Personal Income & Outlays for June; Employment Cost Index for 2Q; Chicago Business Barometer — ISM-Chicago Business Survey — Chicago PMI for July; University of Michigan Final Consumer Survey for July; Canada GDP for May; earnings from Chevron, Exxon Mobil, Procter & Gamble, Enbridge
Stock futures were higher on Friday after Apple and Amazon reported record strong quarterly earnings.
Powered by after-hours gains from the two tech giants, which together combine for a market capitalization of about $3.79 trillion, Nasdaq was leading its peers heading into Friday’s session.
Even as earnings season progresses and investors look for insights in other sources, like Federal Reserve commentary and Thursday’s GDP estimate, the economic picture isn’t clear.
The GDP reading, which showed a second straight quarterly contraction, would conventionally suggest that the economy had entered a recession; however, other parts of the economy, particularly the labor market, remain very sturdy.
The National Bureau of Economic Research, which officially determines the timing and duration of recessions, hasn’t called a recession, but would likely only do so long after one has begun.
Pantheon Macroeconomics Chief Economist Ian Shepherdson put it simply in a Thursday memo: “The economy is not in recession. Payroll growth averaged 456K across the first half, a pace usually not seen even at the peak of booms.”
Friday’s Personal Income & Outlays report will include June readings for the personal-consumption expenditures price index, the Fed.’s preferred gauge of inflation.
The core version of this index, which strips out the more volatile food and energy categories, is expected to rise 4.7% from a year ago, which would be equivalent to May’s 4.7% annual growth rate, according to 12 economists surveyed by The Wall Street Journal.
An update to the index could test markets’ recent optimism with Jerome Powell.
Morgan Stanley economists, for example, wrote that they continue to envision a “steep path for rate increases this year” after Wednesday’s 0.75-point increase. They also believe the “pace of tightening going forward will be highly data-dependent,” suggesting the new inflation data Friday could assume extra importance.
The CME FedWatch Tool currently estimates a 74% chance of an increase of 50 basis points, or half a percent, when the FOMC makes its next move in late September. The tracker assigns a probability of 26% to a 75-basis-point raise.
The University of Michigan’s final consumer sentiment report for July also comes out at 10 a.m. Friday. Economists polled by the Journal anticipate a reading of 51.1, which would be in line with the month’s preliminary reading but still nearly 40% off the index’s value from a year ago.
Overseas, the pan-European Stoxx 600 was 0.9% higher while Hong Kong’s Hang Seng Index tumbled 2.3%. Chinese stocks were weaker after economic warnings from the country’s commerce ministry, including caution on risks to trade.
The dollar fell to a more-than-3-week low against a basket of currencies in further reaction to Thursday’s GDP data.
MUFG said the data caused market participants to reduce expectations for rises in U.S. interest rates. But a strong ECI, which hit a record high in the first quarter, “could cast some doubt on the markets’ expectation for less hawkish Fed policy and provide some relief for the dollar.”
Oil prices gained around 2% in European trading and are on course for a 5% weekly gain.
Brent crude has been choppy in recent days but appears to have stabilized around the $100 a barrel level. Prices might well remain at that level for the remainder of the year, said Natixis. It has forecast $110 a barrel for the third quarter and $105 a barrel in the fourth quarter.
Recessionary fears will weigh on prices and put off speculative investors, Natixis said. 2023 could see tightness return to the market as the EU’s ban on Russian crude oil imports takes effect.
“Oil prices are likely to reaccelerate in 2023.”
Copper prices rose as risk assets gained in Europe on hopes that weak U.S. data would make the Fed ease off its hiking cycle.
Still, the red metal is on course for a 4.8% monthly decline. That would be its fourth straight monthly fall as fears about recession and a strong dollar have weighed on the metal.
“Bad news is good! Powell did say the next hike will be data-dependent; will this [U.S. GDP] be a leading indicator to a moderating Fed path?” said SPI Asset Management.
TODAY’S TOP HEADLINES
Bankrupt Crypto Brokerage Voyager Ordered to Cease False Promises About U.S. Banking Insurance
WASHINGTON-U.S. regulators issued a joint letter ordering bankrupt cryptocurrency broker and lender Voyager Digital Ltd. to cease and desist from marketing itself as insured by the Federal Deposit Insurance Corp., saying statements on its website and elsewhere were false and misleading.
