North American Morning Briefing : Retail Sales, Bank Earnings in Spotlight

OPENING CALL

Stock futures and bond yields edged lower on Tuesday as traders awaited a retail sales report that may give a clue to how consumers are coping with interest rates at 23-year highs.

Investors are keen to see if June's retail sales report, due at 8:30 a.m., provides further evidence that the U.S. economy is cooling and thus increases the chances of an interest rate cut by the Federal Reserve in coming months.

After month-on-month retail sales rose just 0.1% in May, economists expect a 0.4% contraction last month, partly reflecting fewer hours being worked in the sector.

"The data are currently aligned in a way that supports a rate cut, but Powell and the Fed clearly do not think that they have enough time before the next meeting to send a clear signal to the markets," Jefferies said.

"Given the uncertainty in the outlook due to weakening credit conditions, a slowing labor market, and massive political uncertainty on both of the top lines of the ballot, the Fed should certainly start thinking about pulling back on their restrictive policy," Jefferies added.

Premarket Movers

Match Group rose 7.8% after The Wall Street Journal reported activist investor Starboard Value has built a stake of more than 6.5% and is pushing for a possible sale if a turnaround isn't successful.

Tesla was up 1.4%. Shares rose 1.8% on Monday after Elon Musk endorsed Trump in the race for the White House.

Trump Media & Technology fell 9.2% after the company filed for the resale of nearly 38 million common shares. The stock finished with a gain on Monday of 31%.

Expected Earnings

Bank of America rose 0.3%. It's expected by Wall Street to post declines in profit and net interest income when the bank reports second-quarter earnings before the stock market opens.

UnitedHealth rose 0.7% ahead of its second-quarter earnings report, Morgan Stanley gained 0.7%, and Charles Schwab dipped slighty.

Postmarket Movers

Eton Pharmaceuticals said the FDA accepted its new drug application for ET-400, a formulation of hydrocortisone oral solution. Shares rose 11%.

Watch For:

Retail Sales for June; Canada Housing Starts for June; Canada CPI for June; earnings from Bank of America, Morgan Stanley, UnitedHealth

Today's Headlines/Must Reads:

-How Wall Street Keeps Absorbing America's Borrowing Binge

-Party Revolt Against Biden Quiets, but Re-Election Looks Tougher

-China Puts Power of State Behind AI-and Risks Strangling It

MARKET WRAPS

Forex:

Increased chances of Donald Trump winning the presidential election are helping the dollar to recover from last week's falls, MUFG said, with the prospects of trade tariffs and lower taxes lifting longer-dated Treasury yields.

However, the boost to the dollar is limited by the potential for an interest-rate cut in September after Jerome Powell pointed to slowing inflation and a cooling labor market.

"Even if Donald Trump is re-elected in November it will not prevent the Fed from cutting rates," MUFG said.

ING said markets assume a Trump victory would bring expansive fiscal policy, lifting long-dated Treasury yields and the dollar.

"If markets continue to price in a Trump reelection effect into bond and FX markets, the balance of risks is tilted to the upside in the near term for the greenback."

MUFG said investors are likely to sell emerging-market currencies as they anticipate an increasing likelihood of Donald Trump being re-elected president.

Asian currencies will be the most vulnerable, alongside the Mexican peso and Brazilian real.

BNP Paribas Markets 360 maintains a positive view on sterling following last week's stronger-than-expected U.K. growth data and balanced speech from Bank of England chief economist Huw Pill.

"The bar for inflation and employment data released this week to be weak enough for the BOE to strike a more dovish tone may be high."

Politics is another positive, as Labour's landslide election victory ushers in a period of political stability, which should bode well for sterling, BNP said.

Bonds:

The Treasury yield curve is steepening, primarily led by the long end, as the chances for a Donald Trump presidency spike, putting fiscal concerns high on the market's agenda, Commerzbank Research said.

Energy:

Oil prices edged lower on concerns over China's demand outlook and despite dovish comments from Powell ramping up bets for a September rate cut.

China's weaker-than-expected economic data and soft oil imports in June were weighing on market sentiment, while a stronger dollar reduced investor appetite.

However, losses were limited by growing optimism over interest-rate cuts after Powell suggested the central bank has gained greater confidence that inflation is moving toward its 2% goal.

"Powell's comments in Washington were expectedly dovish. Cuts are coming, " Peak Trading Research said.

Metals:

Gold futures rose in a delayed bullish reaction to the attempted assassination of Donald Trump.

MKS Pamp said overall, U.S. and global political uncertainty is rising but remains underpriced.

JPMorgan said as of Friday, inflows into gold markets totaled around $10.9 billion on-week. It's bullish on gold into year-end, seeing prices rising towards $2,500 in the fourth quarter.

