Early Look

Monday, August 5, 2024

U.S. futures in sell-off mode, tracking massive declines in Asian markets overnight as S&P futures (Spuz) -2.75% at 5,227 while the Nasdaq tumbles -4.25% to 17,770 behind 10% losses in NVDA after reports of an AI chip delay and news that Warren Buffett’s Berkshire Hathaway sold 50% of its stake in Apple (AAPL) according to recent earnings. Hard to believe just 14 trading sessions ago on July 16 that the S&P 500 was hitting an all-time high and the CBOE Volatility index (VIX), which is up 115% this morning above 50, was 12-13 and there were very few concerns beyond an eventual 3-5% pullback. Japan’s benchmark Nikkei 225 stock index plunged 12.4% on Monday, adding to last Friday’s decline falling 4,451.28 points at 31,458.42. The Nikkei 225 dropped 5.8% on Friday, making this its worst two-day decline ever. Its worst single-day rout was a plunge of 3,836 points, or 14.9%, on Oct. 20, 1987, a day that was dubbed “Black Monday.” This Monday was gloomy enough: at one point, the benchmark sank as much as 13.4%. One factor of the Bank of Japan recent 25bps interest rate hike has been prolonged weakness in the Japanese yen, which has pushed inflation to above the central bank’s 2% inflation target. The US dollar is trading at 142.21 yen, down from 146.45 late Friday and sharply below its level of over 160 yen a few weeks ago. The sharp rise in the JPY/USD is causing a massive unwind of Yen carry trade positions and contributing to the sharp decline in US stocks. The carry trade is “when traders were borrowing Jap Yen (JPY) at low interest rates, converted them to USD and used this to buy US stocks; but now that the Bank of Japan (BOJ) is raising interest rates, the JPY has strengthened significantly against the USD. U.S. markets have gone to “soft landing” economic concerns to concerns about a US economic slowdown intensified, as traders earlier ramped up bets that the Fed will step in with an emergency interest-rate cut. Treasury prices extend gains as the 10-year yield slips -6 bps to 3.73%. Oil prices drop nearly 2%, Bitcoin prices plunge -17.75% to 51,450 in full risk off for assets.

• The Dow Jones Industrial Average fell -610.71 points, or 1.51%, to 39,737.26.
• The Nasdaq Composite plunged -417.98 points, or 2.43%, to 16,776.16.
• The Russell 2000 Index tumbled -76.85 points, or 3.52% to 2,109.31.

• 9:45 AM ET S&P Global Services PMI, July-F
• 10:00 AM ET                Employment Trends for July
• 10:00 AM ET ISM Non-Manufacturing PMI for July…est. 51.0
• 2:00 PM ET                   Senior Loan Officer Opinion Survey on Bank Lending Practices
• 5:00 PM ET                   Fed’s Daly Speaks in Moderated Discussion

• Earnings After the Close: AAN ACM ADTN ADUS AGM AKYA AMBC AMRC APLE ARCT BCC BMRN BRBR BSM BWXT CAR CBT CHGG CLOV CRGY CSTL CSX CVGI DH EHC EVER FANG FG FNF GAIA GAIN GBDC HIMS HUN III IIPR IPI IVAC JJSF KIDS KMPR KWR LCID MED MTRN MWA NCMI NEWT NR NSA NVTS O OGS OKE OTTR PLTR PLYA PMTS PRAA PRIM PRPL RXST SIBN SPG SPR SPRO SUM SWAV TBI TCMD TDC TDUP TRUE UIS VMEO VNO VNOM VSTO VTS WMB WTRG XPER ZI

• Keybanc Technology Leadership Forum 8/4-8/6, in Vail

• Privately owned Mars, whose candy brands include M&M’s and Snickers, is exploring a potential acquisition of Kellanova (K), maker of snacks such as Cheez-It and Pringles, Reuters reported this weekend https://tinyurl.com/yck35h45

• Robinhood (HOOD) upgraded to Neutral from Sell at Citigroup noting shares finished down 12% on Friday given the potential impact from lower rates. The fundamental story has been improving in recent periods with healthy growth in deposits, margin balances, options/equities trading.

• Nvidia (NVDA) shares drop around -10% after a report in the information said design flaws could cause delay of three months or more in the launch of Nvidia’s upcoming artificial intelligence chips. The setback could affect customers such as Meta, Google, and Microsoft who have collectively ordered tens of billions of dollars’ worth of chips.
• Squarespace (SQSP) downgraded to Neutral from Outperform at Mizuho.