Pre-market trading of the three major stock index futures in the US rose on Tuesday, August 6th. At the time of publication, Dow futures rose by 0.71%, S&P 500 index futures rose by 0.85%, and Nasdaq futures rose by 0.86%.
Pre-market market trends
1. Pre-market trading of the three major stock index futures in the US rose on Tuesday, August 6th. At the time of publication, Dow futures rose by 0.71%, S&P 500 index futures rose by 0.85%, and Nasdaq futures rose by 0.86%.
2. At the time of publication, the DAX index rose by 0.04%, the FTSE 100 index fell by 0.31%, and the CAC40 index fell by 0.44% in France. The European Stoxx 50 index fell by 0.14%.
3. At the time of publication, WTI crude oil rose by 0.12%, reaching $73.03 per barrel. Brent crude oil rose by 0.01%, reaching $76.31 per barrel.
Market News
Behind the global stock market crash: arbitrage trading is the culprit, and is the US just a scapegoat for the hard landing? Analysts said that the recent global stock market crash mostly reflected a decrease in arbitrage trading among investors looking to increase bets, rather than a drastic change in the US economic outlook. They added that although weak US employment data weaker than expected on Friday was a catalyst for market sell-offs, the main cause of such volatility was unlikely to be the reports themselves. Instead, the answer may lie in further large-scale arbitrage trading closing. Arbitrage investors borrow money from economies with lower interest rates, such as Japan or Switzerland, to invest in high-yielding assets elsewhere. According to BlueBay Asset Management CIO Mark Dowding, "in our assessment, this (market sell-off) is largely due to position surrender, as many macro funds have made mistakes in trading and triggered stops, beginning with foreign exchange and yen." He added: "We have not seen any data showing that the economy is facing a hard landing."
Big warning from Morgan Stanley strategist: S&P 500 is overvalued by 10%, and the Federal Reserve's interest rate cuts cannot solve the stock market's dilemma. Mike Wilson, Morgan Stanley's chief US stock strategist, expressed his views on the market's prospects. He said that the market might remain fragile in the short term before it receives more optimistic growth data or more policy support from the Federal Reserve, but he predicted that neither would happen quickly. Wilson believed that the market might gain some support from low valuations, but the current price does not reflect this yet. The S&P 500 index is still trading at 20 times the forecasted 12-month earnings. He pointed out that assuming a soft landing for the economy, a fair value multiple close to 19 times means that the stock price is actually not cheap until it reaches 17-18 times, which is more than 10% higher than the current trading price. Wilson believes that the dilemma faced by the Federal Reserve is that the next meeting will be held six weeks later, which feels like a long time ago for the current market trading situation. The market often lacks patience, so he expects the market to continue to be highly volatile before the Federal Reserve meets market expectations. Of course, on the other hand, there is the possibility of the Federal Reserve cutting interest rates during the meeting; however, Wilson believes that this may exacerbate concerns about economic growth in the market.
The Federal Reserve is accused of exceeding its dual mandate, and Professor Wharton urges an emergency interest rate cut of 75 basis points to save the market. Jeremy Siegel, a professor at Wharton School of Business, issued an urgent appeal on Monday, advocating that the Federal Reserve take action to cut interest rates by 75 basis points before its September meeting. Siegel believes that the Federal Reserve has achieved its policy objectives given the current inflation and employment situation. Siegel emphasized that the current federal funds rate should be between 3.5% and 4%, based on his analysis at the meeting in June, when he pointed out that when the inflation rate dropped to 2% and the unemployment rate reached 4.2%, the long-term federal funds rate should be 2.8%. He pointed out that Friday's employment data showed that the unemployment rate had reached 4.3% and the inflation rate had dropped to 2.5%, approaching the Federal Reserve's target. Siegel believes that given these developments, the Federal Reserve's decision to keep interest rates unchanged is "completely unreasonable." Siegel criticized the Federal Reserve's current policy as slow in response, pointing out that it was "far behind the situation" and describing the Federal Reserve's current posture as "watchful waiting."
Goldman Sachs: Buying after a 5% drop in the S&P 500 can be profitable without loss. Goldman Sachs' analysis of data from the past 40 years shows that buying US stocks after a sharp drop in the past month usually profits. According to data given by Goldman Sachs strategist team led by David Kostin, the median ROI of the S&P 500 index in the three months after dropping 5% from recent highs since 1980 is 6%, and the S&P 500 index has fallen by 8.5% compared to the mid-July high. David Kostin said in a report that a 10% correction is often an attractive buying opportunity, although tracking records show that the rebound is not as strong as after a slight drop. The bank's research shows that in 84% of cases, the ROI after a 5% drop in the US stock market is positive.
After experiencing a sharp decline in global markets, the gold price has stabilized, and Goldman Sachs is bullish that the gold price will rise to $2,700 next year. On Monday, due to some traders cutting their holdings to meet potential margin requirements, the gold price stabilized after being dragged down by the global slump. Although gold is traditionally seen as a safe haven, gold prices usually fall during market turmoil, followed by a rebound. Daan Struyven, an analyst at Goldman Sachs, said in a report that “long gold positions currently offer portfolios the greatest hedge value in commodities,” and the bank maintains that the price of gold will rise to $2,700 per ounce in 2025. They stated that gold can buffer geopolitical shocks such as war, trade tariffs, and US sovereign debt concerns.
