Morning in New York: indices enter consolidation mode

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

The focus of upcoming trading will be the S&P Global business activity index (PMI) for August (consensus for service and manufacturing: 53.5 and 49.5 points after 55.7 and 49.8 in July, respectively). This statistic will provide a gauge of the health of the US economy as of the middle of the third quarter. The persistence of the manufacturing PMI in the contraction zone and the decline in the service sector index will indicate a cooling of economic activity, becoming an additional argument in favor of the Fed rate cut in September.

Average forecasts for the number of applications for unemployment benefits for last week suggest that the indicator will remain at a stable low level of 225 thousand after 224 thousand in the previous similar period. The realization of these expectations will confirm the stability of the labor market. The Fed considers the risk of rising inflation to be higher than the probability of worsening employment situation, despite the mixed reports of the Ministry of Labor over the past three months.

Secondary real estate sales data for July is expected to point to a continued decline of a modest 0.4% m/m after a sizable 2.7% a month earlier.

Before the main session opens, Walmart (WMT), Full Truck Alliance (YMM), Bilibili (BILI), VNET (VNET), MINISO (MNSO) and Scansource (SCSC) will report quarterly results. Intuit (INTU), Workday (WDAY), Ross Stores (ROST) and Zoom (ZM) will report at the postmarket.

Futures on US indices show neutral dynamics. Investors will be closely watching whether profit taking will continue in shares of technology giants and AI-related stocks, which were again under pressure the day before. The key driver of sentiment will be the macro statistics block, which will be released in the first half of the session and may determine the direction of trading. We assess the balance of risks for the upcoming session as neutral with an average level of volatility. We focus on S&P 500 movements in the range of 6345-6450 points (from -0.8% to +0.8% of the previous session's closing level).

- Shares of Nordson (NDSN) reacted positively to strong results for the third fiscal quarter and the announcement of a $500 mln buyback program. The company's revenue in the reporting period grew 12% YoY to $742 mln, while adjusted EPS rose 13% to $2.73. The key driver of the improved results was the Advanced Technology Solutions segment, where organic sales growth reached 15% YoY on the back of strong demand for products for the electronics industry.

- Unifi (UFI) shares fell in the post-market after the release of its quarterly report, which fell short of expectations and reflected continued pressure on the business. The company's revenue fell 12% YoY to $138.5 million, gross margin turned negative, as did adjusted EBITDA. Net income remained positive only due to a one-off effect from the sale of a production asset, which masked operating losses amid weak demand, tariff uncertainty and rising costs.

- Shares of Two Harbors Investment (TWO) declined after the announcement of the settlement of a legal dispute with Pine River, in which the company agreed to a one-time payment of $375 million. Although the move removes long-term uncertainty, the issuer's book value will fall from $12.73 to $11.06 per share because of it. Against this backdrop, investors ignored the positive operating results and the announcement of the quarterly dividend.

August 20 trading on the American stock exchanges ended mostly in the negative. The S&P 500 lost 0.24%, the Nasdaq 100 fell 0.58%, and the Russell 2000 dropped 0.32%, only the Dow Jones was able to stay in the plus again, adding a symbolic 0.04%. The Magnificent Seven stocks continued their decline, putting pressure on the broad market. The energy sector (XLE: +0.83%) was the growth leader. Cyclical consumer goods producers (XLY: -0.99%) were the outsiders. Profit taking in shares of technology giants and AI-related stocks continued to contribute to the correction. Amid the absence of significant macroeconomic data, investors were cautious ahead of Fed chief Jerome Powell's speech at the symposium of global central bank governors, which starts in Jackson Hole this Friday.

The main event of the day was the publication of the minutes of the July FOMC meeting. As we have already mentioned, the majority of the committee members indicated that the threat of persistently high inflation is higher than the risk of deterioration in the labor market. In addition, the regulator's leadership is concerned about the impact of import tariffs on the economy. However, the market reaction to the publication was restrained, because the assessments of the situation already look irrelevant. The meeting was held before the release of weak labor market data for July, which has already managed to shift expectations in the direction of a more rapid easing of the Fed's policy.

White House pressure on the Fed is intensifying, with Donald Trump demanding the firing of Governor Lisa Cook over allegations of mortgage fraud. After the recent resignation of Adriana Kugler, the President's administration, supported by the position of Michelle Bowman and Christopher Waller, who favor early rate cuts, is seeking to get the FOMC to move to ease monetary conditions. The dollar and yields of short-term treasuries reacted to these events with a decrease, while gold - growth. However, some analysts note that fears of interference of authorities in the activities of the Fed may have the opposite effect, as it contributes to the increase in yields at the long end of the curve due to the strengthening of long-term inflation expectations.

- The news of a definitive takeover agreement by Authentic Brands Group caused Guess? (GES: +26.3%) to soar. As part of the deal, the retailer's shareholders will receive $16.75 per share in cash.

- Target (TGT: -6.3%) reported a 1.9% YoY decline in comparable sales for the quarter, which was better than pessimistic forecasts, with full-year EPS guidance reiterated in the $8-10 range. However, investors were disappointed by the decision to appoint the retailer's chief operating officer Michael Fiddelke as CEO. This was perceived by the market as a signal that the company is not ready for radical changes to boost business recovery.

- Carvana (CVNA: -1.6%) shares reacted negatively to news that competitor Hertz is starting to sell used cars through Amazon's Autos platform, which could increase competition in the online car sales market.

- Estée Lauder (EL: -3.7%) reported quarterly revenue of $3.41 billion with consensus of $3.39 billion and EPS came in at $0.09 with average expectations of $0.08, but weak full-year guidance, which included a $100 million tariff impact estimate, dragged down the issuer's stock. The company continues to struggle due to double-digit declines in sales volumes in Greater China. This led to an 8% decline in organic sales for the full fiscal year.

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