US earnings poised for downgrades as strong $US bites

U.S. equities wavered Monday, as traders braced for the busiest week of corporate earnings, as well as a likely rate hike from the Federal Reserve. Monday kicked off the final week of trading for the month of July – and perhaps the most important week of the summer — with the Fed meeting and GDP data on deck.

The S&P 500 added 0.1 per cent, closing at 3,966.84. The Dow Jones Industrial Average climbed 90.75 points, or 0.3 per cent, to 31,990.04. The tech-heavy Nasdaq Composite lagged, sliding 0.4 per cent to 11,782.67. All of the major averages are on track for their best month of the year.

Almost a third of the S&P 500 are set to report quarterly earnings this week as well, including Apple, Alphabet and Microsoft. This all comes as investors fret about the potential of an economic recession.

One strategist said, “Investors likely believe Thursday’s GDP report will show a second quarter of decline, which is the unofficial signal of recession. While the Fed will probably announce a 75-basis-point rate hike on Wednesday, they will offer a more moderate tone towards further rate increases. We see this counter-trend rally continuing in the near term.”

Tech stocks fell Monday on the heels of a warning by Snap, which reported disappointing earnings last week causing investors to worry about declining digital ad spending in the current economic climate. This continues to cast a shadow across social media platforms.

On the flip side, energy stocks were the best performing sector as Oil prices rose over 2.1 per cent on Monday, bolstered by supply fears, and a dip in the U.S. dollar.

Chevron was the top gainer in the Dow, up nearly 3 per cent.

Elsewhere, shares of Newmont Corporation slid 13.2 per cent after the mining company reported a quarterly loss that was down nearly 41 per cent from a year ago, hurt by a drop in gold prices.

After market Walmart cut its quarterly and full-year profit guidance, saying inflation was changing how its customers spend. The big-box retailer said it now expects same-store sales to rise by about 6 per cent in the second quarter, excluding fuel, as consumers buy more groceries instead of higher margin discretionary items. Shares of the company fell about 7 per cent after hours. It also dragged down other retailers’ stocks, including Target, which was down by more than 4 per cent.

The strong dollar has wiped billions of dollars off the second-quarter sales of US companies, prompting many to cut their guidance for the remainder of the year. Even if the rise of the dollar was to stop here, the strengthening we’ve seen over the past 12 months would be enough to prompt further downgrades to earnings estimates just because of the foreign exchange headwinds,” , a strategist with HSBC said.

The implications of which will play out further this week as the earning seasons unfolds with US multinationals set to report.

One Australian dollar strengthened compared to the US dollar yesterday, buying 69.60 US cent.

In commodity news

Iron ore futures are pointing to a 0.4 per cent gain.

Gold prices gave up initial gains to slip on Monday as U.S. Treasury yields edged back up, while investors positioned themselves for an expected 75-basis-point interest rate hike by the Federal Reserve later this week.

Gold lost $8.20 or 0.5 per cent to US$1737 an ounce.

Silver was down $0.29 or 1.6 per cent to US$18.33 an ounce.

Copper was up $0.50 or 0.2 per cent to US$335.45 a pound.

Bitcoin futures were down 3.9 per cent.

The SPI futures are pointing to a 0.4 per cent gain.

Figures around the globe

Across the Atlantic, European markets closed mixed. Paris added 0.3 per cent, Frankfurt fell 0.3 per cent and London’s FTSE closed 0.4 per cent higher.

Asian markets closed lower. Tokyo’s Nikkei lost 0.8 per cent, Hong Kong’s Hang Seng fell 0.2 per cent and China’s Shanghai Composite closed 0.6 per cent lower.

Yesterday, the Australian sharemarket lost 0.02 per cent to 6,790.

Dividends payable

There is one company set to pay eligible shareholders today.

BNK Banking Corporation (ASX:BBC)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.