Morning in New York: political agenda sets the vector for trading

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 investors' attention remains on events related to the US foreign trade policy. A decision to increase duties on Indian imports in response to New Delhi's purchases of Russian energy resources is expected. In parallel, restrictions against the EU and Turkey are being discussed. Overall uncertainty remains, especially for emerging markets and export-oriented sectors. At the same time, Donald Trump announced the imminent conclusion of a trade agreement with China and a possible meeting with Xi Jinping before the end of the year. In addition, Swiss President Karin Keller-Sutter will meet with State Department head Marco Rubio to finalize a trade deal before the White House deadline.

The likelihood of geopolitical tensions easing is increasing. Media reports that Russia is considering a proposal for an air truce with Ukraine in exchange for easing pressure from the US. Washington's possible reaction will influence demand for protective assets and global risk assessment.

The White House officially announced some sort of statement from the president of the United States at 4:30 p.m. East Coast time.

Trump said a successor to retiring Fed Board of Governors member Adriana Kugler will be named by the end of the week. The president also reduced the list of candidates to replace the head of the regulator Jerome Powell to four people.

Uber Technologies (UBER), McDonald's (MCD), Novo Nordisk (NVO), The Walt Disney Company (DIS), Shopify (SHOP), and Unity Software (U) will report quarterly results before the open. The postmarket will feature financial results from AppLovin (APP), DoorDash (DASH), Airbnb (ABNB), Occidental Petroleum (OXY), and Fortinet (FTNT).

Futures on American stock indices are trading in the plus. 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 6240-6360 points (from -0.9% to +1% to the closing level of the previous session).

 - Arista Networks (ANET) posted a strong quarterly report. Its revenue came in at $2.21 billion with consensus of $2.1 billion (+30.4% YoY) and adjusted EPS came in at $0.73 versus expectations of $0.65. The company maintained strong gross margin (65.6%) and operating margin (48.8%), demonstrating its ability to combine growth with cost control. Demand for Arista's products is supported by developments in AI and cloud infrastructure. The issuer's shares reacted to the release by rising 14.4% after the close of the main session on August 5.

- Snap (SNAP) disappointed investors with weak ad monetization results. Revenue per user (ARPU) came in at $2.87 versus expectations of $2.9, on revenue of $1.34 billion (+4% YoY). EPS went into negative territory, amounting to $0.16. The main reason for this was the failure to optimize the advertising platform, where some campaigns were underpriced. Despite the growth in the number of subscriptions and users (469 mln DAU), the company's shares fell by 14.4% in the post-market.

- Super Micro Computer (SMCI) reported $5.76 billion revenue and $0.41 EPS for the quarter, compared to the consensus of $5.89 billion and $0.44, respectively. The issuer's guidance for the current quarter was also below market expectations. Nevertheless, the company said it plans to grow revenue from $22 billion in FY 2025 to $33 billion in FY 2026. The CEO pointed to the broad outlook for new data center solutions and a growing number of large enterprise customers. Positive long-term forecasts remained out of investors' sight: SMCI shares fell by 15.8% after the close of main trading.

- Advanced Micro Devices (AMD) reported quarterly revenue increased 32% YoY to $7.67 billion, with average guidance of $7.43 billion, consensus EPS reached $0.48. Client and Gaming segment revenues grew 67% and 73%, respectively. Data Center revenue fell short of expectations, and export restrictions on MI308 led to an $800 million decline in gross margin (43% vs. 54% excluding this factor). The revenue guidance for the third quarter in the range of $8.4-9 bln was above average expectations. Nevertheless, AMD quotations slipped by 4% due to the uncertain prospects of the AI segment and exports to China.

Market on the eveTrading on August 5 on the U.S. stock exchanges ended mostly in the negative. S&P 500 decreased by 0.49%, Nasdaq 100 lost 0.73%, Dow Jones corrected by 0.14%, only Russell 2000 added 0.6%. All representatives of the "Magnificent Seven" closed in the negative zone, except for Amazon (AMZN: +0.99%). Utility providers (XLU: -1.07%) were the leaders of growth, while materials producers (XLB: +0.71%) were the outsiders.

The key pressure on investor sentiment was the release of the ISM Services PMI for July, which fell to 50.1 from June's 50.8 points, while the consensus was for a rise to 51.5. The orders and employment components went down, while the price index rose to its highest since October 2022 at 69.9 points. Survey respondents reemphasized that they are facing higher costs and delayed deliveries due to import tariffs, and are being forced to postpone planned projects. The report added to concerns following the release of weak July employment data from the Labor Department on August 1.

Against this background, even strong statistics from S&P Global was overshadowed: the final value of the service PMI reached a seven-month peak of 55.7 points. The trade balance data for June was positively perceived, recording a decline in the deficit to the lowest since September 2023, $62.4 bln, while the consensus was $62 bln.

An additional factor of uncertainty was Donald Trump's comments on the upcoming increase in tariffs on goods from India, pharmaceuticals and semiconductors ranging from 10-15% to 250% (in the case of drugs). Protectionist measures aimed at expanding domestic production are increasing pressure on companies with facilities outside the US.

FRB San Francisco head Mary Daly allowed for a key rate cut of more than 50 bps, but the market fears that this will be hindered by heightened inflation risks due to the White House's foreign trade policy.

- Axon Enterprise's (AXON: +16.4%) revenue and margin for the reporting quarter exceeded expectations. Growth was recorded in all key categories, including the TASER product line. Management improved its full-year forecast and noted an increase in bookings, with about 30% of bookings coming from new product lines.

- Apollo Global Management (APO: +2.5%) reported earnings above consensus. The main contribution was made by income from commissions and spreads, with the total amount of funds raised during the quarter amounting to $61 bln.

- Pfizer's (PFE: +5.2%) quarterly revenue and earnings beat average forecasts, driven by higher sales of Padcev, Xeljanz, and COVID-19 treatment and prevention products. Earnings guidance for 2025 was raised.

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