Phillip Nova said gold prices might push toward record highs with Fed rate cuts now in sight and as uncertainty over U.S. elections increase safe-haven flows toward bullion. It said gold might consolidate in the low $2,400s ahead of U.S. retail data later Tuesday.

TODAY'S TOP HEADLINES

Wall Street Has a New Way of Looking at the Stock Market. Here's What to Know.

The S&P 500 has long been a stand-in for "the stock market" among investors. But with the Magnificent Seven tech stocks playing such an outsize role, more people are talking about-and putting money behind-an alternative version.

That could be a smart move it recent market trends continue.

Abolish the Federal Reserve? Here's What Conservatives' Project 2025 Would Do.

A widely circulated conservative policy platform for the next presidential administration would put major constraints on the Federal Reserve's mandate and monetary policy tools.

The conservative Heritage Foundation think tank's so-called Project 2025's primary recommendations for the Fed include a unitary focus on controlling inflation, winding down its balance sheet, and ending its lender-of-last-resort function. Further proposals would return the U.S. to a gold standard or abolish the Fed entirely.

Japan, U.S. Banks Back Atop Asia Investment Banking

Japanese and U.S. banks have returned to the top of investment banking in Asia, helped by a raft of deals in Tokyo and Mumbai at a time when Chinese rivals are saddled with a stagnant home market.

Morgan Stanley sprang back to the top spot in Asian investment banking revenue in the first half of 2024, from fifth a year ago, while Nomura jumped seven places to second, according to data from Dealogic. Five other U.S. and Japanese banks made the top 10.

Elon Musk Has Said He Is Committing Around $45 Million a Month to a New Pro-Trump Super PAC

Elon Musk has said he plans to commit around $45 million a month to a new super political-action committee backing former President Donald Trump's presidential run, according to people familiar with the matter.

Other backers of the group, called America PAC, include Palantir Technologies co-founder Joe Lonsdale, the Winklevoss twins, former U.S. ambassador to Canada Kelly Craft and her husband, Joe Craft, who is chief executive of coal producer Alliance Resource Partners.

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Earnings:

None Scheduled

Economic Calendar (ET):

0815 Jun Housing Starts

0830 Jun CPI

Stocks to Watch:

Champion Iron Workforce Gradually Returning to Bloom Lake Mine Following Nearby Forest Fires

Silvercorp Metals Sees 1Q Rev About C$72M; 1Q Inventory Stockpile Ores Amounted to 59,293 Tonnes Not Yet Processed Due to Mill Capacity Constraints; Ore Mined 341,927 Tonnes in 1Q; Ore Milled 307,696 Tonnes in 1Q

Expected Major Events for Tuesday

04:30/JPN: May Tertiary Industry Index

04:30/JPN: May Revised Retail Sales

08:00/ITA: Jun CPI

09:00/FRA: May Balance of payments

09:00/ITA: May Foreign Trade EU

09:05/GER: Jul ZEW Indicator of Economic Sentiment

12:15/CAN: Jun Housing Starts

12:30/US: Jun Import & Export Price Indexes

12:30/US: Jun Advance Monthly Sales for Retail & Food Services

12:30/CAN: Jun CPI

12:55/US: 07/13 Johnson Redbook Retail Sales Index

14:00/US: May Manufacturing & Trade: Inventories & Sales

14:00/US: Jul NAHB Housing Market Index

20:30/US: API Weekly Statistical Bulletin

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Tuesday

Aehr Test Systems (AEHR) is expected to report for 4Q.

AmeriServ Financial Inc (ASRV) is expected to report for 2Q.

AngioDynamics Inc (ANGO) is expected to report $-0.29 for 4Q.

Bank First Corp (BFC) is expected to report $1.44 for 2Q.

Bank of America Corp (BAC) is expected to report $0.80 for 2Q.

Barrick Gold Corp (ABX.T,GOLD) is expected to report for 2Q.

BowFlex Inc (BFXXQ) is expected to report $-0.06 for 4Q.

Cambridge Bancorp (CATC) is expected to report $1.03 for 2Q.

Charles Schwab Corp (SCHW) is expected to report $0.64 for 2Q.

Drive Shack Inc (DSHK) is expected to report $-0.06 for 1Q.

Equity Bancshares Inc (EQBK) is expected to report $0.92 for 2Q.

First Bancorp Inc (FNLC) is expected to report for 2Q.

Franklin Resources Inc (BEN) is expected to report.

Fulton Financial Corp (FULT) is expected to report $0.13 for 2Q.

Great Southern Bancorp Inc (GSBC) is expected to report $1.21 for 2Q.

Hancock Whitney Corp (HWC) is expected to report $1.20 for 2Q.

Home Federal Bancorp Inc of Louisiana (HFBL) is expected to report for 4Q.

Interactive Brokers Group Inc (IBKR) is expected to report $1.73 for 2Q.

(MORE TO FOLLOW) Dow Jones Newswires

07-16-24 0616ET