North American Morning Briefing: Stock Futures Edge Up Ahead of Fed Update

MARKET WRAPS

Watch For:

U.S. Interest Rate Decision; EIA Weekly Petroleum Status Report; Canada Consumer Price Index for June; McDonald's Corp. 2Q earnings; Pfizer Inc. 2Q earnings; Boeing Co. 2Q earnings; Facebook Inc. 2Q earnings; Ford Motor Co. 2Q earnings.

Opening Call:

Stock futures ticked higher Wednesday as investors awaited fresh guidance from the Federal Reserve and another batch of earning reports from the nation's biggest companies.

The stock market is hovering near all-time highs, with investors betting on strong corporate earnings, the economic rebound, and continued support from central banks' easy monetary policies. Their optimism has been tempered in recent days by concerns about the Delta variant of Covid-19, China's regulatory crackdown and the risk of persistently high inflation.

"There is a general fishing for direction right now," said Aoifinn Devitt, chief investment officer at Moneta Group. " The strong underpinning of the market is that there is a lot of capital waiting on the sidelines, waiting for an opportunity to enter, and that means any corrections are very short lived."

The market's biggest vulnerability right now is that stocks can't trade at current valuations without continued support from the Fed, Ms. Devitt added.

Fed officials are set to conclude their two-day policy meeting on Wednesday, with a statement due to be released at 2 p.m. ET. The focus will be on any signals from Chairman Jerome Powell about whether policy makers are accelerating deliberations over how and when to pare back on their easy-money policies, and any shift in the Fed's view on inflation.

"If Powell is being honest, every economist has been surprised about how high inflation has been, and there is no sign of it coming off just yet, " said Brian O'Reilly, head of market strategy for Mediolanum International Funds. "But they are going to look through this. There will be no change, but they are at the stage where they are starting to talk about talking about tapering."

Ahead of the opening bell, Class A shares in Google's parent company, Alphabet, rose almost 2% after the technology giant said late Tuesday that its profits had surged to a record. Shares in Apple fell 0.8% after the largest American company by market value warned that its rate of growth will likely slow.

Thermo Fisher Scientific, Spotify Technology, Pfizer, McDonald's, Bristol-Myers Squibb and Boeing are among a host of large companies set to release earnings ahead of the opening bell. Facebook, Qualcomm, PayPal Holdings and Ford Motor are due to post reports after markets close.

Overseas, the Stoxx Europe 600 rose. Among individual stocks, Barclays rose almost 4% in London after the U.K. bank reported a rise in quarterly profit that surpassed analysts' expectations.

In Hong Kong, markets clawed back a small part of the deep losses accumulated over the last three sessions following a selloff fueled by growing concern about China's widening crackdowns on online platforms and other businesses.

Forex:

The dollar will move materially if the Federal Reserve mentions the spread of the Delta coronavirus variant or a tapering of asset purchases in its policy statement later Wednesday, BK Asset Management said.

"If the Fed includes concerns about the Delta variant, the dollar could extend its slide quickly, and if they shrug off those worries and officially acknowledge that taper is coming, the dollar will soar," BK forex strategist Kathy Lien said.

Fed Chair Jerome Powell will be pressed to discuss both topics even if they don't make it into the policy statement, she said.

The dollar could fall if the Fed's guidance on asset purchases is left unchanged in a policy decision later Wednesday, Commerzbank said.

Many market participants expect the Fed to signal it could scale back stimulus soon by dropping the word "substantial" from its statement that it will maintain the current pace of asset purchases until "substantial further progress" has been made towards its goals, Commerzbank currency analyst Ulrich Leuchtmann said. "But that is not our house view." That means the dollar should end the day lower, Leuchtmann said.

The fall in U.K. coronavirus cases is a promising development for the pound in the near-term because it could be years before the real economic impact of Brexit becomes clear, Commerzbank said.

Leaving Brexit uncertainty aside, an abatement of the pandemic "speaks for positive real economic impulses," which should support the pound, Commerzbank currency analyst Esther Reichelt said.

"However, the Bank of England's rather dovish stance should put a stop to further significant GBP gains for the time being."

Bonds:

The yield on the benchmark 10-year Treasury note rose to 1.256% from 1.235% on Tuesday.

The Fed is likely to leave rates, the pace of asset purchases and guidance all unchanged at its decision on Wednesday, said UniCredit. A formal discussion about tapering asset purchases will start at the current meeting, said UniCredit, although it doesn't expect any clear hint on the timing or composition of tapering.