Individual stock news
Palantir, the software giant, accelerates revenue growth as an AI revenue engine, with revenue surging 27%. According to the financial report, Palantir Q2 revenue increased 27% YoY to $678 million, better than the average analyst's forecast of $652.8 million; net income increased 20% YoY to $134 million, better than the average analyst's forecast of $82.8 million; adjusted EBITDA was $262 million, a YoY increase of 39%. In terms of performance outlook, Palantir raised its total revenue guidance for 2024 to between $2.74 billion and $2.75 billion, better than the analyst's general expectation of $2.7 billion; the company also raised its adjusted operating margin guidance for this year to $966 million to $974 million, while the analyst's general expectation was $883 million. The company's strong Q2 performance and substantial increase in annual profit outlook are mainly due to the continuous strong demand for Palantir's artificial intelligence software products from global government institutions and major enterprises. At the time of writing, Palantir is up more than 10% in pre-market trading on Tuesday.
Lucid (LCID.US) rises more than 11% in pre-market trading after getting new investment of $1.5 billion from PIF and overachieving Q2 revenue. Data shows that Lucid's Q2 revenue was $200.6 million, better than the average analyst's forecast of $185.8 million; but the adjusted loss per share was $0.29, higher than the analyst's expected loss per share of $0.27. In addition, Lucid is set to receive up to $1.5 billion in cash injection from a subsidiary of Saudi Arabia's Public Investment Fund (PIF), its largest investor. Lucid said it plans to use the new funds for general business purposes, including capital expenditures and operating capital. The funds are expected to provide the manufacturer with funding until the fourth quarter of next year.
Uber Technologies (UBER.US) Q2 revenue rose 15.9% YoY to $10.7 billion, exceeding market expectations. Its comprehensive mobile and delivery revenue rose 19% YoY to $9.4 billion, a 20% increase calculated at a fixed exchange rate. The stock rose 6% in pre-market trading, driving its peer Lyft up nearly 3%.
US solar giant SunPower (SPWR.US) files for bankruptcy and steadily reduces its business. The rooftop solar panel company submitted a Chapter 11 bankruptcy application to the Delaware bankruptcy court, listing assets and liabilities of between $1 billion and $10 billion. Airbus (TTE.US), the French energy giant, is among its major shareholders. According to a statement late on Monday, the company also agreed to sell assets such as Blue Raven Solar's installation division and its new residential business to Complete Solaria Inc. (CSLR.US) for $45 million. The company is requesting that the court approve the transaction by the end of September. At the time of writing, SunPower plummeted more than 40% in pre-market trading on Tuesday.
Caterpillar (CAT.US) once again demonstrated its pricing power: Q2 earnings exceeded expectations, and it said that full-year profit would be higher than expected. The company's Q2 performance exceeded expectations of analysts, thanks to price increases offsetting the impact of declining sales volume. Data shows that the company's Q2 adjusted EPS was $5.99, higher than the average analyst's forecast of $5.54; revenue was $16.69 billion, a YoY decline of 3.5%, slightly higher than expected. Rising equipment prices have shielded the company's profits from rising manufacturing costs, and price increases in the second quarter have brought $578 million in favorable impact to profits. Although sales have declined, Caterpillar's operating margin remains strong at 20.9%, slightly lower than 21.1% in Q2 2023; adjusted operating margin has risen from 21.3% in the same period last year to 22.4%. Looking ahead, the company said that adjusted full-year profit will be higher than its previous guidance, and the profit margin will exceed its target range. Analysts currently expect sales and revenue in the second half of the year to be slightly higher than the first half, but total sales for the year are expected to decline. At the time of writing, Caterpillar rose more than 4% in pre-market trading on Tuesday.
Tuniu (TOUR.US) Q2 net profit soared 194% year-on-year, and it is expected that Q3 net income will increase by at most 8% year-on-year. In the second quarter of 2024, Tuniu's net income was RMB 0.117 billion, a year-on-year increase of 17%. Among them, the income of packaged tour products was nearly RMB 90 million, a year-on-year increase of 29%; net income was RMB 43 million, a year-on-year increase of 194%. The net profit in the same period of 2023 was RMB 0.22 million. In the second quarter of this year, Tuniu's live transaction amount and verification amount both increased by more than 200% year-on-year. As of the end of May this year, Tuniu's live transaction amount and verification amount have exceeded the full-year 2023. The contribution of the live broadcast channel to the company's overall business continues to increase. Tuniu expects net income in the third quarter of this year to be between RMB 0.1835 billion and RMB 0.1924 billion, a year-on-year increase of 3% to 8%.
Important economic data and events notice
00:00 the next day Beijing Time, EIA published the Monthly Short-Term Energy Outlook Report.
API crude oil inventory changes in the United States until the week ending on August 2nd, Beijing time, 04:30.
Performance forecast.
Wednesday morning: Super Micro Computer (SMCI.US), Amgen (AMGN.US), Airbnb (ABNB.US), Fortinet (FTNT.US).
Wednesday pre-market: Novo Nordisk (NVO.US), Sony (SONY.US), Honda (HMC.US), Disney(DIS.US), Shopify (SHOP.US), Lyft (LYFT.US).