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FANG GETS THE BAND BACK TOGETHER AFTER NETFLIX REPORT (1220 EDT/1620 GMT)
Heavyweight tech and growth stocks are surging on Wednesday, with investors betting upbeat quarterly results from Netflix may foretell good news in approaching reports from the likes of Meta Platforms, Alphabet and Amazon .
Netflix is surging over 5% after the streaming video service late on Tuesday predicted a return to subscriber growth after losing 970,000 customers in the second quarter. After falling for most of 2022, slammed by worries about rising competition from other video streamers, Netflix's stock has rebounded over 20% in the past four sessions.
Other members of the once-beloved FANG group are also rallying on Wednesday, with Facebook-owner Meta Platforms up 3.4%, Amazon up 4% and Google-owner Alphabet gaining 1.3%.
Alphabet is due to report its quarterly results on July 26, with Meta reporting on July 27 and Amazon on June 28.
Meta and Netflix's shares have fared particularly poorly this year, down 46% and 64%, respectively, as investors worried about rising interest rates and a potential recession dump growth stocks with pricey valuations.
Other major growth stocks rallying on Wednesday include Nvidia and rival Advanced Micro Devices, each up over 3%.
The Philadelphia Semiconductor index is jumping 2.4% after the Senate on Tuesday voted to move ahead with a slimmed-down version of legislation to provide billions of dollars in subsidies and tax credits for the semiconductor industry.
The SOX has rebounded 16% from its recent closing low on July 1. It remains down 27% in 2022.
Chip manufacturing equipment makers Applied materials and KLA Corp are both jumping over 3%.
(Noel Randewich)
CAPITAL RAISED BY U.S. BANKS PLUMMETS IN JUNE (1200 EDT/1600 GMT)
Capital raised by U.S. banks in June declined 28% from a year ago to $6.08 billion, the lowest monthly issuance in the previous 12 months except for November, S&P Global says.
The amount raised last month fell 53% from May as the drop was driven by a reduction in the value of senior debt issuance, according to data analysis by S&P Global Market Intelligence.
The value of senior debt issuance fell 79% month-over-month and 54% year-over-year to $2.62 billion, the lowest total for senior debt in a month since November.
Total capital raised by U.S. banks through senior debt, subordinated debt, preferred and common equity was just over $2 billion in November, S&P Global said in a note.
JPMorgan Chase & Co. raised the most money in June, with two senior debt offerings totaling $2.5 billion. PNC Financial Services Group Inc. raised the second most among public banks with $850 million in subordinated debt.
(Herbert Lash)
RUNNING DOWN THAT HILL: EXISTING HOME SALES, MORTGAGE DEMAND (1125 EDT/1525 GMT)
After a global pandemic sent the housing market on a roller coaster ride driven by spiking demand and plunging inventories, the sector is now cooler than it was when Corona was still a down-market beach brew.
Sales of pre-owned U.S. homes plunged by 5.4% in June to 5.12 million units at a seasonally adjusted annualized rate (SAAR), according to the National Association of Realtors (MAR).
The drop blew past the shallower 0.6% consensus decline expected to touch the lowest level in two years.
Existing home sales have fallen 14.2% from a year ago, when the sector was enjoying the pandemic-driven demand boom. That demand, however, has since driven inventories to record lows and launched home prices into orbit.
The report piles more woes on the sector, which in recent days has seen housing starts, building permits and homebuilder sentiment approaching or sinking beyond pre-COVID levels.
"Although the outlook is bleak, a vast majority of existing homes sold in June were on the market for less than a month," says Jeffrey Roach, chief economist at LPL Financial. "This indicates core underlying demand for home buying in the midst of a slowing economy."
Having now fallen for five straight months, months supply of pre-owned homes on the market has recovered to 2.9, the most plentiful inventory print since July 2020.
But the supply recovery, reflecting cooling demand, has yet to affect the affordability question.
"Falling housing affordability continues to take a toll on potential home buyers," says NAR chief economist Lawrence Yun. "Both mortgage rates and home prices have risen too sharply in a short span of time."
Speaking of the devil, mortgage rates, which have risen 271 basis points over the last 12 months, resumed their uphill climb last week, sending home loan demand skidding to a 22-year low.
A Mortgage Bankers Association (MBA) report shows the average 30-year fixed contract rate gained 8 basis points to 5.82%.
Applications for loans to purchase homes and refinance existing ones fell by 7.3% and 4.3%, respectively, for an overall demand contraction of 6.3%.
"With most mortgage rates more than two percentage points higher than a year ago, demand for refinances continues to plummet," writes Joel Kan, associate vice president of economic and industry forecasting at MBA. "The weakening economic outlook, high inflation, and persistent affordability challenges are impacting buyer demand."
As seen in the graphic below, total mortgage demand has plunged by a whopping 59.7% from the same week a year ago.
But as data looks backward, the stock market looks forward, reflecting where investors believe the sector will be six months to a year down the road.
While housing stocks rode high in the saddle, well outperforming the broader market in the immediate aftermath of the pandemic shutdowns, that relationship has since reversed.
The graphic below shows that while the twelve-month performances of Philadelphia SE Housing index and the S&P 1500 Home Building index are still below that of the broader S&P 500, that underperformance has narrowed:
Wall Street is gearing up for another day in the green, with risk-on sentiment extending Tuesday's robust rally.
Amazon.com, Apple and Microsoft are once again assuming their customary positions as the indexes' heaviest lifters.
(Stephen Culp)
U.S. STOCKS MIXED EARLY, BUT GROWTH OUTPERFORMS (1016 EDT/1416 GMT)
The Nasdaq is higher early on Wednesday after a positive forecast from Netflix helped set the tone for other high-growth stocks.
That said, the S&P 500 is just below flat, and the Dow is posting a modest loss. Fresh uncertainties stemming from the conflict in Ukraine continue to simmer in the background.
In any event, growth, underpinned by FANG and chip stock strength, is outperforming value. In fact, the IGX/IVX ratio is at its highest level since early May.
It now remains to be seen if the major indexes will see upside follow-through after clearing a technical hurdle on Tuesday.
The SPX ended above its 50-day moving average (DMA) for the first time since April 20, while it was the first close above this closely watched intermediate-term moving average for the Dow since April 21. The IXIC ended above its 50-DMA on Tuesday for the first time since April 7.
Here is an early-trade snapshot:
(Terence Gabriel)
NASDAQ COMPOSITE: DAWN'S EARLY LIGHT? (0900 EDT/1300 GMT)
After falling as much as 34% from its November peak into its June trough, the Nasdaq Composite has recently seen brighter days.
The IXIC has rallied 10% from its June low, while ending Tuesday at its highest level in about six weeks. With this, one measure of the Nasdaq's internal strength is also showing burgeoning strength:
The McClellan Summation (McSum), a breadth/momentum measure based on advancing and declining issues, ended Monday at its highest level since April 7.
The McSum bottomed in late January as it was testing a support line from late 2012, as well as its late-2008 trough. It then established a higher low in mid-May before converging into the Composite's mid-June trough.
However, with this measure now nearing some significant barriers, the Composite's rally may be at an important juncture. The McSum is facing its early-April high as well as the resistance line from its February-2021 top.
Of note, as the IXIC was running out of steam into its November record high, the McSum, which had been diverging for seven months, rolled under its late-June 2021 high, further highlighting waning internal momentum.
Therefore, if the Composite's current advance is going to persist, it may be critical for the McSum to blast through its nearby barriers.
A McSum failure to overwhelm resistance, followed by a reversal back below its 10-day moving average, may see a return of darker days for the Composite.
(Terence Gabriel)
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