Futures are higher thanks to an overnight retreat in oil prices (which is unlikely to hold now that Houthi rebels effectively control the entire Red Sea) and bond yields which track oil tick for tick, but the tone could quickly shift with the week’s biggest catalyst, August CPI data, due before the cash open. As of 8:00am ET, S&P and Nasdaq futures gain 0.6% with Mag 7 stocks are mostly higher, led by AMZN (+0.
6%) and META (+0.7%). In premarket trading, ORCL rose 7% as its AI cloud backlog beat estimates.
MSFT is planning to more than triple its data center capacity to ease computing shortages. WTI crude fell 3% overnight amid the report that Gulf states are weighing a meeting with Iranian officials to discuss the future of the Strait, the first gathering since the war began more than six months ago. Oil is on track for a 8% jump since Monday, and the International Energy Agency warned higher prices would hit consumption.
Bond yields are 1-3bp lower although they remain sticky near 3 year highs: 2Y and 10Y yields are 3.2bp and 2.4bp lower, respectively.
While the meeting itself was net positive for risk assets, the situation in the Middle East remains uncertain, particularly regarding renewed developments in Yemen, as Houthi rebels seize a key Yemeni port city and struck Saudi oil infrastructure. US retail diesel prices topped $6 a gallon for the first time. Commodities are mostly lower except for precious metals.
All eyes are on CPI at 8:30 am ET. We also get the September preliminary UMich sentiment (10 a.m.
), 2Q household change in net worth (12 p.m.) and August federal budget balance (2 p.
m.). Fed speakers remain in external communications blackout period ahead of Sept.
15-16 FOMC meetingIn premarket trading, Mag 7 are mostly higher (Nvidia +0.7%, Amazon +0.7%, Meta +1.
1%, Alphabet +0.5%, Tesla -0.2%, Microsoft +0.
3%, Apple -0.06%)Adobe (ADBE) falls 4% after the company gave an outlook for sales that narrowly missed analysts’ estimates, adding fuel to concerns that artificial intelligence upstarts are hurting the software maker’s business.Copart (CPRT) rises 4% as the vehicle auction firm is set to acquire all outstanding shares of ACV Auctions for $10.
50 per share in cash. ACV (ACVA) surges 44%.Kroger (KR) slips 2% after the company trimmed its annual sales guidance, a sign that fierce competition for grocery spending is weighing on the retailer.
NuScale Power (SMR) falls 4% after UBS cut its recommendation on the small modular reactor company to sell, citing sees increased competition.Oracle (ORCL) gains 6% after the software company’s results featured better-than-expected cloud revenue amid strong AI demand.In other corporate news, OpenAI is considering slowing down the development of cutting-edge artificial intelligence, with CEO Sam Altman hoping other AI companies will do the same.
activist investor Oasis Capital has nominated directors at Vail Resorts in preparation for a proxy fight, Semafor reports. Tesla China launched the new Model Y Performance All-Wheel Drive version, with a starting price of 369,000 yuan ($54,975). In deals, online vehicle auctioneer Copart is making its largest-ever acquisition in the shape of ACV Auctions, a digital marketplace to buy and sell cars, for $1.
9 billion in an all-cash transaction. Billionaire financiers Mark Walter and Todd Boehly are nearing a deal to sell their stakes in Chelsea FC to majority owner Clearlake Capital.After surging yields and a rally in crude left the S&P 500 facing its worst week since June, index futures rebounded 0.
5% as WTI crude fell 3% overnight amid the report that Gulf states are weighing a meeting with Iranian officials to discuss the future of the Strait. Oracle Corp. jumped 6% in early trading as its data center bets showed signs of paying off.
The AI trade got renewed optimism in the form of Oracle and Microsoft overnight. Oracle’s cloud infrastructure revenue jumped +121% to $7.4 billion, beating estimates.
Microsoft’s announcement of plans to more than triple data center capacity to 38 gigawatts by 2032 will give AI infrastructure bulls fresh ammunition. Second derivative improvements in Oracle’s slowing rate of change of free cash flow losses (-$5 billion versus the Street at around double the burn) on healthy operating cash flow (+184% to $23 billion) provides some relief. Meanwhile, Oracle’s ability to charge more for aging GPUs challenges fears that rapid obsolescence will erode hyperscaler returns.
There are some cracks in the AI narrative. Ramp AI highlights that AI spend declined in August among the top 1% of businesses investing in the technology. Adobe’s guidance miss resurrects questions about AI monetization for software incumbents.
Anthropic’s monthly report describing misuses of its AI model shows it blocked possible efforts to build biological weaponsTraders are bracing for Friday’s inflation print at a time when worries over oil-driven price pressures have pushed global bond yields to the highest in years. Money markets price a 67% chance of a Fed hike next week. Economists expect the consumer price index to have risen 0.
4% in August, an acceleration from a month earlier, due in part to higher gasoline costs (our full preview is here). Bloomberg Economics expects to see firmer core PCE forecasts after the CPI print, raising the odds of a Fed rate hike next week, after the PPI components feeding into the PCE deflator came in well above expectations yesterday.“We had the Oracle numbers as a reminder that there’s a tech story that’s still very, very vibrant,” said Guy Miller at Zurich Insurance.
“That’s what investors keep coming back to. We know for at least the next two quarters that earnings are going to be really robust.”August’s CPI report is probably the most anticipated in years, with Fed policymakers — particularly Waller — signaling that the decision at next week’s FOMC meeting hinges on evidence that inflation is moderating.
Bloomberg Economics leans “slightly toward the Fed holding rates steady at the September meeting. But it will be a very close call.” That said, as Goldman trader Brian Bingham lays out, Warsh is facing a bit of a dilemma“The Fed is now in the most paradoxical of all positions, beholden to a single data print and potentially reactive to the rounding on the ECO screen… Warsh told the market in his first press conference that he didn’t want to focus on the number to the right of the decimal point, but now it’s the number to the right of that one that will be the determinant.
Waller’s speech on Thursday was surprisingly and overtly dovish, confirming our view that the Board skews heavily if not unanimously dovish relative to the regional presidents, but offered little new information beyond implicitly confirming a 30bp core CPI will merit a hike. The market appears to be penciling the over/under at 25, but we struggle to see a meaningful rally on an in-line 20bp core print following this week’s jobs report; in a world where the meeting goes in pricing greater than 50% chance of a hike, the risk of the bond market interpreting a hold as a policy error seem far greater than the harm of hiking into above-target inflation.”Elsewhere, BofA strategists note there’s no sign of “panic anywhere” despite the spike in bond yields and commodities.
The pace of flows into global equities is slowing, with US stock funds registering their biggest three-week outflows since January at $14.2 billion. For the current bull market in stocks, the fear is a full-fledged hiking cycle, not a single move.
The Stoxx 600 is gaining 0.6% to staunch three days of losses. Banks, insurers and telecoms stocks are leading the way.
Here are the biggest movers Friday: Trainline shares climb as much as 8.8% after the train ticket retailer reported strong results in its first-half trading update. The group reiterated its revenue forecast for the full year and announced a new buybackC&C shares rise as much as 8.
9%, the most since 2022, after the alcoholic beverage maker de