"There are a range of views on the FOMC regarding tapering, and it will likely take a while to build a consensus," UniCredit said.

The Italian bank's analysts add that the FOMC also wants to gather more clarity from data, while the spread of the delta variant favors caution.

Commodities:

Oil prices were higher, leaving both benchmarks 0.6% and 0.3% below the level at which they began the week. Gentle gains follow API inventory data released Tuesday that showed a larger than expected drawdown in U.S. crude stocks, according to OANDA's Jeffrey Halley.

Traders will watch out for EIA data released later Wednesday.

Gold prices ticked higher ahead of the Fed's monetary policy meeting while base metals were mixed. Three-month copper on the LME fell 0.6% to $9,735.50 a metric ton while aluminum rises 0.4% to $2,496 a ton.

TODAY'S TOP HEADLINES

Facebook's Ad Business Poised to Post Another Strong Quarter

Facebook Inc. is expected to post sharp growth in quarterly revenue and profit, fueled by robust digital ad spending, as it continues to face regulatory scrutiny over the size and influence of its platforms.

The social-media company's second-quarter earnings report, due Wednesday afternoon, should show that advertisers' greater focus over the past year on reaching consumers online continues to be a tailwind. The parent of Facebook, Instagram and WhatsApp also likely benefited from a rise in consumers making purchases from brands directly through its apps, analysts say. However, the company suffered a blow last month when its longtime head of global ad sales, Carolyn Everson, announced her resignation.

Read More ->

Deutsche Bank Posts Surge in Profit but Faces Headwinds

Deutsche Bank AG's results signaled that the bumper profits accruing to its investment bank may have peaked, exposing the deeper challenges the lender faces two years into a strategic makeover.

The Frankfurt-based bank reported a drop in investment-banking revenue in the second quarter as booming client activity during the pandemic slowed down. Still, net profit surged compared with last year as its business lines held better than expected and the economic rebound in Germany put a lid on souring loans.

Read More ->

Barclays Profit Soars on Investment Banking

LONDON-Barclays PLC Wednesday said its net profit rose in the second quarter, driven by a strong performance in its investment bank.

The London-based bank earned GBP2.11 billion, equivalent to $2.92 billion, in the three months to the end of June, up from GBP90 million in the same period last year.

Read More ->

Rio Tinto Net Profit Jumps on Boom in Commodity Prices

SYDNEY-Rio Tinto PLC reported a record first-half net profit and more than tripled its midyear payout to shareholders, benefiting from a bull run in commodity prices that has stoked inflation expectations around the world.

On Wednesday, the world's second-largest mining company by market value said net profit for the six months through June rose to more than $12.3 billion from over $3.3 billion a year earlier.

Read More ->

Apple Profit Sets Record on Strong iPhone Sales

Apple Inc. posted the biggest spring-quarter profit in its 45-year history, leading a streak of record-setting earnings for technology companies even as the pandemic continues to weigh on the global economy.

Not to be overlooked, Google parent Alphabet Inc. and Microsoft Corp. also said Tuesday that their quarterly earnings excelled, underscoring how the pandemic has shifted life and work online and strengthened some of the world's biggest and wealthiest companies.

Read More ->

Credit Suisse Expected to Publish Details of Archegos Failures

Credit Suisse Group AG is likely to publish an investigation as soon as Thursday into the breakdown that led to massive losses from family office Archegos Capital Management, people familiar with the matter said.

The detailed report could become public around the time Credit Suisse reports second-quarter earnings, the people said. The report focuses on problems in the bank's risk management unit, human errors in judgment and unheeded risk in concentrated positions, some of the people said.

Read More ->

Fed Meeting Will Focus on Tapering Timeline

Federal Reserve officials are set to resume deliberations Wednesday about how and when to begin paring their asset purchases amid an economic rebound clouded by supply-chain bottlenecks and rising Covid-19 cases.

Read More ->

Hot Housing Market Lets Banks Sell Mortgage Risk

A red-hot housing market is enabling banks to sell a new kind of bond that shares the risk of mortgage and loan defaults with institutional investors.

Texas Capital Bank recently sold $275 million of securities to investors looking to cash in on the pandemic-fueled boom in home prices. The bonds are backed by short-term loans the bank makes to mortgage lenders. When those lenders' borrowers default, the investors in the bonds effectively cover the loss.

