Disappointing Tech Earnings May Lead To Pullback On Wall Street

The major U.S. index futures are currently pointing to a modestly lower open on Thursday, with stocks likely to give back ground after trending over the past several sessions.

Technology stocks may lead an initial pullback on Wall Street amid a negative reaction to earnings news from companies like Netflix (NFLX) and Tesla (TSLA).

Shares of Netflix are tumbling by 6.5 percent in pre-market trading after the streaming giant reported better than expected second quarter earnings but weaker than expected revenues.

Electric car maker Tesla is also likely to come under pressure after reporting second quarter earnings and revenues that exceeded analyst estimates but a notable decrease in operating margins.

Shares of IBM Corp. (IBM) may also move to the downside after the tech giant reported second quarter earnings that beat expectations but revenues fell short.

On the other hand, shares of Johnson & Johnson (JNJ) may see initial strength after the healthcare giant reported better than expected second quarter earnings and raised its full-year guidance.

Early trading may also be impacted by reaction to a report from the Labor Department showing first-time claims for U.S. unemployment benefits unexpectedly dipped in the week ended July 15th.

Stocks fluctuated after an early move to the upside but largely managed to maintain a positive bias throughout much of the trading day on Wednesday. The major averages once again climbed to their highest closing levels in over a year.

The major averages all closed in positive territory, although the tech-heavy Nasdaq inched up just 4.38 points or less than a tenth of a percent to 14,358.02. The Dow climbed 109.28 points or 0.3 percent to 35,061.21 and the S&P 500 rose 10.74 points or 0.2 percent to 4,565.72.

The strength on Wall Street extended the upward trend seen for much of the past two weeks, with the Dow closing higher for the eighth consecutive session.

Encouraging inflation data helped trigger the recent advance, as traders grow increasingly optimistic the Federal Reserve is nearing the end of its interest rate hikes.

The Fed is still widely expected to raise rates by another quarter point next week, but traders are hopeful that will be the last.

Data indicating the economy has held up relatively well in spite of the Fed’s aggressive rate hikes has also led to confidence the economy will avoid a “hard landing.”

Largely upbeat earnings news has added to the positive sentiment, with regional banks U.S. Bancorp (USB), Ally Financial (ALLY) and Citizens Financial (CFG) posting standout gains after reporting better than expected quarterly earnings.

Meanwhile, traders shrugged off a Commerce Department report showing a sharp pullback in housing starts in the month of June.

The Commerce Department said housing starts plunged by 8.0 percent to an annual rate of 1.434 million in June after spiking by 15.7 percent to a revised rate of 1.559 million in May.

Economists had expected housing starts to plummet by 9.3 percent to a rate of 1.480 million from the 1.631 million originally reported for the previous month.

The report said building permits also tumbled by 3.7 percent to an annual rate of 1.440 million in June after surging by 5.6 percent to a revised rate of 1.496 million in May.

Building permits, an indicator of future housing demand, were expected to edge down by 0.1 percent to a rate of 1.490 million from the 1.491 million originally reported for the previous month.

Telecom stocks showed a substantial move to the upside on the day, extending the recovery from the sell-off seen on Friday and Monday.

The NYSE Arca North American Telecom Index spiked by 3.7 percent, climbing further off its lowest closing level in over three years.

Significant strength was also visible among banking stocks, as reflected by the 2.6 percent jump by the KBW Bank Index. With the gain, the index reached a four-month closing high.

Airline, utilities and commercial real estate stocks also saw notable strength on the day, while steel and semiconductor stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are inching up $0.16 to $75.51 a barrel after falling $0.40 to $75.35 a barrel on Wednesday. Meanwhile, after closing unchanged at $1,980.80 an ounce in the previous session, gold futures are edging down $2.20 to $1,978.60 an ounce.

On the currency front, the U.S. dollar is trading at 139.87 yen versus the 139.65 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1179 compared to yesterday’s $1.201.

Asia

Asian markets finished Thursday’s trading on a weak note amid disappointment over weak tech earnings and anxiety ahead of an earnings report by chipmaker TSMC.

China’s Shanghai Composite Index shed 29.31 points or 0.9 percent to finish trading at 3,169.52. The day’s trading ranged between 3,165.67 and 3,209.06. The Shenzhen Component Index dropped 116.38 points or 1.1 percent to close at 10,816.27.

The Japanese benchmark Nikkei 225 Index tumbled 405.51 points or 1.2 percent to end trading at 32,490.52. The day’s trading range was between 32,465.00 and 32,855.50.

Taisei Corp. and Subaru Corp. both rallied more than 2 percent. JFE Holdings, Toyobo Co. and Nissan Motor Co. all gained more than 1 percent.

Semiconductor testing equipment maker Advantest Corp topped losses with a 4.2 percent decline. Terumo Corp. also lost more than 3 percent. Yaskawa Electric Corp., Taiyo Yuden Co., and Minebea Mitsumi all declined more than 2 percent.

The Hang Seng Index of the Hong Kong Stock Exchange erased 24.29 points or 0.1 percent from the previous close to finish trading at 18,928.02. The day’s trading range was between a high of 18,927.67 and a low of 18,924.06.

The Korean Stock Exchange’s Kospi Index declined 8.01 points or 0.3 percent to close trading at 2,600.23. The day’s trading range was between 2,589.29 and 2,611.34.

Australia’s S&P/ASX200 Index closed trading at 7,325.00, edging up 1.30 points or less than a tenth of a percent. The day’s trading range was between 7,322.90 and 7,383.30.

Mineral Resources surged 5.2 percent. Flight Centre Travel Group added more than 4 percent. Ampol jumped 3.4 percent. Real estate business Lendlease Group and travel services business Webjet both gained more than 2 percent.

