Morning in New York: in search of balance between statistics and geopolitics

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

The upcoming trading will be influenced by the news from the summit of the US and Russian presidents in Alaska. Any statements, especially regarding the settlement of the conflict in Ukraine, can cause a spike in volatility, primarily in commodity markets and in quotations of protective assets.

Against this background, macroeconomic statistics may take a back seat, but they are important for assessing the prospects of the Fed's monetary policy. Retail sales data for July (consensus: +0.5% m/m, June: +0.6% m/m) will be in the spotlight. The benchmark for the core indicator (excluding auto sales) assumes an increase of 0.3% mom after 0.5% a month earlier. The results will allow us to assess the state of consumer demand in the face of rising prices. We see a high likelihood that the slowdown in the rate of increase in personal spending that began in the spring will continue into July. Combined with inflation, this could negatively impact third quarter real GDP. A strong retail sales report will prove the stability of the U.S. economy and may strengthen the position of the hawks in the Fed, postponing expectations of a rate cut. July industrial production statistics will complete the picture of the day. It is expected to show zero dynamics after 0.3% growth a month earlier, which may become a counterargument for supporters of tight monetary policy.

In parallel, active discussion of candidates for the post of the next head of the Fed continues. The day before, two candidates for this position - David Zervos from Jefferies and economist Mark Samerlin - spoke in favor of an immediate 50 bp rate cut, as the current monetary policy is too tight and the latest PPI data should not stop its easing. This position is in line with Donald Trump's views, which only increases political pressure on the Fed and adds uncertainty ahead of the September meeting.

Futures on US indices demonstrate about zero dynamics. We assess the balance of risks before the release of macro statistics as neutral with moderate volatility. We focus on S&P 500 fluctuations in the range of 6430-6500 points (from -0.6% to +0.5% to the previous session's closing level).

- Shares of Nucor (NUE) and UnitedHealth Group (UNH) reacted positively to the news that Warren Buffett's Berkshire Hathaway (BRK.B) fund is acquiring them.

- Applied Materials (AMAT) shares collapsed on the postmarket after the extremely conservative forecast for the current quarter. Management expects revenue of $6.7 billion with EPS of $2.11 with consensus of $7.34 billion and $2.39, respectively. Management justified these guidance points on macroeconomic uncertainty and regulatory pressures, noting that it expects performance in China to decline over the next few quarters. Meanwhile, Applied Materials reported fiscal third-quarter earnings per share (EPS) of $2.48 with a consensus of $2.36.

- Shares of digital bank Nu Holdings (NU) declined in the post-market despite strong results for the quarter. Its revenues totaled $3.7 billion versus average expectations of $3.16 billion. Net income almost tripled over the past two years to $637 million. The negative market reaction seems to reflect investors' profit taking after strong growth in quotes since the beginning of the year, rather than dissatisfaction with the current results.

August 14 trading on the U.S. stock exchanges was held near zero marks. Following the results of the main session S&P 500 added 0.03%, Nasdaq 100 fell by 0.07%, Dow Jones decreased by symbolic 0.02%. At the same time Russell 2000 corrected at once by 1.24%. The "bulls" were supported by shares of technology giants, in particular Amazon (AMZN). This caused a divergence between the capitalization-weighted S&P 500 and its equilibrium counterpart (RSP) by almost 70 bps. The healthcare sector (XLV: +0.5%) led the growth, while consumer staples (XLP: -0.9%) were the outsiders.

Producer Price Index (PPI) for July (total and core) unexpectedly rose by 0.9% m/m with consensus of 0.2%. Against this backdrop, the probability of a 50 bp rate cut, according to market data, has been reduced to a minimum. At the same time, the stock exchange estimates the possibility of its downward revision by 25 bp at 90%.

The number of initial jobless claims for the last week amounted to 224k, with average expectations of 230k. This indicates the stability of the labor market, which together with the strong PPI report makes it difficult for the Fed ahead of the September meeting.

- Deere & Co. (DE: -6.8%) worsened its full-year net income forecast on concerns about the impact of tariffs. The farm equipment maker reported quarterly revenue of $10.36 billion and EPS came in at $4.75 with consensus of $10.31 billion and $4.63, respectively, but investors focused on the company's warning that duty-related costs could reach $600 million for the fiscal year.

- Shares of Masimo (MASI: -2.6%) reacted lower on news that rival Apple (AAPL: -0.2%) has received approval to release an Apple Watch with a blood oxygen measurement feature, escalating a patent dispute between the companies.

- Intel (INTC: +7.4%) soared on Bloomberg's report that the White House is discussing the possibility of the government acquiring a stake in the company to finance the construction of new plants in Ohio. This step is in line with the course of returning the production of modern semiconductors to the U.S. territory.

- CoreWeave (CRWV: -15.5%) reported a loss above estimates in the quarter despite explosive revenue growth of 207% YoY and a positive guidance for the year. Profitability was pressured by sharply higher operating expenses associated with aggressive infrastructure expansion to meet demand for AI solutions.

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