Morning Minutes

Stock Rebound Continues Amid Mixed Earnings and Powell Anticipation




The stock market bounce which began yesterday has continued overnight and into this morning. US index futures are up 0.3%-0.7%, adding to yesterday’s gains of 0.2%-0.4%. Asia Pacific market action was positive, particularly for the Hang Seng which soared 3.6%. In Europe today, the Dax is up 0.3% and the FTSE is up 0.2%, as Germany reported an upward revision to Q2 GDP numbers (1.7% vs street 1.4%).

The US 10-year and 30-year treasury note yields are holding steady this morning near 3.10% and 3.30% respectively as investors await tomorrow’s big Jackson Hole speech by Fed Chair Powell. In late July, the central bank leader helped to spark the start of the recent market rebound by making less hawkish than feared comments after the last FOMC meeting. Since then, however, other Fed leaders have been trying to talk back the dovish market response to his neutral comments with a series of hawkish statements. The Jackson Hole conference has historically been a forum used by Fed leaders to set the tone for monetary policy and with leaders of other countries’ central banks expected to attend, his comments could be particularly significant in the context of the wider global fight against inflation.

There are still a number of key economic announcements ahead of the speech. US Q2 GDP was revised upward to a smaller decline (-0.6% vs previous -0.9% and street -0.8%). The inflation component of GDP, however, was also revised upward (9.0% vs street 8.7% and previous 8.9%). Overall, these numbers suggest ongoing stagflation and have not had much of an impact on trading so far. US weekly jobless claims (243K vs street 253K) were better than expected. Tomorrow morning brings monthly Core PCE inflation along with US personal income and personal spending ahead of Powell’s speech at 10:00 am EDT.

Earnings reports overnight and this morning have been mixed. A rough start to Canadian bank earnings week has been offset a bit this morning by better than expected results from TD Bank ($2.09 vs street $2.04), and CIBC ($1.85 vs street $1.83) both beating analyst expectations. Running themes of weak capital markets results and increasing loan loss provisions continued, however, to run in the background. In the US, Nvidia missed badly on both EPS ($0.51 vs street $1.26), and revenues ($6.7B vs street $8.1B). Nvidia is down 3.1% in premarket action with management blaming a slowdown in demand for gaming graphics cards for the shortfall.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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