US Open: Wall Street extends bearish momentum, indices open lower!

• Wall Street opened lower today due to uncertainty regarding Fed rate hikes and conditions in China
• No significant macroeconomic reports are scheduled for today
• Risks associated with Evergrande are mounting
• A Reuters poll indicates that the Fed is expected to keep interest rates unchanged at the September meeting
• Deere has raised its annual profit outlook due to strong demand for large tractors

Today, Wall Street is set to open lower. US futures and European indices dropped due to concerns about prolonged high interest rates and China's economic struggles. Japan's Nikkei experienced its most significant weekly loss in eight months, and China's market was down due to a lack of measures to stimulate consumption and support the faltering real estate sector. 

Despite market fears concerning prolonged high interest rates, the recent Reuters poll revealed that most economists predict the Federal Reserve will not change interest rates at the upcoming September meeting and foresee a possible rate cut by mid-2023. Also, the likelihood of a US recession has lessened, falling below 50%.

Yesterday, Chinese real estate giant Evergrande sought bankruptcy protection in the US This negatively affected the broader Asia-Pacific region. Europe's Stoxx 600 index also saw declines, and U.S. indices. Contrary to some beliefs, Evergrande clarified that their US court filing supposedly isn't for bankruptcy. They stated their move is a standard procedure for handling offshore debt restructuring under New York Law. Reports suggest that Evergrande has moved its main office from Shenzhen to Guangzhou, possibly for cost-saving reasons.

The US500 index is currently trading at 4362, reflecting a decline of approximately 0.40% today. A significant bearish development was observed when the index broke through a crucial uptrend support line at 4500 – marked by a blue line on the chart. Following this, the index experienced a rapid decrease, slicing through several other support zones until reaching 4350. If the bearish momentum continues, critical support levels to monitor are at 4300 and subsequently 4200 points.

Company News:

• Deere & Co. (DE.US) raised its fiscal 2023 financial forecast due to sustained strong machinery demand from farmers, even with declining crop prices. The leading agricultural equipment manufacturer now anticipates a net income between $9.75 billion and $10 billion, surpassing its previous prediction and the Bloomberg consensus. This increased demand is partly attributed to the spike in global crop prices following Russia's invasion of Ukraine. Even as crop markets stabilize, farmers, especially from the U.S., Brazil, and Russia, are investing in newer and more advanced equipment.
• Applied Materials (AMAT.US), a semiconductor equipment specialist reported quarterly earnings with its revenue dropping 1% year over year to $6.43 billion. The company generated $2.58 billion in cash from operations. The gross margin was 46.4%, operating income stood at $1.82 billion, and the EPS was $1.90. Applied Materials returned $707 million to shareholders, which included $439 million in share repurchases and $268 million in dividends. CEO Gary Dickerson highlighted their successful execution during the fiscal third quarter and their strategic focus on pioneering technologies for the Internet of Things and AI era. This approach aims to ensure consistent robust performance in 2023 and position the company for sustained excellence.
• Estée Lauder (ET.US) has lowered its annual sales and profit projections due to a more gradual recovery in its Asian travel retail sector and decreasing demand in the U.S., leading to a 4.5% drop in its shares during premarket trading. As China, the world's second-largest economy, grapples with challenges like diminishing consumer demand, rising youth unemployment, and high living costs, many global corporations are adopting a cautious approach towards its economic revival. Analysts suggest that the diminished consumer appetite in China and the sluggish resurgence of travel retail in Asia could adversely affect luxury brands like Estée Lauder, which derives approximately 30% of its annual earnings from the Asia Pacific zone.