Telix Pharmaceuticals declined 14.6 percent following a quarterly business update. Gold mining business Northern Star Resources extended losses with a 6.6 percent decline. Semiconductor business Brainchip Holdings shed 5.1 percent, pharma business Imugene dropped 4.8 percent and Sayona Mining declined 2.8 percent.

The NZX 50 Index of the New Zealand Stock Exchange shed 12.44 points or 0.1 percent to close at 11,932.10. Trading ranged between 11,882.17 and 11,961.37.

Stride Property topped gains with a 2.8 percent rally. Sanford, Argosy Property, Meridian Energy and Arvida, all rose more than 1 percent.

Pacific Edge was the biggest laggard, declining 4.4 percent. Mainfreight, Synlait Milk, Ryman Healthcare and Restaurant Brands NZ all declined more than 1 percent.

Europe

European stocks have moved mostly higher during trading on Thursday, led by gains in the materials and healthcare sectors.

Easing concerns about policy tightening after recent data from the U.S. and several European countries showing drops in consumer prices appear to be contributing to the positive sentiment in the markets.

While the U.K.’s FTSE 100 Index has climbed by 0.6 percent, the French CAC 40 Index is up by 0.4 percent and the German DAX Index is up by 0.2 percent.

Technology stocks are mostly lower, weighed down by lower earnings from Netflix and Taiwan Semiconductor Manufacturing.

In the U.K. market, Hikma Pharmaceuticals is surging 8 percent. Anglo American Plc is up 5 percent after reporting strong production for the second quarter.

Persimmon is gaining 4.5 percent. Antofagasta, Glencore, Barratt Developments, Royal Mail, Burberry, Segro, Taylor Wimpey, Rio Tinto, Berkeley Group Holdings, M&G, Fresnillo and BHP are up 2 to 4 percent.

Pennon is declining nearly 4 percent. Easyjet is down 1.6 percent despite reporting a record pretax profit of 203 million pounds.

Just Eat Takeaway.com, Diageo, Scottish Mortgage, Unilever and Flutter Entertainment are down 1.2 to 1.6 percent.

In Paris, Publicis Groupe is up 2.6 percent after reporting results that surpassed expectations and raising guidance.

ArcelorMittal is gaining 2.5 percent. Kering, TotalEnergies, Orange, AXA, Saint Gobain, Engie, Bouygues and Sanofi are gaining 1.3 to 2 percent.

L’Oreal is down nearly 2 percent. Dassault Systemes is lower by 1.5 percent and STMicroElectronics is down 1.1 percent after the company cut its earnings outlook.

In the German market, Fresenius is climbing more than 6.5 percent. Fresenius Medical Care is up 1.8 percent, while BASF, Brenntag, HeidelbergCement, SIemens and Deutsche Post are rising 1 to 1.5 percent.

SAP, Infineon, Adidas, Henkel, Beiersdorf, Siemens Healthineers and Siemnes Energy are down 0.6 to 1.4 percent.

On the economic front, data from Destatis showed German producer prices increased at the weakest pace in the current sequence of growth started in 2020 amid a continued drop in energy costs.

The producer price index (PPI) edged up 0.1 percent year-over-year in June, slower than the 1 percent rise in May. Economists had expected prices to remain flat for the month. On a monthly basis, producer prices decreased 0.3 percent in June versus a 1.4 percent slump in May.

Data from the statistical office INSEE showed the French manufacturing sentiment index came in at its long-term average of 100.0 in July, the same as in June and in line with economists’ expectations. The overall business confidence index stayed stable for the second straight month at 100.0 in July.

A report from the European Central Bank said the euro area posted a surplus of 9 billion euros in May compared to 4 billion euros in April. In May 2022, the balance was a 14 billion euro deficit.

Data from the Federal Customs Administration showed Switzerland’s trade surplus rose to CHF 9.92 billion in the second quarter from CHF 8.62 billion in the previous quarter.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits unexpectedly dipped in the week ended July 15th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims slipped to 228,000, a decrease of 9,000 from the previous week’s unrevised level of 237,000. Economists had expected jobless claims to inch up to 242,000.

The Labor Department said the less volatile four-week moving average also edged down to 237,500, a decrease of 9,250 from the previous week’s unrevised average of 246,750.

The Federal Reserve Bank of Philadelphia released a separate report showing a continued decline in Philadelphia-area manufacturing activity in the month of July,

The Philly Fed said its diffusion index for current activity crept up to a negative 13.5 in July from a negative 13.7 in June, with a negative reading indicating a contraction. Economists had expected the index to rise to a negative 10.0.

Looking ahead, the Philly Fed said most future indicators improved, suggesting more widespread expectations for overall growth over the next six months.

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of June. Existing home sales are expected to decrease to an annual rate of 4.23 million in June from a rate of 4.30 million in May.

The Conference Board is also due to release its report on leading economic indicators in the month of June at 10 am ET. The leading economic index is expected to fall by 0.6 percent in June after sliding by 0.7 percent in May.

At 1 pm ET, the Treasury Department is scheduled to announce the details of this month’s auctions of two-year, seven-year and five-year notes.

Stocks In Focus

Shares of Discover Financial Services (DFS) are moving sharply lower in pre-market trading after the financial services company reported weaker than expected second quarter results and pausing its share repurchases.

Investment management company Blackstone (BX) may also move to the downside after reporting second quarter adjusted earnings in line with analyst estimates but weaker than expected revenues.

On the other hand, shares of Zions Bancorp (ZION) are likely to see initial strength after reporting a rebound in customer deposits in the second quarter.

Homebuilder D.R. Horton (DHI) is also moving notably higher in pre-market trading after reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.