Markets Adjusting to Stubborn Inflation and Election Noise
5 Things to Know Before the Stock Market Opens
Federal Reserve’s Stance on Interest Rates
Here's what investors need to know as markets prepare to open:
1. Levi’s Sinks as Sales Narrowly Miss Expectations
Shares of Levi Strauss & Co. (LEVI) are plummeting 15% in premarket trading after the jeans maker reported quarterly revenue that narrowly missed analyst expectations. Levi’s reported adjusted earnings per share (EPS) of 16 cents, beating expectations, but its $1.44 billion in revenue fell just below analyst forecasts. The company attributed the revenue miss to weak sales at its Docker’s unit and unfavorable foreign exchange rates. Despite the miss, Levi’s raised its dividend to 13 cents per share, the first increase in six quarters.
2. Micron Drops on Weak Revenue Guidance
Micron Technology (MU) shares are down more than 5% in premarket trading after the chipmaker issued weaker-than-expected revenue guidance. Although Micron’s third-quarter revenue of $6.81 billion exceeded analyst expectations, its net income of $332 million was lower than anticipated. The company projected $7.6 billion in revenue for the final quarter of the 2024 fiscal year, in line with analyst projections, though some analysts suggested investor expectations were higher.
3. Investors Looking to See Earnings Growth at Nike
Nike (NKE) shares are steady ahead of its earnings report, scheduled to be released after markets close today. Analysts expect Nike to show improvement in both sales and earnings for its third-quarter report, despite the company projecting a low-single-digit revenue drop in the first half of fiscal 2025. Nike has pointed to macroeconomic headwinds, particularly in Europe, the Middle East, Africa (EMEA), and Greater China, and announced $2 billion in cost-cutting measures over the next three years. CEO John Donahoe has also highlighted plans to reverse underinvestment in the running shoe category.
4. Salesforce Investors to Consider Executive Pay Packages
Salesforce (CRM) investors will be watching closely as the company’s shareholder meeting on Thursday includes votes on executive pay packages and activist investor proposals. Among these proposals is a call for the separation of the CEO and chair positions, both currently held by Marc Benioff, and limitations on executive pay. Salesforce may also provide updates on its artificial intelligence (AI) progress after reporting weaker-than-expected sales in its most recent quarterly earnings report. Shares of Salesforce are down less than 0.5% in premarket trading.
5. Amazon in Focus After It Reaches $2 Trillion Market Cap
Amazon (AMZN) shares are in focus after the e-commerce giant reached a $2 trillion market capitalization on Wednesday. Amazon joins four other tech companies—Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOGL)—in reaching this milestone. Amazon’s shares have been buoyed by spending on AI and cloud computing, and are up 0.3% in premarket trading.
Markets Adjusting to Stubborn Inflation and Election Noise
The S&P 500 has gained nearly 15% this year, but volatility could increase due to Federal Reserve policy and election-related uncertainties. Treasury yields have been volatile, influenced by inflation data and Fed officials' comments about maintaining higher interest rates. Additionally, the upcoming U.S. presidential debate and broader election cycle could impact market sentiment.
Federal Reserve’s Stance on Interest Rates
Federal Reserve officials, including Fed governor Michelle Bowman and San Francisco Fed President Mary Daly, have downplayed expectations of interest rate cuts this year. Recent global inflation data has heightened concerns, with rising inflation in Canada, the eurozone, and Australia potentially leading to further rate hikes.
Labor Market Cooling
The number of continuing unemployment claims reached 1.84 million last week, the highest since November 2021. The four-week moving average of weekly jobless claims increased to 236,000, signaling a potential cooling of the labor market. LPL Financial chief economist Jeffrey Roach views this as a warning sign, while Oxford Economics lead U.S. economist Nancy Vanden Houten suggests a persistent rise in claims could prompt the Fed to consider rate cuts by September.
Boeing Faces NTSB Rebuke
Boeing disclosed that missing paperwork led to a door plug issue on a 737 Max aircraft, prompting a reprimand from the National Transportation Safety Board (NTSB) for releasing non-public investigative information. The incident highlights ongoing quality control issues at Boeing's assembly lines and has drawn attention from federal investigators and regulators.
Conclusion
As investors navigate these developments, they should keep an eye on upcoming economic data, particularly the Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, and the U.S. presidential debate. These factors will provide further insights into economic forecasts and potential interest rate decisions.