Stocks Set to Open Higher After Biden’s Withdrawal, Earnings and Key U.S. Inflation Data in Focus

September S&P 500 E-Mini futures (ESU24)are up +0.47%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.59% this morning as investors looked past Joe Biden’s exit from his presidential reelection campaign and awaited a slew of corporate earnings reports, with a particular focus on results from “Magnificent Seven” companies Tesla and Alphabet, as well as the release of the Fed’s preferred inflation gauge later in the week.

U.S. President Joe Biden ended his reelection campaign on Sunday and endorsed Vice President Kamala Harris as the Democratic nominee. In a post on X, Biden said that he will stay in his role as President and Commander in Chief until his term ends in January 2025 and will address the nation later this week. “It has been the greatest honor of my life to serve as your President. And while it has been my intention to seek reelection, I believe it is in the best interest of my party and the country for me to stand down and to focus solely on fulfilling my duties as President for the remainder of my term,” Biden wrote. The move was widely anticipated following Biden’s poor debate performance in June and amid polls indicating a growing likelihood of an election win by former President Donald Trump in November.

In Friday’s trading session, Wall Street’s major averages closed in the red, with the benchmark S&P 500 dropping to a 2-1/2 week low and the tech-heavy Nasdaq 100 falling to a 3-1/2 week low. CrowdStrike Holdings (CRWD) plunged over -11% and was the top percentage loser on the S&P 500 and Nasdaq 100 after a botched upgrade of its cybersecurity software brought down Microsoft’s systems and triggered a global IT outage. Also, chip stocks lost ground, with Intel (INTC) sliding more than -5%, ON Semiconductor (ON) dropping over -3%, and Nvidia (NVDA) falling more than -2%. In addition, Travelers Cos. (TRV) slumped over -7% and was the top percentage loser on the Dow after reporting weaker-than-expected Q2 revenue. On the bullish side, Intuitive Surgical (ISRG) surged more than +9% and was the top percentage gainer on the S&P 500 and Nasdaq 100 after the company reported better-than-expected Q2 results. Also, Starbucks (SBUX) climbed over +6% following a report from the Wall Street Journal that activist investor Elliott Management has built a “sizeable” stake in the coffee chain.

Second-quarter earnings season kicks into high gear this week, with investors awaiting fresh reports from major companies such as Tesla (TSLA), Alphabet (GOOGL), IBM (IBM), AT&T (T), Verizon (VZ), Comcast (CMCSA), ServiceNow (NOW), Texas Instruments (TXN), NXP Semiconductors N.V. (NXPI), Spotify Technology S.A. (SPOT), General Motors (GM), Ford (F), AbbVie (ABBV), Bristol-Myers Squibb Company (BMY), Visa (V), 3M Company (MMM), Coca-Cola (KO), Lockheed Martin (LMT), American Airlines Group (AAL), and United Parcel Service (UPS).

On the economic data front, the June reading of the U.S. core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlight in the coming week. Also, market participants will be monitoring a spate of other economic data releases, including the U.S. GDP (preliminary), S&P Global Composite PMI (preliminary), S&P Global Manufacturing PMI (preliminary), S&P Global Services PMI (preliminary), Existing Home Sales, Richmond Manufacturing Index, Building Permits, Goods Trade Balance, New Home Sales, Crude Oil Inventories, Durable Goods Orders, Core Durable Goods Orders, Initial Jobless Claims, Personal Income, Personal Spending, and Michigan Consumer Sentiment.

Federal Reserve officials are in a blackout period before the Federal Open Market Committee meeting at the end of July, so they are prohibited from making public comments this week.

Meanwhile, U.S. rate futures have priced in a 4.7% chance of a 25 basis point rate cut at July’s monetary policy meeting and a 91.7% probability of a 25 basis point rate cut at the conclusion of the Fed’s September meeting.

The U.S. economic data slate is mainly empty on Monday.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.236%, down -0.07%

The Euro Stoxx 50 futures are up +1.34% this morning, recovering from significant losses in the previous session, while investors assessed the impact of President Joe Biden’s withdrawal from the U.S. presidential election race. Construction and materials stocks outperformed on Monday. Meanwhile, investors are bracing for a busy week of earnings reports from major European lenders such as Deutsche Bank, Lloyds Banking Group, BNP Paribas, Banco Santander, and UniCredit. In corporate news, Ryanair Holdings Plc (RYA.I.DX) plunged over -12% after the budget airline reported a 46% year-over-year decline in its first-quarter profit after tax and stated that fares would be lower than anticipated during the summer months. At the same time, Belimo Holding Ag (BEAN.Z.IX) surged more than +11% after the Swiss heating and ventilation solutions maker lifted its sales guidance.

