By Geoffrey Smith
Investing.com -- Stocks are set to open higher after Tesla (NASDAQ:TSLA) and Microsoft (NASDAQ:MSFT) both beat expectations. It'll be the turn of Amazon (NASDAQ:AMZN), AT&T and Intel (NASDAQ:INTC) later. Jobless claims are expected to show little further improvement in the U.S. labor market last week. Commodities are still rallying as the dollar falls for the ninth day out of the last 10. And Senate Republicans make progress on drafting their next round of stimulus proposals. Here's what you need to know in financial markets on Thursday, 23rd July.
1. Tesla beats, with a little help from emissions credits
Tesla beat expectations for the second quarter with a net profit of $114 million, albeit with the help of some $428 million in income from the sale of emissions credits to makers of dirtier cars.
Tesla’s stock rose 4.8% in premarket trading to test a new record high as speculation again intensified that it will be included in the S&P 500 index, having met a key precondition of posting four successive profitable quarters.
S&P didn’t comment. Its regular rebalancing of the index is due on Sept. 21, although according to various reports, the relevant committee is capable of making an ad-hoc decision before then.
The company also said it had chosen a site near Austin, Texas, for a new factory that will make its planned pickup truck and Model Y crossover.
2. Jobless claims bottoming out?
After a couple of fallow days, the data calendar is a little fuller on Thursday. Topping the bill at 8:30 AM ET (1230 GMT) are the U.S. jobless claims numbers, which last week hinted at a levelling off of the improvement in the labor market, as the spread of the coronavirus across the south and west of the country triggered a new wave of restrictive measures on some businesses, notably restaurants and bars.
Initial claims are expected to be unchanged from last week’s 1.300 million, while continuing claims, which have a one-week lag against the initial claims numbers, are expected to drop to 17.067 million from 17.338 million.
At 9 AM ET, the Kansas City Fed will release its regular business survey.
Earlier in Europe, German consumer confidence registered a sharper-than-expected bounce in the wake of Berlin's second fiscal support package, which included a temporary cut of 3 percentage points in value-added tax and one-off payments for child support.
3. Stocks set to open higher; Big Tech earnings to continue, AT&T eyed
U.S. stock markets are poised to open higher, with the late results from Tesla and – to a lesser extent, Microsoft – helping sentiment.
Microsoft had beaten analyst expectations with a 13% rise in sales and a net profit of $11.2 billion, although some were disappointed that sales growth at its Cloud hosting business Azure slowed to below 50%.
By 6:30 AM ET (1030 GMT), the Dow futures contract was up 112 points or 0.4%, while the S&P 500 Futures contract was up 0.4% and the Nasdaq 100 futures contract was up 0.9%
Thursday’s earnings are headed up by Intel after the close, and by AT&T before the opening.
4. GOP stimulus proposals
Senate Leader Mitch McConnell may present the Republicans’ plans for the next round of fiscal stimulus as early as today, after reportedly settling differences both within the Senate and vis-à-vis the administration.
It still isn’t clear whether the proposals will include the payroll tax cut that President Trump said he wants included, or to what extent the existing paychecks to the unemployed will be cut from the end of the month.
Nor is it yet clear whether the bills will be introduced in the Senate, or whether the GOP will first try to thrash out a compromise with the House of Representatives, where the majority Democrats have drawn up plans for as much as $3.5 trillion in fresh spending. Republicans have dismissed that number as unrealistic.
5. Commodities on a roll as dollar weakens
Crude oil prices are again testing post-pandemic highs after shrugging off a surprise increase in U.S. inventories last week. The 4.9 million-barrel rise in stocks reported by the government wasn’t as extreme as the American Petroleum Institute’s 7.5 million-barrel estimate on Tuesday.
U.S. crude futures were up 0.2% at $41.98 a barrel, while the international benchmark Brent was up 0.3% at $44.41 a barrel
Other commodities are still well bid, with gold closing in on the $1,900 level and silver steady above $23/oz, against a backdrop of a steadily weakening dollar.
The dollar index that tracks the greenback against a basket of developed market currencies has fallen for nine of the last 10 sessions and touched its lowest in four and a half months overnight.