Here are five things you must know for Thursday, July 21:
1. — Stock Futures Edge Lower With ECB Rate Decision In Focus
U.S. equity futures moved lower Thursday, while the dollar rallied and oil prices extended their recent run of declines, as investors pared risk bets ahead of a key European Central Bank rate decision and broader concerns for the health of the global economy.
The ECB is expected to lift its key lending rate for the first time in eleven years later today in Frankfurt, while unveiling details of a package that would support indebted member states from undue pressure in the bond market.
Expectations of a hike of as much as 50 basis points have given the euro some support against the dollar this week, following its slump into parity against the U.S. dollar for the first time in two decades last month, but those bets have faded heading into today’s meeting, with the euro easing to 1.0183 and the U.S. dollar index rising 0.05% to 107.087 in defensive overnight trading.
The ECB rate decision will be published at 8:15 am Eastern time, with a press conference from President Christine Lagarde at 8:45 am Eastern time.
An earlier rate decision from the Bank of Japan was also broadly dollar positive, as Governor Haruhiko Kuroda lifted near-term inflation forecasts but maintained a key lending rate at -0.1% and pledged to hold long-term bond yields at 0% in order to support growth.
Two geo-political developments in Europe kept a lid on risk appetite, as well, as Italy’s Prime Minister Mario Draghi, a former ECB President, resigned amid a collapse of his fragile coalition government and Russia President Vladimir Putin repeated his warning that gas from the newly re-opened Nord Stream 1 pipeline could slow, or even stop, due to crumbling infrastructure.
Europe’s Stoxx 600 was marked 0.8% lower in early Frankfurt trading ahead of the ECB rate decision, following on from a modest 0.08% decline for Asia’s region-wide MSCI ex-Japan index.
In the U.S., the Treasury bond yield curve remains deeply inverted, with 2-year notes climbing to 3.246% and 10-year notes trading at 3.055%, while oil prices extended declines following a bigger-than-expected build-up in gasoline supplies reported yesterday by the Energy Department.
WTI futures for September delivery, which are tightly linked to U.S. gas prices, were marked $4.07 lower at $95.81 per barrel, while AAA data noted pump prices fell for a 33rd consecutive day to $4.44 per gallon.
On Wall Street, futures tied to the S&P 500 are indicating a 5 point opening dip while those liked to the Dow Jones Industrial Average are priced for a 70 point move to the downside. Futures linked to the tech-focused Nasdaq are indicating a 10 point bump.
2. — Tesla Jumps After Q2 Earnings Beat, 2022 Delivery Target Pledge
Tesla (TSLA) – Get Tesla Inc. Report shares jumped higher in pre-market trading after the carmaker topped Wall Street’s second quarter earnings forecasts and reiterated its goal for full-year delivery growth despite input price pressures and narrowing margins.
Tesla said adjusted earnings for the three months ending in June rose 56.5% from last year to a Street-beating, $2.27 per share, although revenues were modestly light at $16.94 billion. Gross automotive margins were 27.9%, Tesla said, a 500 basis point decline from last year, Tesla said, just inside the Street forecast of 28.2%, owing to put a surge in input costs and expenses linked to the ramp-up of new factories in Austin and Berlin.
Tesla also said it sold around 75% of it bitcoin holdings by the end of the second quarter, a figure equal to around $936 million, which was added to its balance sheet.
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“Q2 was a unique quarter for Tesla due to a prolonged shutdown of our Shanghai factory. But in spite of all these challenges, it was one of the strongest quarters in our history,” CEO Elon Musk told reporters on a conference call late Wednesday. “And as a result, we have the potential for a record-breaking second half of the year. I do want to emphasize this is obviously subject to force majeure, things outside of our control.”
Tesla shares were marked 2.51% higher in pre-market trading to indicate an opening bell price of $761.15
3. — United Airlines Slides After Q2 Earnings Miss As Fuel, Staffing Costs Surge
United Airlines (UAL) – Get United Airlines Holdings Inc. Report shares slumped lower in pre-market trading after the carrier posted softer-than-expected second quarter earnings as surging staff and fuel costs offset a boom in post-pandemic travel demand.
United swung to profit last quarter, its first since without government support since the 2020 pandemic, but its adjusted earnings of $1.45 missed Street forecasts by more than 50 cents. Revenues were solid at 12.1 billion, but a 45% surge in fuel costs, as well as ongoing staff and pilot shortages, ate into its bottom line.
United said it expects the travel boom to “more than offsetting economic headwinds — leading to expected revenue and earnings acceleration in the third quarter,” but won’t increase capacity between now and the end of the year as it works to build staffing levels and keep a lid on costs.
United Airlines shares were marked 6.55% lower in pre-market trading to indicate an opening bell price of $38.95 each.
4. — Carnival Slumps After Discounted $1 Billion Stock Sale
Carnival Corp (CCL) – Get Carnival Corporation Report shares slumped lower in pre-market trading after the cruise line operator unveiled plans to raise around $1 billion through a discounted stock offering.
Carnival, whose shares closed at $11.09 each on Wednesday, said the sale would be priced at $9.95 per share. Carnival said proceeds from the sale, underwritten by Goldman Sachs, will be used for “general corporate purposes, which could include addressing 2023 debt maturities”.
Late last month, Carnival said it expects to turn a profit for both the second and third quarters, but noted it will likely post a full-year loss as surging fuel and staffing costs bite into its bottom line.
Carnival shares were marked 10.73% lower in pre-market trading to indicate an opening bell price of $9.90 each.
5. — Ford Edges Higher Amid Report of 8,000 Pending Job Cuts
Ford Motor Co. (F) – Get Ford Motor Company Report shares edged higher in pre-market trading following a report from Bloomberg News that suggested the carmaker is preparing to cut up to 8,000 jobs over the coming weeks.
Ford, which has a scheduled call with investors later today to provide updates on its EV production targets, is likely to cut jobs in its newly-created Ford Blue division, Bloomberg said, which focuses on the carmaker’s legacy internal combustion engine operations. Salaried employees are likely to be affected as well, the report indicated.
Last month, Ford said it would invest $3.7 billion in new facilities in Michigan, Ohio and Missouri, most of it focused on EVs, while creating an estimated 74,000 new direct and indirect jobs. The spending forms part of Ford’s previously-announced $50 billion in new EV investments, spread over the next five years, that were unveiled in March.
Ford shares were marked 0.1% higher in pre-market trading to indicate an opening bell price of $12.74 each.