Stock futures slide as US-China tensions simmer over Pelosi’s planned trip to Taiwan
Impact of Pelosi’s trip on the markets
Mona Mahajan, senior investment strategist at Edward Jones, addressed the market impact of Pelosi’s possible visit to Taiwan during an appearance on CNBC’s “Squawk Box” on Tuesday:
“Geopolitical tension has been a theme that we have really watched all year and that has weighed on the markets. … The risk and worry is that we have a Russia-Ukraine 2.0, something that is even more serious in from China. I think right now it’s an extreme risk. I think the trip won’t cause any real economic disruption, but of course the rhetoric and the headlines are starting to escalate and it’s is something we need to watch out for in the future.”
Caterpillar tumbles after reporting revenue
Caterpillar shares fell more than 1% after the industrial giant posted mixed quarterly results. The company earned $3.18 per share, beating the Refinitiv consensus forecast of $3.01 per share. However, Caterpillar’s revenue of $14.25 billion was just below an estimate of $14.35 billion.
Treasury yields fall in early trading
U.S. Treasury yields fell in early trading on Tuesday ahead of House Speaker Nancy Pelosi’s scheduled trip to Taiwan. The benchmark 10-year rate fell more than 5 basis points to 2.548%, while the 2-year rate slipped to 2.856%.
Oil giant BP raises dividend as quarterly profits jump on high commodity prices
British oil giant BP raised its dividend on Tuesday as it posted bumper second-quarter profits, benefiting from a surge in commodity prices.
Underlying second-quarter replacement cost profit, used as an indicator of net profit, was $8.5 billion. Soaring profits allowed BP to increase its quarterly dividend to shareholders by 10% to 6.006 cents per common share.
European stocks fall, following global risk aversion sentiment
European markets fell slightly on Tuesday, following global risk aversion sentiment as investors assess whether last month’s rally has yet to continue.
The pan-European Stoxx 600 fell 0.6% in mid-morning London, with tech stocks shedding 2.1% to lead losses as nearly all sectors and major exchanges slipped into the red. Telecoms gain 0.6%.
Earnings remain a key driver of individual stock price performance. BP, Ferrari, Maersk and Uniper were among the top European companies reporting before the bell on Tuesday.
Chinese stocks fall as tensions rise over Pelosi visit
Flat Open Equity Futures Contracts
Stock futures opened flat in overnight trading on Monday.
Futures contracts linked to the Dow Jones Industrial Average edged down 0.06%, or 21 points. S&P 500 and Nasdaq 100 futures fell 0.06% and 0.01% respectively.
— Samantha Subin
The upside from here is limited over the next few months, says Truist’s Lerner
Investors overinvested in equities should consider using current market conditions to trim their positions, as the upside in equities is limited going forward, says Keith Lerner, co-chief investment officer at Truist.
According to Lerner, market upside over the next few months is likely capped between 3% and 5%, but the downside could exceed that amount.
“The market has been very resilient, no doubt, and maybe it will be for a little while, but we don’t see the risk-reward ratio as compelling here,” he said.
This is by no means an indication of the top of the market and shares could rise, but it is an opportunity to reallocate exposure after the market’s strong rally last month, Lerner added.
Pinterest shares rise 21% as Elliott Management reveals position as biggest investor
Pinterest shares jumped more than 21% after the company posted higher-than-expected user numbers and Elliott Management revealed it was the image-sharing company’s largest shareholder.
Activist investor Elliott said in a statement that he was “convinced of the opportunity to create value” at Pinterest, calling the social media company a “highly strategic company with significant growth potential.”
“As the market-leading platform at the intersection of social media, search and commerce, Pinterest is uniquely positioned in the advertising and shopping ecosystems, and CEO Bill Ready is the right leader for oversee Pinterest’s next phase of growth,” Elliott wrote.
Despite the stock move, Pinterest missed estimates for the second quarter on both the top and bottom lines, monthly active users for the period exceeded estimates by 2 million.
— Samantha Subin