LDN - Business

Futures slip ahead of economic data, Big Pharma results roll in

[August 01, 2023] By Johann M Cherian and Bansari Mayur Kamdar

(Reuters) -Wall Street futures edged lower on Tuesday ahead of more economic data that could clear the air on a soft landing for the U.S. economy, while investors assessed mixed earnings from pharmaceutical heavyweights Merck and Pfizer.

Merck rose 1.4% in premarket trading as it raised its full-year profit forecast after posting a smaller-than-expected second-quarter loss, while Pfizer slipped as the drugmaker fell short of Wall Street expectations for quarterly revenue.

Uber climbed 3.1% as it forecast third-quarter operating profit above Wall Street estimates, betting on a growing demand for ride hailing due to strong leisure travel trends and a gradual return to in-office work.

Caterpillar inched lower as it warned of a sequential fall in current quarter sales and margins, stoking worries that demand for its equipment may have peaked, even as it beat profit estimates.

U.S. second-quarter earnings are now expected to fall 6.4% from a year earlier, compared with a 7.9% decline estimated a week ago, as per Refinitiv data.

All eyes will be on the ISM Manufacturing survey which is expected to show that July U.S. factory activity contracted less than the month before. Labor Department's Job Openings and Labor Turnover Survey for June is also on tap.

The manufacturing and employment surveys are expected at 10 a.m. ET

"Since the release of the softer than expected June U.S. CPI inflation report, the market has been increasingly hopeful that the narrative of a soft landing for the economy will stick," said Jane Foley, head of FX strategy at Rabobank.

Wall Street ended July on a strong footing, riding on the back of better-than-expected earnings, and hopes of a soft landing for the economy that has stayed strong in the face of tighter credit conditions while inflation has cooled.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., July 20, 2023. REUTERS/Brendan McDermid/File Photo

The benchmark S&P 500 hit a more than 15-month high on Monday, and is 4.7% away from breaching its record intraday high scaled on Jan. 4, 2022.

At 06:56 a.m. ET, Dow e-minis were down 51 points, or 0.14%, S&P 500 e-minis were down 7.25 points, or 0.16%, and Nasdaq 100 e-minis were down 32.5 points, or 0.2%.

Arista Networks jumped 14.8% as the Santa Clara, California-based firm forecast quarterly revenue above estimates after delivering better-than-expected results, supported by higher demand for its cloud networking gear.

U.S.-listed shares of Chinese firms such as Bilibili and Alibaba were off 3.0% and 1.7%, respectively, after a survey showed China's factory activity swung to contraction in July, hit by sluggish market conditions at home and abroad.

Traders will also parse commentary by Chicago Fed President Austan Goolsbee, a voting member this year, for clues on the U.S. central bank's monetary policy path.

Global long/short hedge funds, which bet whether the stocks will fall or rise, were forced to unwind bearish positions that were dragging down performance in July, a Goldman Sachs report showed on Monday.

(Reporting by Johann M Cherian and Bansari Mayur Kamdar in BengaluruEditing by Vinay Dwivedi)

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