Read More ->

Lawmakers Say Infrastructure Deal Within Reach

WASHINGTON-Lawmakers expressed renewed optimism Tuesday that they were close to reaching a deal on a roughly $1 trillion infrastructure package as they worked through a series of 11th-hour holdups.

After a day of partisan sniping over last-minute disputes, lawmakers said Tuesday they were approaching resolution to some of the issues that had bogged down the final stretch of negotiations. But they still hadn't finished their talks, weeks after the group announced that they had agreed to a loose framework for a deal.

Read More ->

Credit Suisse Expected to Publish Details of Archegos Failures

Credit Suisse Group AG is likely to publish an investigation as soon as Thursday into the breakdown that led to massive losses from family office Archegos Capital Management, people familiar with the matter said.

The detailed report could become public around the time Credit Suisse reports second-quarter earnings, the people said. The report focuses on problems in the bank's risk management unit, human errors in judgment and unheeded risk in concentrated positions, some of the people said.

Read More ->

German Consumer Confidence Set to Stagnate in August

German consumer sentiment is expected to remain unchanged from the previous month in August, according to data from the market-research group GfK released Wednesday.

GfK's forward-looking consumer sentiment index is set to stay at minus 0.3 points in August, unchanged from July, when it reached the highest level since August 2020. Economists polled by The Wall Street Journal had expected consumer sentiment to rise to 0.5.

Read More ->

Biden to Propose Buy American Rule for Government Procurements

WASHINGTON-The Biden administration is proposing a rule that would accelerate federal procurement policy to require a higher level of American-made products.

Under an initiative to be announced Wednesday, the government would require that products obtained under the longstanding "Buy American" program have at least 60% of the value of components made in the U.S., up from the current 55% threshold. That would increase to 75% by 2029, White House officials said.

Read More ->

Vaccination Rates Drive Global Economic Growth Prospects, IMF Says

The economic outlook is diverging for countries based largely on how well they are rolling out Covid-19 vaccinations, according to new forecasts released Tuesday by the International Monetary Fund.

Economic prospects are improving for advanced economies, where nearly 40% of the population has been vaccinated, despite challenges from new variants of the coronavirus, the IMF said. At the same time, far lower vaccination rates have left emerging and developing economies more vulnerable to additional waves of the pandemic and the associated economic fallout.

Read More ->

GOP Bill Attempts to Inject Life Into Stalled Internet Privacy Talks

With work toward a federal privacy law largely stalled for the past 18 months, a top GOP lawmaker is trying to turn back the clock.

Sen. Roger Wicker (R., Miss.) plans Wednesday to introduce the Setting an American Framework to Ensure Data Access, Transparency, and Accountability Act. The new bill from the Senate Commerce Committee's ranking member largely reverts to a 2019 draft bill for ensuring consumers' control over personal data collected or processed by companies.

Read More ->

U.S., Russian Officials to Hold Talks on Future Arms Control Agenda

The Biden administration will take its first step toward defining its future arms control agenda with Moscow when senior U.S. and Russian officials meet Wednesday for strategic stability talks in Geneva.

The talks, which were agreed to by President Biden and Russian President Vladimir Putin at their summit meeting last month, will be led by U.S. Deputy Secretary of State Wendy Sherman and Russian Deputy Foreign Minister Sergei Ryabkov.

Read More ->

Jake Ellzey Wins Texas Special Election, Upsetting Trump-Endorsed Candidate

WASHINGTON-GOP state Rep. Jake Ellzey won a special election runoff in Texas on Tuesday, unexpectedly defeating the widow of the GOP lawmaker he will replace in the U.S. House, according to the Associated Press.

Republican Susan Wright had been favored to win the runoff after being endorsed by former President Donald Trump to represent the district south of Dallas. Her late husband, Ron Wright, died in February at the start of his second House term after battling Covid-19 and cancer.

Read More ->

China to Revise Population Law to Reverse Birthrate Decline

Lawmakers in China plan to clear remaining legal barriers to encourage couples to have more children, as the country faces another year of fewer births.

In a congressional meeting Tuesday, Chinese lawmakers said they would revise the Population and Family Planning Law in sessions scheduled between Aug. 17 and Aug. 20, according to a statement on the legislature's website.

