Market Watch: Tech rebound, Netflix, TSMC, ECB decision.

Market Watch: Dow futures contract fell by 20 points, while S&P 500 futures rose by 12 points and Nasdaq 100 futures by 90 points.

Wall Street is expected to recover after a tech sector downturn, with strong results from TSMC and Netflix’s latest numbers, and the European Central Bank’s policy-setting meeting.

TSMC strong earnings

Taiwan Semiconductor Manufacturing (TSM) reported a 36% rise in Q2 net profit, driven by a surge in demand for semiconductors used in artificial intelligence applications. The company, the world’s main producer of advanced chips, posted a net profit of T$247.85 billion ($7.6 billion), compared to Reuters’ expectations.

TSMC is considered a bellwether for the global chipmaking industry due to its high capacity for producing advanced chips. However, TSMC stock fell due to geopolitical tensions and potential export curbs on China.

Netflix net subscriber additions

Netflix has forecast lower net subscriber additions in the second quarter than in the first three months of the year, with an estimated 4.82 million subscribers added.

This dropoff follows gains in the wake of a crackdown on password sharing and as viewer attention moved to summer sporting events.

JPMorgan believes Netflix may surprise with an impressive content slate, price hikes, and ongoing benefits from password crackdown efforts. Analysts remain positive on Netflix shares heading into Q2 earnings.

ECB is expected to maintain interest rates unchanged

The European Central Bank (ECB) is expected to maintain interest rates unchanged after lowering them from record highs last month.

The focus is on ECB President Christine Lagarde’s press conference, where she aims to strike a balance between regional growth and high domestic inflation and wage growth.

Markets are pricing in two rate cuts over the year.

Warner Bros Discovery is considering splitting

Warner Bros Discovery is considering splitting its digital streaming and studio businesses from its legacy TV networks to generate greater shareholder value. CEO David Zaslav is exploring strategic options, including selling assets or separating Warner Bros movie studio and Max streaming service into a new company. Warner Bros’ stock has fallen 27% this year.

Economic Calendar

• 8:30 AM                  Weekly Jobless Claims
• 8:30 AM                   Continuing Claims
• 8:30 AM                  Philly Fed Index M/M for June
• 10:00 AM                 Leading Index Change M/M for June
• 10:30 AM               Weekly EIA Natural Gas Inventory Data
• 1:45 PM                  Fed’s Logan Gives Opening Remarks
• 4:00 PM                  Net Long-term TIC Flows
• 6:05 PM                  Fed’s Daly Participates in Fireside Chat
• 7:15 PM                  Fed’s Bowman Gives Keynote Address

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Recent data indicating a possible cooling in the U.S. economy have alleviated some persistent inflation concerns, fueling hopes that the Federal Reserve will start to bring interest rates down from more than two-decade highs as soon as September. Along with the Dow, the benchmark  and tech-heavytouched record marks last week.

The durability of the strength on Wall Street will likely be tested by a fresh batch of corporate results this week, including quarterly returns from artificial intelligence darling Nvidia (see below). Durable goods and consumer sentiment data will also be in focus as markets hunt for more evidence that growth is moderating enough to give the Fed justification for rolling out rate cuts this year.

Recent data indicating a possible cooling in the U.S. economy have alleviated some persistent inflation concerns, fueling hopes that the Federal Reserve will start to bring interest rates down from more than two-decade highs as soon as September. Along with the Dow,

The durability of the strength on Wall Street will likely be tested by a fresh batch of corporate results this week, including quarterly returns from artificial intelligence darling Nvidia (see below). Durable goods and consumer sentiment data will also be in focus as markets hunt for more evidence that growth is moderating enough to give the Fed justification for rolling out rate cuts this year.

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MFitch Ratings has downgraded China’s credit rating outlook to “Negative” from “Stable” due to concerns over growing public debt and slowing growth in the world’s second-largest economy. The agency affirmed China’s rating at A+, citing increasing risks to China’s public finance outlook. Concerns over slowing economic growth have grown in recent months, with Fitch expecting gross domestic product growth to fall to 4.5% in 2024.

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U.S. inflation data for February is expected to provide insights into the future direction of Federal Reserve monetary policy. The overall consumer price index (CPI) is expected to match the previous month’s pace of 3.1% annually, with the core CPI expected to slow to 3.7% from 3.9% in January. However, the month-on-month gauge is expected to shed light on price gains momentum.

Fed officials have made cooling inflation the main objective of interest rate hikes, which have brought borrowing costs to over two-decade highs. They suggest cuts may be coming later this year, but need more evidence that price growth is sustainablely easing back down to their 2% annualized target. Analysts at ING believe inflation is likely too hot for comfort.

U.S. inflation data for February is expected to provide insights into the future direction of Federal Reserve monetary policy. The overall consumer price index (CPI) is expected to match the previous month’s pace of 3.1% annually, with the core CPI expected to slow to 3.7% from 3.9% in January. However, the month-on-month gauge is expected to shed light on price gains momentum.

Fed officials have made cooling inflation the main objective of interest rate hikes, which have brought borrowing costs to over two-decade highs. They suggest cuts may be coming later this year, but need more evidence that price growth is sustainablely easing back down to their 2% annualized target. Analysts at ING believe inflation is likely too hot for comfort.