Despite a challenging night, the futures markets have shown resilience, trading near breakeven levels this morning ahead of the initial jobless claims report. Last night's concerns about rising geopolitical tensions have eased, and traders have shifted their focus to earnings news. This includes a report from content maker Warner Brothers Discovery (WBD), which took a $9.1 billion impairment charge on its television assets during the recent second quarter. On a brighter note, shares of Eli Lily (LLY) are up significantly this morning after the drug maker posted strong earnings results and raised its full-year guidance, benefiting from the strong adoption of its Monjaro, Zepbound, and Verzenio drugs. The initial jobless claims report revealed the loss of about 233,000 jobs, a figure that was less than investors had expected, propelling the market higher. This suggests a positive start to the trading day.
Later today, wholesale inventories for June will be released. Richmond Federal Reserve President Tom Barkin will give remarks on the economy in the afternoon, which may provide further insight into how the central bank is viewing the market action of the last several days.
The stock market started strongly yesterday, continuing a rally from Tuesday, as investors bought back some of their stock after the Monday market rout. However, sentiment quickly turned to negative as traders utilized the higher prices to shed positions, and the major market indices fell into the red and trended lower through the rest of the day. Overall, the S&P 500 finished off 41 points (down 0.77%), the NASDAQ declined 171 points (down 1.05%), and the Dow Jones Industrial Average fell 234 points (down 0.60%). Market breadth was somewhat negative, with decliners outpacing advancers by a 1.4-to-1.0 ratio. Financial stocks were amongst the best performers on the day, while materials equities were amongst the worst.
In commodity news, oil prices rose throughout yesterday’s session as traders priced in higher levels of geopolitical risk in Iran and Israel. Elsewhere, U.S. Treasury bond yields were choppy through much of the day, but those with longer durations increased, helping to flatten the inverted yield curve a bit. The 'inverted yield curve' is a situation where short-term interest rates are higher than long-term rates, which is often seen as a signal of an impending economic downturn. Traders believe a significant interest rate cut will occur at the upcoming Federal Open Market Committee (FOMC) meeting in September. After an initial fall, the Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, rose throughout the day but still finished well off of Monday’s highs.
With few economic reports set for release on Friday, trading is likely to be more influenced by changes in sentiment and the results of earnings reports tomorrow. Several companies will report earnings results and give guidance into the second half of the year after the bell this afternoon and before the market opens on Friday. These reports may provide valuable insight into how companies are faring and may shed light on the job picture. - John E. Seibert III
At the time of this article’s writing, the author held positions in none of the companies mentioned.
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