Stock market today: As earnings season kicks off, global markets retreat on weak China growth
By Elaine Kurtenbach And Matt Ott, The Associated Press on July 17, 2023.
BANGKOK – With earnings season ready to kick into high gear this week, Wall Street ticked lower early Monday after China reported weaker growth than forecast in the last quarter. Future for the S&P 500 inched down 0.2%, while the Dow Jones Industrial Average fell 0.3%. Wall Street’s expectations are low yet again heading into earnings season. Analysts are forecasting the worst drop in earnings per share for S&P 500 companies since the spring of 2020. That would mark a third straight quarter where profits sank. Such expectations are key for financial markets, because one of the biggest factors behind a stock’s price is how much profit the company earns. Wall Street nevertheless rallied hard this week thanks to rising optimism about the other major lever that sets stock prices: how much investors are willing to pay for each $1 of corporate profits. Coming up this week are results from Bank of America, Netflix, Tesla and airlines United and American. A retail sales report from the government on Tuesday could factor into the Federal Reserve’s next interest rate policy decision later this month. Two reports earlier this week showed that inflation continued to cool across the U.S. economy in June. That bolstered investors’ hopes that the Federal Reserve is close to feeling comfortable enough to halt its blistering campaign to raise interest rates. The Fed has already hiked its federal funds rate to a range of 5% to 5.25%, up from virtually zero early last year. High rates undercut inflation by slowing the economy and putting downward pressure on prices for stocks and other kinds of investments. The expectation is still for the Fed to raise rates one more time at its next meeting in two weeks. But traders are largely betting on that being the final hike of the cycle. Elsewhere, China reported its economy grew at a 6.3% annual pace in April-June, better than the 4.5% expansion in the January-March quarter but well below forecasts of over 7%. The economy is expected to slow further in coming months, though investors will be expecting moves from Beijing to prop up growth. So “the data will be viewed through the lens of how it will influence the policy decisions made at the upcoming Politburo meeting in late July,” Stephen Innes of SPI Asset Management said in a commentary. The Shanghai Composite index dropped 0.9% to 3,209.63, while markets in Japan were closed for a holiday and Hong Kong’s market was shuttered due to a typhoon. In Seoul, the Kospi shed 0.4% to 2,619.00, while Australia’s S&P/ASX 200 edged less than 0.1% lower, to 7,298.50. Bangkok’s SET gained 0.8% and the Sensex in India was up 0.5%. In a blow to global food security, Russia halted a breakthrough wartime deal on Monday that allows grain to flow from Ukraine to countries in Africa, the Middle East and Asia where hunger is a growing threat. Wheat prices jumped 3% on the announcement, though analysts don’t expect more than a temporary bump to food commodity prices because places like Russia and Brazil have ratcheted up wheat and corn exports. A Kremlin spokesman said Russia would suspend the Black Sea Grain Initiative until its demands to get its own food and fertilizer to the world are met. Ukraine and Russia are both major global suppliers of wheat, barley, sunflower oil and other affordable food products that developing nations rely on. In Europe at midday, Germany’s DAX slid 0.7% lower and the CAC 40 in Paris tumbled 1.4%. Britain’s FTSE lost 0.3%. In other trading Monday, U.S. benchmark crude oil lost 99 cents to $74.43 a barrel in electronic trading on the New York Mercantile Exchange. It lost $1.47 to $75.42 a barrel on Friday. Brent crude, the pricing basis for international trading, declined $1 to $78.87 a barrel. The dollar slipped to 138.29 Japanese yen from 138.82 yen. It has weakened recently amid speculation that the Bank of Japan might alter its ultra-lax monetary policy soon. That may shrink the gap between higher returns in the U.S. and other markets where interest rates have been hiked sharply, and Japan, where the benchmark rate has been kept at minus 0.1% for a decade. The euro rose to $1.1236 from $1.1229. On Friday, Wall Street’s latest winning week closed with a mixed finish following stronger profit reports than expected from several big U.S. companies. – – Kurtenbach reported from Bangkok; Ott reported from Silver Spring, Md. 25-24
