Apple beats investor expectations, slowdown in online sales and appreciation of the dollar are among the themes
Wall Street looks set to end the week on a negative note as weak activity data leaves investors worried about the possibility of a U.S. recession. Nonfarm payrolls will be watched for signs of growth, while results from tech heavyweights Apple and Amazon will also be in the spotlight.
In Brazil, the appreciation of the dollar against the real reaches its highest value since December 2021 amid external pressures and communication from the monetary authority.
1. Payroll in the USA
The economic highlight this Friday (Aug. 2, 2024) will be the release of the closely watched nonfarm payrolls report, known as payrolls, with investors looking for more clues about the health of the US labor market and the economy in general.
Economists expect the U.S. economy to have added 177,000 jobs in July, a moderation from 206,000 the previous month. The unemployment rate, which has risen in each of the past three months, is expected to hold steady at 4.1%.
O Fed The Federal Reserve kept its benchmark overnight interest rate unchanged on Wednesday, where it has been since July, in a range of 5.25% to 5.50%, but also opened the door to lower borrowing costs as early as its next meeting in September. In a statement accompanying the announcement, the Fed softened its description of inflation and said the risks to employment were now on par with those from rising prices.
Data released earlier this week showed U.S. job openings fell modestly in June, while new claims for unemployment benefits rose to an 11-month high last week.
A weak report from the U.S. ISM (Institute for Supply Management) manufacturing also raised fears of an economic slowdown and prompted investors to worry that the Federal Reserve may be behind schedule in cutting rates.
U.S. stock futures fell on Friday (Aug. 2) as investors digested some disappointing earnings from the key technology sector while awaiting the release of the widely watched monthly nonfarm payrolls report.
At 7:58 a.m. (Brasília time), the Dow futures contract was 0.93% lower, the S&P 500 futures fell 1.08%, and the Nasdaq 100 futures fell 1.6%.
Wall Street indexes closed sharply lower on Thursday (Aug. 1) after a softer-than-expected ISM report on the U.S. manufacturing sector prompted investors to worry about a possible recession.
The S&P 500 fell 1.4%, the Nasdaq Composite dropped 2.3% and the Dow Jones Industrial Average fell nearly 500 points, or 1.2%.
Investors will focus on the official jobs report for further clues on the strength of the US labor market, with risk sentiment ending the week on the back foot.
Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) reported earnings after the close on Thursday (Aug. 2) and will be in the spotlight, as will Intel (NASDAQ:INTC) after the chipmaker said it would cut more than 15% of its workforce and suspend its dividend starting in the fourth quarter as it seeks a turnaround.
As for earnings, major oil companies Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) will announce their quarterly results this Friday (Aug. 2), before the market opens.
2. Apple impresses
Apple reported third-quarter results on Thursday that beat Wall Street estimates as a jump in services revenue helped offset a drop in iPhone revenue amid growing competition in China.
Shares of the tech giant rose 0.6% in late trading, adding to gains of nearly 30% in the past three months, resulting in gains of about 13% so far this year.
Apple said revenue in its fiscal fourth quarter would grow at a similar rate to the 4.9% increase it posted in the April-June period, which was better than expectations.
Services revenue rose 14% to a record $24.21 billion, beating Wall Street estimates of $24.01 billion.
iPhone sales also improved in Q3, falling just 0.9%, compared with the 2.2% decline expected by analysts, although China – Apple’s third-largest market – continued to be a drag, as sales there fell 6.5%.
Apple has started discounting its iPhones in China to compete with much cheaper alternative smartphones offered by local rivals such as Huawei.
Despite these difficulties, things could improve in the next quarter as analysts expect a strong upgrade cycle for the iPhone 16 series, which is likely to launch in September.
The company unveiled a series of AI products and services it calls Apple Intelligence at its developer conference in June, and to operate Apple Intelligence requires at least an iPhone 15 Pro, which could prompt consumers to upgrade their devices.
3. Sales slowdown
Amazon shares fell hours after the online retail giant reported slowing online sales growth in the second quarter, adding that price-conscious consumers were acting cautiously.
Amazon’s online store sales rose 5% in Q2 to $55.4 billion, compared with 7% growth in Q1. The company also provided Q3 revenue guidance of $154-158.5 billion, below expectations of $158.2 billion.
CFO Brian Olsavsky told reporters on an earnings call that consumers “remain cautious about reducing their spending”. “They are looking for deals”he added, noting that lower-priced products were selling quickly.
That news overshadowed generally positive results, with second-quarter profit and cloud computing sales both beating analysts’ estimates. Amazon shares fell nearly 7% in after-hours trading but were still up more than 20% year to date.
4. Oil
Oil prices were virtually flat on Friday (Aug. 2) but were on track for a fourth straight week of losses amid growing concerns over slowing economic growth.
At 7:58 a.m. ET, U.S. crude futures (WTI) were up 0.03% at $76.33 per barrel, while the Brent contract was up 0.05% at $79.56 per barrel.
Both benchmark indexes have fallen about 8% in the past four weeks as disappointing economic data from top oil importer China. Surveys showing weaker factory activity in Asia, Europe and the United States have added to concerns about weak global economic growth, weighing on oil consumption.
Weak economic sentiment has caused markets to largely ignore heightened tensions in the Middle East following the assassination of a Hamas leader in Iran earlier in the week.
OPEC+ (Organization of the Petroleum Exporting Countries and its allies) made no changes to its production policies after an online meeting on Thursday (August 1), reiterating that it could pause plans to increase output from October.
5. Dollar soars
Breaking barriers once again, the dollar surpassed R$5.70, with investors cautious about the global scenario and the statement from the Copom (Monetary Policy Committee) of the Brazilian Central Bank. The American currency continued to appreciate against the real and reached its highest price since December 2021.
On Thursday (August 1), the dollar’s closing price reached R$5.73 for sale, an increase of 1.43%. Other currencies were affected, such as the Chilean peso, the Mexican peso, and risk assets on the stock exchange. In 2024, the US currency has already gained 18.24% against the real, amid fiscal and interest rate uncertainties in the US.
Among the reasons for the risk aversion were tensions over a possible escalation of conflicts in the Middle East, with the assassination of Hamas leader Ismail Haniyeh in Tehran, the capital of Iran. In addition to the external scenario, the market was looking for a signal from Copom that it could raise interest rates if necessary, but the committee left the next steps open.
Some analysts therefore understood that the monetary authority had not been tough enough in the face of unanchored inflationary expectations.
At 7:58 am (Brasília time), the EWZ ETF (NYSE: EWZ) was down 0.26% in pre-market trading.
With information from Investing Brazil.
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