Morning in New York: expectations of Fed rate cut support risk demand

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The dynamics of stock exchanges during the upcoming session will be determined by the news, as well as comments from the representatives of the Fed's management, first of all, the president of FRB Atlanta Raphael Bostic and his colleague from Chicago Austan Goolsby. Both speakers may hint at the possibility of a rate cut following the September meeting and assess the impact of rate policy on inflation. Any signals of readiness to ease monetary conditions soon will be received with optimism by the investment community.

Global markets remain positive after the release of consumer inflation statistics in the U.S. for July. Expectations of the Fed rate cut in September support the demand for risk. APAC stock indices, including MSCI All Country World and Nikkei 225, are trading in the plus. The external background may contribute to the continuation of the upward momentum formed after the publication of the July CPI.

Investors continue to follow the news agenda related to tariff policy and semiconductor export control. After reports of negotiations between the White House and the largest chip manufacturers, analysts expect new comments and a possible reaction from Beijing. On the geopolitical front, preparations for the summit between the US and Russian presidents are attracting attention, but the upcoming event has no significant impact on market sentiment so far.

Brinker International (EAT), Performance Food Group (PFGC), Venture Global (VG), Hudbay Minerals (HBM), Elbit Systems (ESLT) and Endeavour Silver (EXK) will report quarterly results before the start of trading. Cisco Systems (CSCO), Coherent (COHR), Equinox Gold (EQX) and StandardAero (SARO) will release their financial results after the close of the main session.

Futures on American indices show about zero dynamics. We assess the balance of risks for the upcoming session as neutral with an average level of volatility. We focus on the S&P 500 movements in the range of 6410-6480 points (from -0.5% to +0.5% to the closing level of the previous session).

- Shares of cloud provider CoreWeave (CRWV) fell 10% in the Aug. 12 postmarket after the company released its quarterly results. Investors reacted negatively to slowing order growth, which increased their concerns about stabilizing demand in the industry. Nevertheless, the company demonstrated revenue growth and expansion of its customer base in the AI-computing segment.

- Webtoon Entertainment (WBTN) shares reacted to the release of its quarterly report with a 40.2% surge after the close of major trading. The company's revenue and profit were above market expectations. An additional positive driver was the announcement of a strategic partnership with Disney that will see popular Marvel, Star Wars and Disney Studios franchises adapted to the Webtoon mobile format. Management provided an optimistic outlook for the third quarter, suggesting revenue in the range of $380-390 million versus consensus of $373.7 million.

- Cava Group (CAVA) shares fell 21.6% in the post-market as the company's adjusted EPS for the quarter declined to $0.16 from last year's $0.17, although the consensus was for $0.13. Revenue rose 20.2% YoY to $280.6 mln, with average guidance of $285.6 mln.

- Circle Internet Group (CRCL) shares are down 5.9% following the announcement of an additional share issue despite a strong quarterly report. The USDC steiblcoin issuer generated revenues of $658 mln vs. average expectations of $647 mln, and USDC volume outstanding increased 90% YoY to $61.3 bln. Management announced plans to launch a new ARC blockchain network in the second half of the year to simplify settlements in stable digital currencies.

August 12 trading on the U.S. stock exchanges ended in the plus. The S&P 500 rose by 1.13% and renewed its historical maximum, closing above 6400 points for the first time. The Nasdaq 100 added 1.33%, the Dow Jones gained 1.1% and the Russell 2000 jumped 2.99%. All representatives of the "Magnificent Seven" closed in positive territory. Communications service providers (XLC: +1.91%) led the gains. The real estate industry traded weaker than the market as a whole (XLRE: +0.17%).

The key positive driver for stock exchange quotations was the Consumer Price Index (CPI) statistics for July. The overall indicator rose by 0.197% m/m with a consensus of 0.2%, while the core indicator (excluding energy and food prices) increased by 0.32% m/m with a forecast of 0.3%. At the same time, in annualized terms, the core indicator climbed by its highest since February at 3.1% y/y with average forecasts of +3%. Sectors sensitive to import duties showed mixed dynamics. Prices for clothing and household appliances declined, while furniture and footwear rose in price. The cost of basic services, excluding housing, rose by 0.5% mom, the fastest pace since January. The publication supported expectations of a Fed rate cut in September. According to Fed Funds futures estimates, the probability of this decision is about 93%. At the same time, representatives of the Fed leadership Jeffrey Schmid and Thomas Barkin pointed to the limited impact of import tariffs on inflation, assessing the current monetary policy as adequate.

- Nvidia (NVDA: +0.6%) and AMD (AMD: +1.6%) have agreed to pay the U.S. government 15% of revenues from sales of their chips in China in exchange for export licenses. The agreement, covering NVIDIA's H20 and AMD's MI308, allows for the resumption of shipments previously effectively banned for national security reasons. Analysts called the deal unprecedented and reflecting the high price of access to the Chinese market.

- Alphabet (GOOGL: +1.2%) has received an offer from Perplexity to buy the Chrome browser for $34.5 billion, well above the startup's own market valuation ($18 billion). The offer coincided with a lawsuit in the U.S., which is considering forcing the sale of Chrome to reduce Google's dominance in Internet search.

- Sea Limited (SE: +19.1%) reported a successful second quarter, beating market benchmarks for GMV (total sales), revenue and EBITDA. Growth was supported by increased orders in e-commerce and strong results from digital financial services. Management gave a positive GMV guidance for the third quarter.

- Texas Instruments (TXN: +5%) rose on reports of a new round of price increases and positive comments from management at an industry conference, which provided the basis for improved margin forecasts.

This article was AI-translated and verified by a human editor