By Peter Bergman (MoneyAmped.com)
Wall Street is poised to extend its recovery from Monday’s significant decline, thanks to the Bank of Japan’s decision to refrain from implementing additional interest rate increases amidst the current period of market instability. Another round of global earnings reports is underway, with all eyes turning to the latest figures from Walt Disney, the renowned entertainment powerhouse.
1. Futures continue to recover after a sharp decline
During the previous session, Wall Street broke a three-day losing skid, which resulted in the U.S. futures market seeing an upward trend. This trend built on the positive momentum observed during the previous session.
The Dow futures agreement had a rise of 242 points at 04:15 Eastern Time (08:15 GMT), which is comparable to a 0.6% increase by that time. Futures contracts on the S&P 500 index witnessed an increase of 40 points, which corresponds to a rise of 0.8%. The Nasdaq 100 futures, on the other hand, demonstrated a significant increase of 180 points, which is equivalent to a 1% increase.
The Wall Street indices experienced a strong recovery on Tuesday following a challenging start to the week. The blue-chip Dow Jones Industrial Average concluded the day with a nearly 300-point increase, representing a 0.8% rise. Additionally, both the broad-based S&P 500 and the tech-heavy Nasdaq Composite saw gains of 1%.
On Monday, the DJIA and the S&P 500 experienced their most challenging session since 2022, driven by concerns that the U.S. economy was on the verge of a recession.
On Wednesday, there are additional earnings reports to consider, including those from entertainment powerhouse Walt Disney (NYSE:DIS) [see below], CVS Health (NYSE:CVS), and Shopify (NYSE:SHOP).
In addition, Super Micro Computer (NASDAQ:SMCI) experienced a significant decline in premarket trading following the announcement of underwhelming fiscal fourth-quarter earnings. The company also revealed plans for a 10-for-1 stock split, which is scheduled to take effect at the beginning of October on a split-adjusted basis.
Airbnb (NASDAQ:ABNB) also experienced a decline in premarket trading as the house rental company projected that its third-quarter revenue would fall short of expectations. Additionally, they cautioned about shorter booking windows, indicating that travelers may need more time to delay their bookings until the last minute due to economic uncertainty.
2. Disney is set to release its third-quarter earnings report
Walt Disney is scheduled to announce its fiscal third-quarter earnings before the market opens on Wednesday. It will join a long list of major companies providing insights into the financial challenges faced by consumers.
Disney has been facing various difficulties, including a decrease in its traditional television sector, slower expansion in its parks division, and obstacles to achieving profitability in streaming.
CEO Bob Iger was reinstated in 2022 to revitalize the company and has restructured its reporting system into three main business divisions: Disney Entertainment, which encompasses its complete media and streaming portfolio; Experiences, which includes the parks business; and Sports, which comprises ESPN networks and ESPN+.
The Experiences division is projected to maintain strong growth, especially in international markets, while the media and entertainment segment may encounter notable obstacles.
3. BOJ aims to calm market concerns
On Wednesday, the Bank of Japan came to the rescue, crucially calming global market concerns following Monday’s turbulent stock market performance.
Shinichi Uchida, the deputy governor of BOJ, stated on Wednesday that the central bank has no plans to increase interest rates during periods of market instability. This suggests that the likelihood of a near-term rise in borrowing costs is minimal.
“Given the significant fluctuations in both domestic and international financial markets, it is imperative to sustain the existing levels of monetary easing for the foreseeable future,” Uchida expressed during a speech delivered to prominent business figures in Japan.
Last week, the BOJ increased rates by 15 basis points and indicated that further tightening is on the horizon. In addition to the hostile U.S. labor data that raised concerns about a recession in the most significant global economy, the yen’s trade unraveled, leading to a widespread market downturn.
According to Citi analysts, the U.S. markets were heavily impacted by this market downturn, mainly due to disappointing job market data. However, the Bank of Japan (BOJ) also added to the uncertainty, as there are concerns about whether the central bank will raise interest rates beyond its previous hike in July.
According to Citi analysts, further increases in interest rates are expected to have a detrimental effect on the market. This supports the belief that the Bank of Japan has made a sudden shift towards a more hawkish stance.
4. Global corporate earnings keep pouring in
In addition to the ongoing global earnings season, noteworthy corporate outcomes have occurred outside of Wall Street.
Shares of Novo Nordisk (NYSE:NVO) declined by 5% following the release of the Danish pharmaceutical company’s second-quarter financial results. The company reported a net profit that fell short of expectations and also revised its operating profit forecast downward.
Surprisingly, despite a significant 55% increase in sales of its highly sought-after weight loss medication, Wegovy, during the second quarter of 2024, the company still experienced a sense of letdown compared to the same period in 2023.
Novo Nordisk is encountering growing rivalry in the weight loss industry, not only from smaller enterprises but also from pharmaceutical powerhouses like Roche. Recently, Roche disclosed encouraging preliminary trial results for its obesity medication.
Puma (ETR:PUMG) shares took a significant hit, dropping by more than 10%, following the German sportswear powerhouse’s announcement that it has revised its forecast for full-year core profit. The company attributes this adjustment to the challenges posed by currency fluctuations, increased freight expenses, and the prevailing subdued consumer sentiment.
Puma has been facing challenges due to decreased consumer demand and surplus inventory at the sportswear retailers where it primarily sells its products. Additionally, it has been dealing with intense competition from larger competitors such as Adidas and Nike.
Sony (NYSE: SONY) experienced a significant increase in operating profit during the April-June quarter in Asia. Additionally, the company raised its full-year profit forecast by 3%, thanks to the strong performance of its image sensor business, which is considered a leader in the industry.
The image sensor business, a key supplier for smartphone manufacturers, experienced a significant boost in profit due to the positive effects of foreign exchange and increased sales, resulting in a nearly threefold increase.
SoftBank Group (TYO:9984) surprised investors with a loss in the June quarter, even though technology valuations were on the rise due to optimism surrounding artificial intelligence. However, the tech investment giant did announce a share buyback of 500 billion yen ($3.4 billion).
The repurchase occurs amidst increasing investor demands for the tech giant to generate value for shareholders, as its stocks are being traded at a substantial markdown compared to the overall worth of the company’s assets.