The joint letter released Thursday, from the Federal Reserve and FDIC, said the company’s statements “likely misled and were relied upon by customers who placed their funds with Voyager and do not have immediate access to their funds.”
JPMorgan Must Face Former Compliance Employee’s Lawsuit, Judge Rules
A judge in New York declined to block a lawsuit brought against JPMorgan Chase Bank NA by a former compliance employee who says she was fired for raising concerns about the bank’s compliance program.
Shaquala Williams, a former JPMorgan vice president, sued her former employer last year, arguing that the concerns she raised, including that the bank had insufficient sanctions screening and anticorruption practices, were protected under a whistleblower anti-retaliation law.
Life Sciences Investor Genoa Ventures Raises $84 Million Second Fund
Venture firm Genoa Ventures has topped its fundraising goal for its second fund, raising $84 million to invest in diagnostics, agriculture and other life sciences sectors outside drug development.
Healthcare venture capital fundraising has jumped in recent years, largely because venture firms, drawn to emerging treatments such as gene editing and cell and gene therapy, have rounded up larger pools to invest in drug-development companies. U.S. healthcare venture capitalists secured $28.3 billion in 2021, a record total, surpassing the $16.8 billion they raised in 2020, according to Silicon Valley Bank.
Short Seller Carson Block Sued Over $14 Million Whistleblower Award
A private investor is seeking $7 million in a lawsuit against short seller Carson Block and his equity research firm Muddy Waters LLC in a dispute over an approximately $14 million whistleblower award by the Securities and Exchange Commission.
Kevin Barnes said he worked with Mr. Block on a report on Focus Media Holding Ltd. that formed the basis of a SEC action, and that the two had agreed to share proceeds from legal or regulatory actions stemming from their research on the China-based advertising company. Mr. Block is known for investigating Chinese companies.
Standard Chartered Second-Quarter Profit Rose 6.5%
Standard Chartered PLC’s second-quarter profit rose 6.5% compared with the same period a year earlier, thanks to stronger interest income, as it announced a new $500 million share buyback program.
The Asia-focused bank Friday posted second-quarter underlying pretax profit of $1.32 billion. Operating income rose 6.5% to $3.93 billion, driven by higher net-interest income as central banks increased interest rates aggressively to fight elevated inflation.
Private-Equity Investors Push Secondhand Asset Sales to a First-Half Record $57 Billion
The market for secondhand stakes in private-equity funds accelerated this year, with $57 billion worth of transactions in the first six months, the highest sum ever recorded for the period, investment bank Jefferies LLC said.
The total rose 19% from the previous record for first-half secondary-transaction volume, set last year at $48 billion.
Senate Climate Bill Is a Boon for Fossil Fuels
WASHINGTON-Senate Democrats are moving forward on the costliest and most ambitious effort ever by the U.S. to address climate change-powered in part by benefits for fossil fuels and the broader energy industry.
The proposed $369 billion compromise bill struck by Senate Majority Leader Chuck Schumer (D., N.Y.) and Sen. Joe Manchin (D., W.Va.) includes tax incentives aimed at channeling billions of dollars to wind, solar and battery developments that put clean power onto the grid.
House Passes Chips Act to Boost U.S. Semiconductor Production
WASHINGTON-The House passed a $280 billion bill aimed at boosting U.S. semiconductor manufacturing and competitiveness with China, despite a late push by Republican leaders to block the legislation over a separate Democratic spending proposal.
President Biden is expected to sign the legislation, which passed in a 243-187 vote. Twenty-four Republicans joined with Democrats to vote for the bill. One Democrat, Rep. Sara Jacobs (D., Calif.), voted present. Her family founded chip developer Qualcomm Inc.
China’s Xi Warns Biden Over Taiwan as a Possible Pelosi Trip Adds to Tensions
WASHINGTON-Chinese leader Xi Jinping warned President Biden about relations with Taiwan, as a possible trip to the island by House Speaker Nancy Pelosi adds tensions to strained U.S.-China relations.
In a more than two-hour phone call Thursday, the leaders ranged over an array of friction-filled issues, from Russia’s military assault on Ukraine and other world hot spots to the global economy, according to accounts of the meeting issued by the Chinese Embassy in Washington and a senior Biden administration official.
Los Angeles Halts Plans to Reimpose Mask Mandate as Covid-19 Cases Decline
(MORE TO FOLLOW) Dow Jones Newswires
July 29, 2022 05:18 ET (09:18 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.