Read More ->

Write to sarka.halas@wsj.com

TODAY IN CANADA

Earnings:

Acadian Timber Corp. (ADN.T) 2Q

Agnico Eagle Mines Limited (AEM.T) 2Q

Alamos Gold Inc. (AGI.T) 2Q

Alaris Equity Partners Income Trust (AD.U.T) 2Q

Trust Units Reg S 3c7

Baytex Energy Corp. (BTE.T) 2Q

Cameco Corp. (CCO.T) 2Q

Canadian Pacific Railway Limited (CP.T) 2Q

CGI Inc. Class A (GIB.A.T) 3Q

Champion Iron Ltd. (CIA.T) 1Q

Crescent Point Energy Corp. (CPG.T) 2Q

Equitable Grp Inc. (EQB.T) 2Q

Exco Tech Limited. (XTC.T) 3Q

GFL Environmental Inc (GFL.T) 2Q

Golden Star Resources Ltd. (GSC.T) 2Q

Kinross Gold Corp. (K.T) 2Q

Kirkland Lake Gold Ltd. (KL.T) 2Q

Loblaw Companies Limited (L.T) 2Q

Lundin Mining Corp. (LUN.T) 2Q

Methanex Corp. (MX.T) 2Q

North American Constr Grp Ltd. (NOA.T) 2Q

Real Matters Inc. (REAL.T) 3Q

Shopify Inc. Class A (SHOP.T) 2Q

Suncor Energy Inc. (SU.T) 2Q

Tilray Inc. (TLRY.T) 1Q

Toromont Indus Ltd. (TIH.T) 2Q

Tourmaline Oil Corp. (TOU.T) 2Q

West Fraser Timber Co. Ltd. (WFG.T) 2Q

Economic Indicators (ET):

0830 Jun CPI

Stocks to Watch:

FirstService Higher-Than-Expected 2Q Revenue Drives Profit Rise

FirstService Corp. on Tuesday reported a rise in second-quarter profit, benefiting from higher-than-expected revenue in the period as activity among its brands accelerated and amenity services approach normalized levels.

The Toronto-based real estate services company said earnings per share were 83 cents, up from 64 cents in the comparable quarter a year ago.

Net income attributable to the company was $36.7 million, compared with $27.1 million a year ago.

However, adjusted earnings at $1.21 a share in the period missed analyst consensus expectations of $1.27 a share, polled on FactSet.

Sales rose to $831.6 million from $621.6 million, while analysts anticipated revenue to be at $737 million.

"The strong results for this second quarter reflect an acceleration of activity in many of our brands and a resumption of amenity services approaching normalized levels in our property management business," Chief Executive Officer Scott Patterson said.

Other News:

No items published

Market Talk:

No items published

Expected Major Events for Wednesday

05:00/JPN: May Indexes of Business Conditions - Revision

06:00/GER: Aug GfK consumer climate survey

06:00/GER: Jun Foreign trade price indices

06:00/UK: Jul Nationwide House Price Index

06:45/FRA: Jul Consumer confidence survey

08:00/ITA: Jul Consumer Confidence Survey

08:00/ITA: Jul Business Confidence Survey

11:00/US: 07/23 MBA Weekly Mortgage Applications Survey

12:30/CAN: Jun CPI

12:30/US: Jun Advance Economic Indicators Report

14:00/US: Jun Metropolitan Area Employment & Unemployment

14:30/US: 07/23 EIA Weekly Petroleum Status Report

18:00/US: U.S. interest rate decision

23:01/UK: Jun UK monthly automotive manufacturing figures

23:50/JPN: Jul Provisional Trade Statistics for 1st 10 days of Month

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

Expected Earnings for Wednesday

A&W Revenue Royalties Income Fund (AW.UN.T,AWRRF) is expected to report for 2Q.

Affiliated Managers Group Inc (AMG) is expected to report $2.37 for 2Q.

Amphenol Corp (APH) is expected to report $0.55 for 2Q.

Automatic Data Processing Inc (ADP) is expected to report $1.13 for 4Q.

Avery Dennison Corp (AVY) is expected to report $2.04 for 2Q.

Boeing Company (BA) is expected to report $-0.21 for 2Q.

CME Group Inc (CME) is expected to report $1.48 for 2Q.

Cameco Corp (CCJ,CCO.T) is expected to report $0.03 for 2Q.

Celsion Corp (CLSN) is expected to report $-0.08 for 2Q.

Cowen Inc (COWN) is expected to report $1.35 for 2Q.

Enterprise Products Partners LP (EPD) is expected to report $0.49 for 2Q.

Evercore Inc (EVR) is expected to report $2.98 for 2Q.

