Markets coverage today August 3, 2022 – Stock futures gained as investors digested comments from central bankers and eyed House Speaker Nancy Pelosi’s visit to Taiwan.
Futures tied to the S&P 500 added 0.4%, while tech-heavy Nasdaq-100 futures were up 0.5%. Read our full daily markets roundup.
Federal Reserve officials said the central bank was likely to continue raising interest rates, damping hopes that slowing economic growth could mean a change in policy.
Stocks have also come under renewed pressure as Mrs. Pelosi met with Taiwan’s president despite warnings from China. The S&P 500 has lost nearly 1% this week.
Stocks finished Tuesday lower, with all three U.S. indexes in the red.
Match Shares Tumble Premarket
Shares of online-dating company Match slid by over 20% in premarket trading after a disappointing earnings report.
Match shares were recently at $60.04 premarket, which would mark the lowest level since it was spun off from tech-holding company IAC/InterActive in 2020.
Match reported lower-than-expected profit and revenue in its second quarter and warned that top-line growth would be flat in the second half of the year.
The company also announced that the chief executive of Tinder, with which it merged in 2017, was leaving amid “disappointing execution” on new initiatives at the popular dating app.
Match is struggling with disruptions in user behavior brought on by the pandemic, which weighed on in-person dating. The company’s shares were already down 52% in the past year, before Tuesday’s downbeat results.
PayPal Shares Jump 12% Premarket on Elliott Stake
Shares of PayPal jumped 12% premarket Wednesday after the activist investor said it has a roughly $2 billion investment in the digital payments giant. The Wall Street Journal reported Elliott’s stake in the company last month.
In PayPal’s earnings release Tuesday, Jesse Cohn, managing partner at Elliott, said that the firm “strongly believes in the value proposition at PayPal.”
PayPal also noted in the release that it has entered into an information-sharing agreement with Elliott.
Elliott’s comments came alongside PayPal’s earnings for the quarter ended June, during which net revenue rose 9% from the prior-year period. PayPal also reported a $341 million loss during the quarter, compared with a $1.2 billion profit a year earlier.
The company also named Blake Jorgensen as its next finance chief.
Elliott Management is regarded as one of Wall Street’s most prolific activist investors, with a history of pushing for management shake-ups.
Elliott confirmed Monday afternoon a stake in Pinterest, sending its shares up 12% Tuesday.
Investors grow frustrated with hedge funds after historic losses
The industry is on track to post one of its worst years on record as long-short players struggle
Hedge funds are heading for one of their worst years of performance on record, leaving investors frustrated with how many managers have failed to offset sharp falls in equity and bond markets.
Funds were down 5.6 percent on average in the first six months of 2022, according to HFR. While a narrower HFR daily index of performance shows them clawing back around 0.5 percent last month, the industry is nevertheless on track for its second-worst year of returns since 1990, when the data provider’s records begin — beaten only by steep losses during the 2008 global financial crisis.
High U.S. Valuations Don’t Make Foreign Shares More Attractive, Analyst Says
American equities are more expensive than other global stocks by one measure, but that hasn’t stopped the S&P 500 from outperforming its foreign counterparts.
U.S. stocks are trading at 17.1 times their projected earnings over the next 12 months, compared with 11.5 times for Europe, 12.4 times for Japan, and 10.9 times for emerging markets, according to DataTrek Research. Yet investors have piled into U.S. equities: Since the end of 2019, the S&P 500 has outperformed stocks in Europe, Japan, and emerging markets, said DataTrek.
“Scan the current valuation data and returns since 2019, and you will come to the inevitable conclusion that U.S. stocks were expensive 2 1/2 years ago but that made no difference to their ability to outperform by a wide margin,” said DataTrek co-founder Nicholas Colas.
The MSCI World Index has added more than 7.4% over the past month. Still, said Colas, investors should be wary of recommendations of non-U.S. stocks based on valuation or recent performance.
“We suggest taking those with a large grain of salt,” he said.
Investors Boost Bets on Fed Rate Increases
Investors are readjusting their expectations for Federal Reserve policy tightening after central-bank officials indicated Tuesday that aggressive rate increases may still be needed to tame inflation.
Futures bets show traders see a roughly 43% probability that the Fed will raise interest rates by another 0.75 percentage-point at its September meeting, according to CME Group. That is up from 29% on Monday, before the Fed comments.
Investors also boosted bets on future Fed rate increases. Traders now see a 58% probability that the Fed benchmark borrowing costs will be at 3.25% or higher by June of next year, compared to a probability of 30% on Monday.
Bond yields have risen alongside expectations for more rate hikes from the Fed. Yields rise as prices fall. The yield on the 10-year Treasury climbed to 2.752% from 2.740% Tuesday.
The increase in bets on higher rates contrasts with recent hopes among investors for a milder path of Fed policy tightening following the central bank’s meeting last week. Those expectations helped major U.S. indexes deliver their best month since 2020 in July.