are currently
trading, it said.
The bank's shift to a neutral weight in all bond segments in
line with benchmark weighting, anticipating their performance to be
broadly similar over a six-month horizon.
"Due to the combination of a more modest rise in interest rates
and similar spread increases in some cases, the expected losses in
all bond segments are fairly close together over a six-month
horizon," DZ Bank said.
The opposing forces of recession and inflation will continue to
hold sway over the bond markets for the foreseeable future,
implying elevated uncertainty, the bank said.
Energy:
Oil prices were slightly down after finishing higher overnight
on data which showed a sharp drop in U.S. inventories.
"Recession fears remain elevated for key markets, including the
U.S. and EU, raising concerns over the strength of future oil
demand," Fitch Solutions said.
Meanwhile, developments relating to a potential renewed nuclear
deal with Iran will also likely be closely watched.
Metals:
Gold lost further ground after suffering a fourth straight
session loss overnight due to a stronger dollar.
"The U.S. dollar might continue to strengthen if U.S. economic
data continues to surpass expectations," Oanda said. "After
breaking below $1,800, gold has been struggling to regain its
footing."
---
Metals were mostly down as a stronger dollar continues to weigh
on commodity prices. Marex said the rising dollar "is a drag on
commodities, " with sentiment still "risk-off."
Data showed U.K. consumer confidence fell to a record low this
month, pushed by recession and inflation worries. That said, zinc
is moving higher. Marex noted that zinc is a "standout," being the
only metal down in terms of Chinese production, while other base
metals rise.
TODAY'S TOP HEADLINES
For Bed Bath & Beyond, Investor's Turnabout Adds to
Problems
Bed Bath & Beyond Inc. suffered another blow this week when
its highest-profile investor sold out, just months after buying up
shares and securing seats on the board.
Billionaire investor Ryan Cohen filed to sell his entire 10%
stake in the company, a disclosure that sparked a pullback in its
stock that began late Wednesday.
Just Eat Takeaway.com to Sell Around 33% Stake in iFood JV to
Prosus
Just Eat Takeaway.com NV said Friday that it has agreed to sell
its around 33% stake in the iFood joint venture to Prosus NV for up
to 1.8 billion euros ($1.82 billion) as it looks to focus on
improving profitability and on a disciplined capital
allocation.
The Amsterdam-based food-delivery group said the amount
comprises EUR1.5 billion in cash on closing and a deferred
consideration based on the performance of the online food delivery
sector over the next year of up to EUR300 million.
Roblox Poaches Seasoned Meta Executive as It Chases Growth in
Asia
HONG KONG-Roblox Corp. has poached a Meta Platforms Inc.
executive for the newly created role of Asia-Pacific head of public
policy, as the videogame company chases growth in the region.
Steve Park, the longtime government relations head for South
Korea and Japan at Facebook's parent company, will join Roblox next
week, a spokeswoman for the San Mateo, Calif.-based company
said.
China's GigaCloud Goes Public in U.S., Bucking Delisting
Trend
E-commerce company GigaCloud Technology Inc. made its debut on
the Nasdaq Stock Market on Thursday, a rare instance of an initial
public offering by a Chinese company in the U.S. as the two
countries head toward a financial decoupling.
GigaCloud, an online platform that connects manufacturers of
bulky consumer items with buyers around the world, raised $36
million in gross proceeds after selling 2.94 million Class A
shares. The deal valued the company at $486 million. The amount
raised could increase to $41 million if the underwriter sells more
shares to exercise the so-called overallotment options, typically
when the stocks are in high demand.
Lloyd's to Exclude Catastrophic Nation-Backed Cyberattacks From
Insurance Coverage
Lloyd's of London Ltd. will require its insurer groups globally
to exclude catastrophic state-backed hacks from stand-alone cyber
insurance policies starting next year.
Lloyd's is a marketplace where roughly 75 syndicates of
underwriters congregate to provide insurance coverage for
businesses, organizations and individuals. As of March 31, when
coverage begins or is renewed, syndicates must exclude state-backed
cyberattacks from policies that protect against physical and
digital damage caused by hacks, Underwriting Director Tony Chaudhry
said in a bulletin dated Aug. 16.
Ride-Hailing Stocks Reverse After Recent Rally
Ride-hailing firms Uber, Lyft and Grab have recovered some of
their lost market value over the past month, but a selloff this
week has undermined the rally.
The shares of Uber Technologies Inc. and Lyft Inc. have risen
more than 35% since mid-July, aided by their stronger-than-expected
results earlier this month. Singapore-based Grab Holdings Ltd.,
which is set to report its second-quarter performance on Aug. 25,
has jumped 41%.
Investors Should Go Where the Float Is
The check is never really "in the mail."
