Market snapshot: investors brace for a barrage of results and updates

Investors are bracing for a barrage of news flow today, with five major US banks reporting, an inflation update and comments from the new Federal Reserve chair – in addition to assessing the latest developments in the Strait of Hormuz.

At present, both the US and Iran are claiming control of the waterway, and US President Donald Trump’s latest announcement that he was reinstating a blockade sent the oil price almost 10% higher to $85 per barrel amid renewed strikes between the warring parties. The implications will broaden out further with the latest Consumer Price Index (PRI) print, the Fed’s preferred measure on inflation, with a headline rise of 3.8% expected year-on-year. In turn, Chair Kevin Warsh will appear before the House Financial Services Committee today, where the bank’s current thinking on monetary policy will be in the spotlight. His testimony will follow hawkish comments yesterday from Fed Governor Christopher Waller, who implied the need for an interest rate hike due to inflation remaining above target and the labour market in a relatively stable condition, leading to a consensus which is increasingly moving towards a rise in rates as early as this month.

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Meanwhile, the banks paused for breath yesterday with shares drifting lower, ahead of a day which will contain updates from a slew of big names including The Goldman Sachs Group Inc (NYSE:GS), Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C). The season generally is facing some stretching expectations, with profit growth expected to exceed 20% for the second quarter in a row. Despite the more recent weakness across the major indices, they remain close to record highs and earnings will need to be powerful to maintain those levels on a valuation basis.

Indeed, tech is set to provide the fireworks over the next few weeks. The capital expenditure explosion is threatening not only to erode cash generation, with an estimated $230 billion (£172 billion) having been spent so far this year, but also investor confidence in terms of the ultimate results which have yet to filter through. Semiconductor names have been under scrutiny of late, and another testing session saw falls of 4% for Micron Technology Inc (NASDAQ:MU), 6% for Intel Corp (NASDAQ:INTC) and 3.5% for NVIDIA Corp (NASDAQ:NVDA), the latter being the single heaviest drag on the benchmark S&P 500. SK Hynix Inc ADR (NASDAQ:SKHY), meanwhile, fell by 9% on Nasdaq following the South Korean chipmaker’s debut which saw its shares pop by 13% on Friday.

Leading into a day when investors have their work cut out assessing corporate and economic results and outlook, the main indices have a decent level of insurance against the many potential pitfalls which could come. In the year to date, the Dow Jones is ahead by 9.2%, with gains of 9.8% and 11.3% for the S&P 500 and Nasdaq respectively providing underlying support.

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Asian markets generally drifted, especially those which have seen substantial rises on the tech trade such as Japan and South Korea. An exception to the blip was the Shanghai Composite, which was buoyed by a 27% increase in June Chinese exports, as the adoption of AI resulted in strong demand for chips and associated technology, leading to an increase in the country’s trade surplus to $125.6 billion, as compared to a level of $105.4 billion in May. The region remains on the radar for many diversified investors, which is allied yet one step removed from the eye of the storm in the US.

The oil price bounce lifted the index heavyweights Shell (LSE:SHEL) and BP (LSE:BP.), with the latter seeing the additional benefit of a sturdy trading update. There were also gains for Glencore (LSE:GLEN) and Anglo American (LSE:AAL) as each were boosted by broker upgrades, with diversified giant Rio Tinto  Ordinary Shares (LSE:RIO) following closely behind.

These moves reduced an otherwise tepid opening for the FTSE 100 overall, with International Consolidated Airlines Group SA (LSE:IAG) drooping on the oil price spike alongside a broad markdown which dragged the likes of Diageo (LSE:DGE), Whitbread (LSE:WTB) and Pearson lower, as well as Barratt Redrow (LSE:BTRW) ahead of a full-year trading update tomorrow, which is likely to reflect the ongoing difficulties within a challenged housing market. 

The premier index nonetheless remains ahead by 5.6% this year as a result of its generally robust and stable nature. The FTSE 250 continues to suffer from the domestic economic outlook, let alone the political uncertainty surrounding a change of leadership at the helm of the government, and the index opened weakly, looking to preserve some minor progress which has lifted the index by 3.7% in the year to date.