Farmers National Banc (FMNB) is expected to report $0.43 for 2Q.

General Dynamics Corp (GD) is expected to report $2.54 for 2Q.

Loblaw Companies (L.T,LBLCF) is expected to report $1.20 for 2Q.

Marine Products (MPX) is expected to report $0.17 for 2Q.

McDonald's Corp (MCD) is expected to report $2.11 for 2Q.

New York Community Bancorp (NYCB) is expected to report $0.30 for 2Q.

Norfolk Southern Corp (NSC) is expected to report $2.95 for 2Q.

Owens Corning (OC) is expected to report $2.08 for 2Q.

Pfizer Inc (PFE) is expected to report $0.87 for 2Q.

Prosperity Bancshares (PB) is expected to report $1.39 for 2Q.

Provident Financial Holdings Inc (PROV) is expected to report $0.22 for 4Q.

RPC Inc (RES) is expected to report $-0.01 for 2Q.

Radware Ltd (RDWR) is expected to report $0.05 for 2Q.

Rollins Inc (ROL) is expected to report $0.18 for 2Q.

Ryder System (R) is expected to report $1.52 for 2Q.

Santander Consumer USA Holdings Inc (SC) is expected to report $1.77 for 2Q.

Shopify Inc (SHOP,SHOP.T) is expected to report $0.07 for 2Q.

Silgan Holdings Inc (SLGN) is expected to report $0.83 for 2Q.

Six Flags Entertainment Corp (SIX) is expected to report $-0.22 for 2Q.

Stepan Co (SCL) is expected to report $1.69 for 2Q.

Stock Yards Bancorp Inc (SYBT) is expected to report $0.40 for 2Q.

Strategic Education Inc (STRA) is expected to report $0.86 for 2Q.

TE Connectivity Ltd (TEL) is expected to report $1.56 for 3Q.

Teledyne Technologies Inc (TDY) is expected to report $2.63 for 2Q.

Thermo Fisher Scientific (TMO) is expected to report $4.40 for 2Q.

Virtus Investment Partners Inc (VRTS) is expected to report $2.08 for 2Q.

Wabash National Corp (WNC) is expected to report $0.11 for 2Q.

Wingstop Inc (WING) is expected to report $0.33 for 2Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

Advance Auto Parts Raised to Strong Buy From Outperform by Raymond James

American Airlines Group Raised to Hold From Sell by Berenberg

American Airlines Group Raised to Neutral From Negative by Susquehanna

Antero Resources Raised to Strong Buy From Outperform by Raymond James

AT&T Cut to Hold From Buy by Argus Research

ATI Physical Therapy Cut to Hold From Buy by Benchmark

ATI Physical Therapy Cut to Hold From Buy by Jefferies

ATI Physical Therapy Cut to Market Perform From Outperform by Barrington Research

ATI Physical Therapy Cut to Neutral From Buy by Citigroup

Atlantic Capital Bancshrs Cut to Neutral From Overweight by Piper Sandler

AutoZone Cut to Outperform From Strong Buy by Raymond James

Century Aluminum Raised to Buy From Neutral by B. Riley Securities

Expeditors International Cut to Hold From Buy by Vertical Research

F5 Networks Raised to Buy From Neutral by B of A Securities

Heartland BancCorp Cut to Neutral From Overweight by Piper Sandler

HollyFrontier Raised to Outperform From Neutral by Credit Suisse

Medallia Cut to Hold From Buy by Berenberg

Medallia Cut to Hold From Buy by Needham

Medallia Cut to Hold From Buy by Stifel

Medallia Cut to Neutral From Buy by BTIG

Medallia Cut to Neutral From Buy by Citigroup

Northwest Bancshares Cut to Neutral From Buy by B. Riley Securities

O'Reilly Automotive Cut to Market Perform From Outperform by Raymond James

PBF Energy Cut to Underperform From Neutral by Credit Suisse

Prelude Therapeutics Raised to Buy From Neutral by B of A Securities

Rocky Brands Price Target Announced at $79.00/Share by BTIG

RPM International Cut to Equal-Weight From Overweight by Wells Fargo

SW Energy Raised to Outperform From Underperform by Raymond James

Texas Capital Bancshares Raised to Outperform From Neutral by Wedbush

Weyerhaeuser Raised to Buy From Neutral by B of A Securities

This article is a text version of a Wall Street Journal newsletter published earlier today.


  (END) Dow Jones Newswires
  07-28-21 0607ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.