North American Morning Briefing: Earnings Optimism Continues to ... - Morningstar

MARKET WRAPS

Watch For:

Housing Starts for June; EIA Weekly Petroleum Status Report; earnings from Goldman Sachs, IBM, Netflix, Tesla

Today’s Headlines/Must Reads

– Antitrust Enforcers Issue Blueprint for Challenging More Mergers

– Tech Stocks, Meme Stocks, Crypto: Investors Are Feeling Bold Again

– U.S. Rate Rises Have Hit the Yen Hard, but Now It’s Staging a Comeback

– Microsoft and Activision Blizzard Still Committed to $75 Billion Merger

Follow WSJ markets coverage here .

Opening Call:

Stock futures were little changed on Wednesday, leaving Wall Street benchmarks on course for their highest open since April 2022 as earnings underpin investor sentiment.

Also underpinning sentiment is hope that cooling inflation can help central banks soon stop increasing borrowing costs and that the interest rate rises to date have yet to badly damage the U.S. economy.

“The likelihood of a further interest rate rise next week from the Federal Reserve is all but a done deal, although more recent indicators suggest the hike could mark the end of its aggressive monetary tightening offensive,” interactive investor said.

“The current reporting season is off to a strong start, albeit against low expectations, pointing to an economy which has yet to suffer from the rising interest rate environment.”

Fundstrat said the stock market’s recent gains means a period of consolidation may be nearing, but that the technical set up remains positive.

Overseas markets were mixed. Real-estate and utility stocks led the Stoxx Europe 600 up 0.4% while in Asia, Japan’s Nikkei 225 rose 1.2% as the yen weakened but Hong Kong’s Hang Seng slipped 0.3%.

Premarket Movers

ASML was down 1.3% after the company raised its annual sales guidance despite warning of a delayed recovery in the semiconductor industry.

Carvana fell 8.6% after the company moved forward the release of its second-quarter earnings by more than two weeks. Carvana will report earnings on Wednesday. Results previously were scheduled for Aug. 3. The stock has gained 740% this year.

Forex:

The dollar edged up slightly after recent falls but it remains weak as investors retain their overall bearish tone toward the currency, UniCredit Research said.

This is demonstrated by the DXY dollar index “failing to hold gains much above 100” even as it recovers modestly after hitting a 15-month low of 99.5890 earlier this week.

The fact that sterling remains above $1.29 even after weaker-than-expected U.K. inflation data is “further proof of how much the ongoing dollar weakness is providing the other majors [major currencies] with a parachute,” UniCredit said.

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The pound hit a seven-week low against the euro, after U.K. inflation fell more than expected in June, with headline annual CPI dropping to 7.9% from 8.7% in May, versus a reading of 8.1% forecast by economists in a WSJ poll.

The figures will ease concerns about how much more the Bank of England will have to raise interest rates, although inflation remains high and for now more rate increases are likely to be in store.

Read U.K.’s Stubborn Inflation Means More Pain for Homeowners, Renters

Energy:

Oil prices wavered as investors balance signs of tightening Russian supply against concerns about Chinese demand.

Ship tracking data has pointed to declining Russia oil exports, suggesting Moscow is making good on its promise to other OPEC members to slash output. But, weaker than expected Chinese data in recent days has countered that, capping oil’s gains, analysts said.

Metals:

Base metals were lower as weak demand in China continued to hit prices for industrial goods.

Commonwealth Bank of Australia pointed to weak property demand with new home sales in China failing to budge in June, and one of the largest consuming areas of metals individually is the Chinese property sector.

“Confidence remains critically low…any policy support will likely need to be larger and in place for longer than in previous property downturns to be effective.”

Read Gold Has High Chance of Breaching Resistance at Ichimoku Cloud’s Top, Charts Show

TODAY’S TOP HEADLINES

Tesla to Report Second-Quarter Earnings Fueled by Sales Growth

After a rocky start to the year, Tesla has returned to a feverish rate of sales growth for its electric vehicles. That growth’s cost will become evident Wednesday when the company reports second-quarter financial results.

New-vehicle deliveries almost doubled in the April-through-June period to a record high. Still, analysts expect profit to rise just 3.4% from a year earlier after the Texas-based automaker slashed U.S. prices by more than a fifth on some offerings.

AT&T Halts Plans to Remove Lead Cables in Lake Tahoe

AT&T said Tuesday that it will halt plans to remove two lead-clad cables in Lake Tahoe that it had previously agreed to remove as part of a 2021 settlement and that it will test lead levels at other locations where it has lead-clad cables around the country.

The telecom giant said in a court filing that it wanted to allow for additional testing for lead and “maintain the Lake Tahoe cables in place while working cooperatively with regulators and other stakeholders on an appropriate risk assessment.”

Oddity Prices Closely Watched IPO Above Expectations

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Oddity Tech priced its initial public offering above expectations at $35 a share, signaling a potential thaw in the new-issue market.

The company is expected to raise about $425 million for selling stockholders including private-equity firm L Catterton, by placing significantly more shares than planned, according to people familiar with the matter.

ADB Holds Asia Economic Growth Outlook Steady

The Asian Development Bank has kept its 2023 economic growth projection for the region steady, as consumption and investment is expected to help offset weakness in exports amid weak global demand.

The Manila-based multilateral bank on Wednesday issued its July development outlook. It continues to expect 4.8% economic growth this year for developing Asia, a region comprising 46 of its members, including China, South Korea and India. It trimmed its 2024 forecast to 4.7% from the 4.8% projected in April.

One Equity Investigated by SEC

The Securities and Exchange Commission is investigating whether private-equity firm One Equity Partners’ communications with investors about its past and future performance violated rules.

One Equity, which was once JPMorgan Chase’s buyout arm, has recently been in settlement talks with the SEC, people familiar with the matter said. Regulators have sought a fine of as much as $5 million, although One Equity hasn’t agreed to that amount and the penalty could be lower, one of the people said.

Senators to Propose Ban on U.S. Lawmakers, Executive Branch Members Owning Stock

WASHINGTON-Two U.S. senators are set this week to introduce bipartisan legislation to bar members of the federal executive branch and lawmakers from owning stock in individual companies, as new polling shows broad public support for such a measure.

The bill from Sens. Kirsten Gillibrand (D., N.Y.) and Josh Hawley (R., Mo.) would permit the president, vice president, lawmakers, Capitol Hill aides and employees of the executive branch to own mutual funds and broad industry and index funds.

Michigan Charges 16 People With Acting as False Electors for Trump in 2020

Michigan’s attorney general on Tuesday brought conspiracy and forgery charges against 16 people she said were part of a multistate effort to cast doubt about the outcome of the 2020 presidential election and keep former President Donald Trump in power.

The Michigan residents allegedly signed documents in December 2020 falsely claiming to be the rightful state electors pledged to vote for Trump. They tried to present copies of the documents to the Michigan legislature, the U.S. Congress and the National Archives, seeking to put themselves forward as an alternative pro-Trump slate of electors at a meeting of the Electoral College later that month, according to the attorney general’s office.

Write to paul.larkins@dowjones.com TODAY IN CANADA

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Earnings:

None scheduled

Economic Calendar:

None scheduled

Stocks to Watch:

Anaergia: Board Approved Motion to Engage Financial Adviser for Strategic Review

Expected Major Events for Wednesday

06:00/UK: Jun UK producer prices

06:00/UK: Jun CPI

08:30/UK: May UK House Price Index