As trillions of dollars move between two places, or when they
just sit in the middle, the sum is often called "float." In the
long era of easy money and superlow rates, those vast sums didn't
matter much. Now they do. With rates rising and the Federal Reserve
fighting to restrain inflation, merely a percentage of that
mountain of money is in and of itself serious money. That will
change things for companies and individuals, for better or
worse.
Biotech Rebounds on Optimism and Deal Making
Biotech stocks, some of the biggest losers in the selloff, are
soaring.
The speculative sector is getting a boost from renewed optimism
among investors. Fundamental drivers like deal making, new drug
approvals and buying by big investors provide confidence that the
rally could persist.
What Biotech ETFs Might Be Right for Your Portfolio?
Biotech is back. For those who want to invest through
exchange-traded funds, here are some choices.
An exchange-traded fund, or ETF, invests in numerous stocks,
quickly conferring exposure to a sector or theme and making ETFs a
popular tool for diversifying portfolios. Many offer low expense
ratios, reflecting the fees that investors pay each year.
North Korea Berates South Korean President: 'We Don't Like Yoon
Suk-yeol Himself'
SEOUL-On Monday, South Korean President Yoon Suk-yeol sought to
shake up frothy inter-Korean ties with what he called an "audacious
plan." He offered food aid and economic assistance that could
modernize North Korea's airports and hospitals-only if Pyongyang
showed some commitment to denuclearize.
By the end of the week, North Korea gave its answer: "We don't
like Yoon Suk-yeol himself."
Vanished Chinese-Canadian Billionaire Sentenced to 13 Years in
Prison
Xiao Jianhua, a Canadian-Chinese billionaire whose abduction
from Hong Kong five years ago sent shock waves through China's
business community, was sentenced to 13 years in prison by a
Shanghai court after pleading guilty to charges including graft and
illegal handling of funds.
Mr. Xiao used the company he founded, Tomorrow Group, to pay
bribes to unnamed government officials totaling around $100 million
over 20 years, according to a statement from the Shanghai No. 1
Intermediate People's Court released on Friday through state media.
It said Mr. Xiao used companies he controlled to illegally collect
more than more than $45 billion in public deposits.
Write to nihad.ahmed@wsj.com TODAY IN CANADA
Earnings:
Newcrest Mining Limited 4Q
---
Economic Indicators (ET):
0830 Jun Retail trade
---
Stocks to Watch:
Shawcor: Awarded $500M Pipe Coating Contract in Southeast
Mexico
Expected Major Events for Friday
06:00/GER: Jul PPI
06:00/UK: Jul UK monthly retail sales figures
06:00/UK: Jul Public sector finances
09:00/ITA: Jun Balance of Payments
12:30/CAN: Jun Retail trade
14:00/US: 2Q Quarterly Retail E-Commerce Sales
14:00/US: 2Q Advance Quarterly Services
14:00/US: Jul State Employment and Unemployment
All times in GMT. Powered by Onclusive and Dow Jones.
Expected Earnings for Friday
5E Advanced Materials Inc (FEAM) is expected to report for
4Q.
Bit Digital Inc (BTBT) is expected to report for 2Q.
Bri-Chem (BRY.T) is expected to report for 2Q.
Buckle Inc (BKE) is expected to report $0.82 for 2Q.
Canlan Ice Sports (ICE.T) is expected to report for 2Q.
Deere & Co (DE) is expected to report $6.63 for 3Q.
Enterprise Group (E.T) is expected to report for 2Q.
Focus Universal Inc (FCUV) is expected to report for 2Q.
Foot Locker Inc (FL) is expected to report $0.89 for 2Q.
GLG Life Tech Corp (GLG.T,GLGLF) is expected to report for
2Q.
Madison Square Garden Entertainment Corp (MSGE) is expected to
report for 4Q.
Mega Matrix Corp (MTMT) is expected to report for 2Q.
North European Oil Royalty Trust (NRT) is expected to report for
3Q.
Oncotelic Therapeutics Inc (OTLC) is expected to report for
2Q.
Pineapple Energy Inc (PEGY) is expected to report for 2Q.
Regional Health Properties Inc (RHE) is expected to report for
2Q.
Twin Disc Inc (TWIN) is expected to report $0.17 for 4Q.
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ANALYST RATINGS ACTIONS
American Axle Cut to Peer Perform From Outperform by Wolfe
Research
BJ's Wholesale Club Raised to Buy From Neutral by B of A
Securities
Krispy Kreme Cut to In-Line From Outperform by Evercore ISI
Group
United Rentals Cut to Underperform From Market Perform by
Bernstein
Verizon Cut to Underperform From Market Perform by
MoffettNathanson
Wolverine World Wide Cut to Hold From Buy by Argus Research
World Wrestling Cut to Neutral From Buy by Northcoast
Research
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
August 19, 2022 06:16 ET (10:16 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.