Morning in New York: Treasury yields and Walmart's earnings will set the tone for trading

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.

Participants in the upcoming session will continue to monitor the trend in Treasury bond yields following their sharp decline yesterday. For 30-year bonds, yields fell to about 5.19% following the Ministry of Finance’s decision to increase the buyback of long-term debt, which is supporting interest-rate-sensitive stocks. However, the sustainability of the rally is in doubt, as key pressures—including a high budget deficit and public debt, an increase in corporate debt issuance, as well as risks of rising oil prices and accelerating inflation—remain. The minutes from the Fed’s July meeting, released yesterday, point to the risk of monetary policy tightening.

Geopolitical factors continue to limit growth potential in the stock market. Brent crude is holding steady around $93 per barrel amid ongoing tensions surrounding the Strait of Hormuz and a lack of progress in negotiations between the U.S. and Iran. Negotiations between the U.S. and Canada to reduce import tariffs on automobiles, steel, and aluminum could provide support for cyclical sectors.

Today, the Philadelphia Fed’s Manufacturing Activity Index for August will be released, along with weekly unemployment insurance claims data. The consensus estimates for initial and continuing claims are 212,000 and 1.788 million, compared with 209,000 and 1.777 million for the same period last month. In addition, the Leading Economic Index for July will be released (consensus: +0.1% MoM, June: +0.2%). These statistics are of secondary importance and are unlikely to have a significant impact on investor sentiment.

The day’s main corporate event will be Walmart’s (WMT) earnings report, which is set to be released before the market opens. Market consensus estimates call for adjusted EPS of around $0.74 and revenue of about $186.9 billion. The retailer’s own forecast calls for sales growth of 4–5%, with operating income rising 7–10% and EPS in the range of $0.72–0.74. The most important indicators for investors will be consumer demand, traffic trends, e-commerce and advertising revenue, as well as the impact of import duties and related compensation.

Before the start of the main trading session, Alibaba (BABA), Deere (DE), Futu Holdings (FUTU), NetEase (NTES), and Advance Auto Parts (AAP) will also report their results for the last quarter. After the market closes, Ross Stores (ROST) will release its earnings report.

S&P 500 futures are trading nearly flat. We assess the risk balance for the upcoming session as neutral, with moderate volatility. Falling long-term Treasury yields and a weaker dollar are currently supporting the stock rally, but its sustainability is in question. Geopolitical tensions are contributing to persistently high oil prices and inflationary risks. Corporate and macroeconomic news are creating some uncertainty.

— Webull (BULL) shares are up 14% following the release of strong earnings results. The number of registered users on its platform reached 28.2 million, client assets increased by 79% year-over-year to $28.5 billion, and stock trading volume rose by 88% year-over-year.

— Nordson (NDSN) shares rose 7% following the release of its third-quarter financial results, which showed record revenue of $818 million and adjusted EPS of $3.25. Both metrics exceeded average market expectations, and company management raised its full-year forecast.

— Ultragenyx Pharmaceutical (RARE) shares are up 7% as the FDA’s approval of the Genglycos gene therapy for the treatment of type Ia glycogen storage disease significantly reduces the program’s regulatory risks and paves the way for the commercialization of the treatment.

— Wolfspeed (WOLF) shares fell 9% following the release of its quarterly earnings report. Investors were disappointed by the company’s continued weak profitability and the lack of convincing signs of a rapid business recovery, despite growing demand from AI data centers.

— Coty (COTY) shares are down 5%, despite higher-than-expected revenue for the quarter. The negative reaction was driven by a cautious outlook for the next three months and the absence of full-year guidance amid the restructuring of the Consumer Beauty segment.

Trading on August 19 on U.S. stock markets ended mostly in positive territory, although by the end of the session, prices had pulled back from their intraday highs. The S&P 500 rose 0.21% for the day, the Dow Jones gained 0.22%, the Russell 2000 climbed 0.5%, and only the Nasdaq-100 fell 0.22%.

The equally weighted broad-market index outperformed the "classic" benchmark by about 0.8%, indicating buyer interest in a large number of stocks.

The main driver of the capital reallocation was the decline in Treasury bond yields following news of an expansion of the Treasury’s buyback program. Among the “Magnificent Seven,” shares of Tesla (TSLA: +4.23%), Amazon (AMZN: +2.46%), and Apple (AAPL: +2.19%) were in the highest demand. At the same time, the technology sector as a whole came under pressure due to profit-taking in the semiconductor industry. As a result, the IT sector (XLK: −1.07%) topped the list of underperformers. The healthcare sector (XLV: +3.51%) emerged as the top performer, receiving a strong boost from reports of successful clinical trials by several biotech and pharmaceutical companies.

Investors focused on the U.S. Treasury’s decision to double the volume of buybacks of long-term debt securities to stabilize the market. This led to a 9–10 bps decline in yields at the long end of the curve, causing it to flatten. Nevertheless, the auction for the placement of $16 billion in 20-year Treasuries was rather weak: the bid-to-cover ratio and demand from foreign investors were below recent averages. There were no significant macroeconomic data releases, but quarterly reports from major retailers allowed market participants to conclude that consumer demand remains resilient.

The minutes of the Fed’s July meeting that were released had a moderately “dovish” tone. Members of the Federal Open Market Committee (FOMC) expect price growth to slow further by the end of the year. At the same time, monetary authorities confirmed their readiness to raise rates should disinflationary trends weaken. The regulator identified the escalation of the conflict in the Middle East as the main inflationary risk. Against this backdrop, and given the lack of progress in negotiations between the U.S. and Iran, WTI crude oil rose 0.4%, brushing aside data showing a 4.4 million-barrel increase in U.S. commercial inventories.

— Successful interim results from the Phase 3 clinical trials of a personalized mRNA vaccine against melanoma led to a historic surge in Moderna’s stock price (MRNA: +177%). The drug, developed in partnership with Merck (MRK: +12.6%), demonstrated significant improvements in survival rates without recurrence or distant metastases.

— Estée Lauder (EL: +16.3%) reported strong results for the fourth fiscal quarter, which included unexpected sales growth in the Asia-Pacific region, particularly in mainland China. Management raised its guidance for operating margin and earnings for fiscal year 2027, significantly exceeding Wall Street’s expectations.

— Marvell Technology (MRVL: +9.9%) has entered into a major commercial agreement with Alphabet (GOOGL) to develop custom semiconductor solutions. Alphabet received warrants to purchase up to 59 million shares of the chipmaker with an exercise price of $206.58 and an expiration date in fiscal year 2033.

— Target (TGT: +4.4%) reported second-quarter revenue and earnings that exceeded consensus estimates. These results were driven by strong foot traffic. The retailer raised its full-year guidance, reaffirming its ability to effectively translate increased customer activity into higher margins.

— TJX Cos.’ (TJX: −4.2%) comparable sales at its key U.S. division, Marmaxx, for the quarter disappointed market participants. Although the retailer’s management symbolically raised its average full-year earnings forecast, its conservative guidance for the third quarter heightened investors’ concerns about a local slowdown in consumer demand.

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