Morning in New York: External Factors Heighten Risks

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

Price movements during the upcoming session will likely be largely determined by the escalation of the conflict in the Middle East. Over the weekend, the U.S. and Iran exchanged a series of large-scale attacks using missiles and drones. Tehran announced the closure of the Strait of Hormuz for an indefinite period. At the same time, U.S. Central Command denied this report. However, according to Kpler, only six ships passed through the strait on Sunday—the lowest number in at least five weeks. Against this backdrop, Brent crude futures are up 4.04% to $79.1 per barrel, while WTI is rising by about 4.15% to $74.4. The latest escalation of the Middle East conflict calls into question the prospects for an interim agreement, heightens fears of accelerating inflation, and fuels expectations of tighter monetary policy. Polymarket now estimates the probability of a Fed rate hike by the end of the year at 60%.

The main macroeconomic release this Monday will be the federal budget deficit data for June (consensus: -$128.3 billion, May: -$292.6 billion). Speeches by Federal Reserve Governors Michelle Bowman and Christopher Waller are also scheduled; they may provide additional guidance on the regulator’s future course ahead of the release of June inflation data in the coming days.

Futures on U.S. stock indices are falling, signaling a decline in investor appetite for risk due to a new round of tensions in the Middle East. We assess the risk balance for the upcoming session as negative, with moderate volatility, due to the rally in oil prices.

— Apple (AAPL) has filed a lawsuit against OpenAI and two former employees, accusing them of misappropriating trade secrets. The lawsuit escalates long-standing tensions between the companies. According to analysts, the lawsuit could slow OpenAI’s expansion in the device market.

— Shares of South Korea’s SK Hynix (SKHY) rose 12.76% on July 10, their first day of trading on the Nasdaq, but plummeted 15.37% on Monday in Seoul amid profit-taking. This triggered a decline in the Kospi index. The pressure is attributed to arbitrage trades by funds exploiting the persistent valuation gap between ADRs and local shares. SK Hynix’s initial public offering, totaling over $26 billion, became the second-largest in U.S. market history.

— Ford (F) and the Canadian union Unifor have agreed on the preliminary terms of a three-year collective bargaining agreement covering more than 5,000 employees. The agreement must still be ratified by union members. The current collective bargaining agreements expire on September 20; negotiations for the new agreement began earlier than usual amid a deteriorating economic climate.

— Paramount Skydance (PSKY) shares may come into the spotlight, as the Oregon Attorney General’s Office has withdrawn its motion to delay the closing of the $111 billion merger with Warner Bros. As a result, the deal could be finalized as early as July 22. At the same time, several states are continuing to review the deal for compliance with antitrust laws, which could theoretically lead to a court injunction blocking it.

— CONMED (CNMD) shares rose as much as 10% in after-hours trading on Friday on reports of interest from investment funds in acquiring the surgical equipment manufacturer. According to media reports, the company has retained advisors to evaluate the offers it has received. No official confirmation of readiness for the deal has been received yet.

Trading on July 10 on U.S. stock markets ended mostly higher, near the day’s highs. The S&P 500 gained 0.42%, the Nasdaq 100 rose 0.33%, and the Dow Jones climbed 0.28%; only the Russell 2000 fell 0.49%.

The rally extended beyond the technology sector, with stocks in cyclical industries seeing strong demand. Commodity and materials producers led the gains (XLB: +1.25%). The healthcare sector (XLV: -0.82%) lagged behind due to pressure from pharmaceutical companies and insurers.

Shares of the “Magnificent Seven” traded in mixed directions. The most active buying was seen in Nvidia (NVDA: +4.03%) and Meta Platforms (META: +5.97%). The tech sector was buoyed by reports of Meta’s plans to increase its computing power to 14 GW by 2027 and statements by its CEO, Mark Zuckerberg, regarding the need to maximize that capacity.

The latest exchange of threats between the U.S. and Iran did not lead to a significant rise in oil prices, as the market was skeptical that hostilities would resume.

The Fed’s semiannual report on monetary policy did not contain any new information. The regulator noted that inflation remained high, the labor market remained strong, and long-term inflation expectations were anchored near target levels. Treasury bond prices fell, and the yield curve flattened due to pressure on the short end. Yields at the short end of the curve rose by about 3 basis points. The dollar index rose 0.1%, gold fell 0.7%, and WTI crude oil declined 0.9%.

— Circle Internet (CRCL: +4.97%) has received final approval from the Office of the Comptroller of the Currency (OCC) to establish a bank.

— Nurix Therapeutics’ (NRIX: -6.6%) second-quarter revenue and profit fell short of average market expectations. Analysts generally viewed the updates to the development pipeline positively, primarily due to the drug Bexdeg. However, investors chose to take profits after the pharmaceutical company’s stock price rose by more than 50% over the past three months.

— Delta Air Lines (DAL: -1.81%) reported its second-quarter results: operating revenue and earnings per share came in above consensus, while PRASM and TRASM (revenue per available seat-mile) were weaker. The carrier’s earnings guidance for the current quarter also exceeded average market expectations. Management expects TRASM growth to accelerate as a result of increased capacity. Analysts viewed the company’s outlook and steady demand positively but noted generally weaker passenger revenue and profitability.

— Herbjørn Hansson, Chairman of the Board of Directors and CEO of Nordic American Tankers (NAT: +4.58%), purchased 100,000 shares of the company at $6.03 each. The market often views such transactions by top management as a positive sign.

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