European markets mixed as cautious sentiment persists; Avast up 42%
European stocks were mixed on Wednesday, continuing the cautious regional trend this week.
The pan-European Stoxx 60 slipped 0.2% in early trade, with autos falling 1.5% while tech stocks gained 1.2%.
It’s a busy day for earnings in Europe, with Commerzbank, SocGen, BMW, Banco BPM, Siemens Healthineers, Veolia and Wolters Kluwer among the companies reporting before the bell.
Shares of Czech cybersecurity firm Avast soared 42% after the UK’s competition regulator provisionally cleared its $8.6 billion sale to US peer NortonLifeLock.
Focus on data, not what Fed speakers are saying, Art Hogan says
Despite the “parade of Fed speakers,” that’s not what investors should focus on, according to Art Hogan, chief market strategist at B. Riley Financial.
“I think that investors have to pay more attention to what the data is telling us than what every individual Fed speaker, whether they’re a voter or not, has to say about what our expectations should be,” Hogan told CNBC’s “Squawk Box Asia.”
Still, he said Fed officials have been able to shift expectations for where Fed policy is heading.
St. Louis Federal Reserve President James Bullard on Tuesday said the central bank will need to keep hiking rates, and the Fed funds rate will likely have to go to 3.75%-4% by the end of 2022. San Francisco Fed President Mary Daly said “our work is far from done” in fighting inflation, while Chicago Fed President Charles Evans said another large rate hike is possible, though he hopes it can be avoided.
After last week’s meeting, some expected the Fed would continue hiking to reach 3.25%-3.5% before pivoting in 2023, Hogan said.
“I think the parade of Fed speakers this week has done a pretty good job of pulling that back, tamping down those expectations,” he said.
— Abigail Ng
These stocks are poised for a comeback if inflation peaks, Jefferies says
A slowdown could be on the horizon, and more earnings downgrades ahead have been predicted. If inflation also peaks, as some analysts expect it to, that mix of factors will favor one class of stocks, Jefferies says.
Jefferies produced a screen of such stocks that investors can buy, based on a list of metrics which include high profitability, reasonable valuations and good cashflows. Pro subscribers can read the story here.
— Weizhen Tan
PayPal rises on earnings, share buyback announcement
PayPal shares soared by more than 11% after hours. The payments company beat analysts’ earnings and revenue estimates for the second quarter and issued upbeat full-year guidance. PayPal also announced a $15 billion share repurchasing program.
Stock buybacks provide a way for companies to boost their per-share earnings and enhance the value of their stock, particularly while the market across the board suffers steep price declines this year. The company kicked off a $10 billion program four years ago.
Elliott Management said it has a $2 billion stake in the payments giant. PayPal announced that it entered an information-sharing agreement on value creation with the activist investor.
— Tanaya Macheel
Despite Fedspeak about fighting inflation, an ‘easing cycle’ is emerging says Leuthold’s Jim Paulsen
Leuthold Group chief investment strategist Jim Paulsen said that despite the Federal Reserve’s “ongoing lip service toward fighting inflation” by tightening monetary policy, there are several factors that suggest the market may be entering an “emerging easing cycle.”
Bond yields have achieved a sizable rate cut, the dollar is finally rolling over and junk spreads have pulled back, he said in a note to investors late Tuesday.
“The media, policy officials, and investors focus primarily on the war against inflation and how aggressively the Fed will need to keep hiking rates,” Paulsen said. “Yet, with real economic growth already reduced to a crawl and evidence building that inflation is easing, the case for further Fed tightening at its September meeting is rapidly falling apart.”
“Investors should place appropriate weight on the leading nature of economic policies,” he added. “Tightening today means lower real and nominal growth tomorrow.”
— Tanaya Macheel
MatchGroup shares tumble after hours
Shares of the dating app operator Match Group tumbled as much as 23% after the company reported revenue of $795 million for the second quarter, compared with FactSet estimates of $803.9 million. Match also issued weak guidance around adjusted operating income and revenue for the current quarter.
— Tanaya Macheel