European Central Bank policymaker Peter Kazimir suggested on Monday that there could be two additional interest rate cuts by the end of the year if data justified them. “The doors remain open to additional easing should the environment warrant and justify such action,” Kazimir said in a blog post. “Financial markets are betting on two more rate cuts before the year ends. While this isn’t entirely misplaced, it should not be taken as a given or a baseline scenario.”

The European economic data slate is largely empty on Monday.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.61% and Japan’s Nikkei 225 Stock Index (NIK) closed down -1.16%.

China’s Shanghai Composite Index closed lower today as President Xi Jinping’s policy blueprint disappointed investors despite the People’s Bank of China’s unexpected rate cut. Energy stocks led the declines on Monday. China issued a policy document over the weekend outlining familiar goals, such as developing advanced industries and improving the business environment, without signaling any major policy shift. Meanwhile, Chinese bond yields fell on Monday after the central bank unexpectedly lowered a key policy rate to bolster the nation’s struggling economy. The People’s Bank of China cut the 7-day reverse repo rate to 1.70% from 1.80%, stating that it aimed to “step up financial support for the real economy.” Minutes later, China reduced benchmark lending rates by the same margin at the monthly fixing. The one-year loan prime rate was cut to 3.35% from 3.45%, while the five-year LPR was trimmed to 3.85% from 3.95%. In other news, China’s Ministry of Commerce announced on Monday that it will carry out a final review of anti-dumping measures on imports of stainless steel billets and hot-rolled stainless steel plates from the European Union, Britain, South Korea, and Indonesia. In corporate news, Pharmaron surged over +6% in Hong Kong after the clinical services group said it anticipates H1 net profit to increase between 34% and 45% year-over-year.

Japan’s Nikkei 225 Stock Index closed lower today amid ongoing uncertainty about the Bank of Japan’s policy outlook. Electronics and heavy industry stocks underperformed on Monday. Meanwhile, Japan’s 10-year government bond yield climbed on Monday, recovering losses from last week amid rising expectations that the Bank of Japan would hike interest rates again at its July policy meeting. The BOJ has been under constant pressure to raise rates as a significant gap between domestic and foreign yields pushed the yen to a 38-year low. Prime Minister Fumio Kishida also stated that normalizing the central bank’s monetary policy would aid Japan’s shift to a growth-driven economy. In corporate news, Shinwa Co. Ltd. dropped more than -2% after reporting a 36.2% decline in its profit to 1.81 billion yen for the nine months ending May 31. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +5.48% to 20.60.

Pre-Market U.S. Stock Movers

Nvidia (NVDA) gained more than +1% in pre-market trading after Reuters reported that the company is developing a version of its new flagship AI chips for the China market that would comply with existing U.S. export controls.

CrowdStrike Holdings (CRWD) slid over -3% in pre-market trading after Guggenheim downgraded the stock to Neutral from Buy.

Fiserv (FI) rose more than +1% in pre-market trading after Morgan Stanley upgraded the stock to Overweight from Equal Weight with a price target of $175.

Lennar (LEN) fell over -1% in pre-market trading after Goldman Sachs downgraded the stock to Neutral from Buy.

C.H. Robinson (CHRW) advanced more than +2% in pre-market trading after BofA upgraded the stock to Buy from Underperform with a $99 price target.

American Airlines (AAL) dropped over -1% in pre-market trading after Bernstein downgraded the stock to Market Perform from Outperform.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - July 22nd

Verizon (VZ), Cadence Design (CDNS), NXP Semiconductors (NXPI), Truist Financial Corp (TFC), IQVIA Holdings (IQV), Nucor (NUE), Brown&Brown (BRO), Alexandria RE (ARE), WR Berkley (WRB), Medpace Holdings (MEDP), Equity Lifestyle (ELS), Crown (CCK), Simpson Manufacturing (SSD), AGNC Invest (AGNC), Zions (ZION), Cleveland-Cliffs (CLF), BOK Financial (BOKF), RLI (RLI), Cadence Bancorp (CADE), Cathay (CATY), Agilysys (AGYS), Bank of Hawaii (BOH), Calix (CALX), NBT Bancorp (NBTB), Bank of N.T. Butterfield Son (NTB), Metals Acquisition (MTAL), Metals Acquisition (MTAL), Dynex Capital (DX), Hbt Fin (HBT), KKR Real Estate (KREF), TrustCo Bank NY (TRST), Washington Trust (WASH), SmartFinancial Inc (SMBK), RBB Bancorp (RBB).

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