Stock futures kick-off September in the red; Nvidia tumbles as U.S. bans AI chip shipments to China; Disney reportedly mulling ‘Amazon-like’ membership program; Apple shares weaker as IDC lowers global smartphone outlook and Broadcom Q3 earnings in focus as chip market wobbles.
Here are five things you must know for Thursday, September 1:
1. — Stock Futures Kick-Off September in the Red
U.S. equity futures moved lower again Thursday, while Treasury bond yields jumped amid bets on aggressive Fed rate hikes, as investors kicked-off the market’s toughest month in a pessimistic mood.
Weakening growth in Asia, where PMI data Thursday indicates slowing in the region’s three major economies, alongside Europe’s Russia-linked energy crisis and record high inflation, has investors leaking confidence heading into the start of September, which is traditionally the month that offers the least in terms of historic returns for U.S. investors.
Stocks are also facing headwinds linked to the Fed’s inflation fight, with bets on a third consecutive 75 basis point rate hike rising to 72% in overnight trading, pulling benchmark 2-year Treasury note yields north of 3.5% for the first time since 2007.
Those bets were cemented by overnight comments from Cleveland Fed President Loretta Mester, who told an event in Dayton, Ohio that the Fed Funds rate is likely to rise “somewhat” above the 4% level, adding it was “wishful thinking” to assume that inflation has peaked.
Growth concerns remain, however, and oil prices extended declines in overnight trading amid reports of further Covid lockdowns in China that will accelerate the slump in demand from the world’s biggest energy importer.
WTI futures contracts for October delivery were marked $2.02 lower overnight to trade at $87.61 per barrel while Brent contacts for the same month, the global pricing benchmark, jumped $2.12 to trade at $93.54 per barrel.
Overnight in Asia, hopes of a fresh round of stimulus from Beijing helped China stocks to a modest Thursday gain, although weakness around the region pulled the MSCI ex-Japan index 1.85% lower on the session.
In Europe, stocks were 1.75% lower in early Frankfurt trading as expectations for a 75 basis point rate hike from the European Central Bank, which meets on September 8 in Frankfurt, are now fully-priced into regional interest rate markets.
On Wall Street, futures tied to the S&P 500, which fell 4.24% last month, are indicating a 29 point opening bell decline while those liked to the Dow Jones Industrial Average are priced for a 142 point move to the downside. Futures linked to the tech-focused Nasdaq are indicating a 130 point retreat.
2. — Nvidia Tumbles As US Bans AI Chip Shipments to China
Nvidia Corp. (NVDA) – Get NVIDIA Corporation Report shares fell sharply lower in pre-market trading after the U.S. government ordered the chipmaker to stop exporting artificial intelligence components to clients in China.
Nvidia said in Securities and Exchange Commission filing late Wednesday that the government has imposed new restrictions on the sale of its A100 and forthcoming H100 chips, which are also incorporated in other Nvidia-designed products.
The chipmaker said it had booked $400 million sales of A100-linked products to China that could be scrapped it clients won’t purchase alternative products.
“The (U.S. Government) indicated that the new license requirement will address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia,” Nvidia said, adding it doesn’t sell products to customers in Russia.
Nvidia shares were marked 5.5% lower in pre-market trading to indicate an opening bell price of $142.70.
3. — Disney Mulling ‘Amazon-Like’ Membership Program – Report
Walt Disney (DIS) – Get The Walt Disney Company Report shares edged lower in pre-market trading following a report from the Wall Street Journal that the media and entertainment group is planning an ‘Amazon-like” membership program.
The plans, which the Journal reported as being referred to as “Disney Prime” among company executives, would be designed to encourage potential members to spend more on Disney-linked products across its streaming, parks and merchandise categories.
Last month, activist investor Dan Loeb, who runs the Third Point LLC hedge fund, unveiled a new stake in Disney and called on management to shake up the group’s board of directors and the spin-off if its ESPN sports network.
Disney reported better-than-expected June quarter earnings of $1.09 per share on revenues of $21.5 billion, while overall subscriber totals for Disney+ hit 152.1 million.
Disney shares were marked 0.55% lower in pre-market trading to indicate an opening bell price of $111.45 each.
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4. — Apple Shares Weaker As IDC Lowers Global Smartphone Outlook
Apple (AAPL) – Get Apple Inc. Report shares were helped lower in pre-market trading by a report from analysts at International Data Corporation that forecast weaker-than-expected global smartphone shipments between now and the end of the year.
IDC’s latest report, an industry benchmark, sees global shipments falling 6.5% from last year to 1.27 billion units, thanks in part to surging inflation, geo-political tensions and macroeconomic headwinds that will curb consumer demand.
Reports last month, however, indicate Apple remains confident heading into its two busiest quarters, and expects its assembler base to make 220 million iPhones this year — on pace with 2021 levels — including 90 million of its newest models.
Apple shares were marked 0.93% lower in pre-market trading to indicate an opening bell price of $155.76 each.
5. — Broadcom Q3 Earnings In Focus As Chip Market Wobbles
Broadcom (AVGO) – Get Broadcom Inc. Report shares edged lower in pre-market trading ahead of the chipmaker’s third quarter earnings after the closing bell.
Broadcom, which entered into an agreement to buy the VMWare (VMW) – Get VMware, Inc. Report, the former cloud computing division of Dell Technologies (DELL) – Get Dell Technologies Inc. Class C Report, for $61 billion earlier this year, is expected to post a bottom line of $9.56 per share on revenues of $8.37 billion.
The chipmaker has said it it will maintain its current dividend policy of delivering 50% of its prior-year free cash flow to shareholders, despite the VMWare acquisition, which includes Broadcom’s assumption of around $8 billion in VMware debt. Broadcom shareholders will own around 88% of the company when the deal is complete, with VMware holding the remaining 12%.
Broadcom shares were marked 1.22% lower in pre-market trading to indicate an opening bell price of $493.00 each.
