By Geoffrey Smith
Investing.com -- Snapchat puts a chill on the relief rally, putting Twitter results in sharp focus. Stocks are due to open lower but are still on course for their highest weekly close since early June. Verizon, Amex and Schlumberger all report earnings. Recession fears in Europe grow after some weak business surveys, and there's a ray of hope for poor food-importing countries as Russia and Ukraine edge closer to a deal on securing grain exports out of the Black Sea, pushing wheat prices lower. Here's what you need to know in financial markets on Friday, July 22.
1. Snapchat puts a chill on the rally
The relief rally in U.S. stocks ran into resistance overnight after Snapchat owner Snap (NYSE:SNAP) posted its slowest-ever growth in sales as a public company, causing its stock to fall by nearly 30% in premarket trading.
The company also posted a loss of $422 million for the quarter and said it would “substantially” cut its hiring, in an echo of similar reports about bigger technology companies throughout the week. However, Snapchat has consistently had bigger problems with posting a profit than other social media companies, and its broader implications may not be too great. Twitter (NYSE:TWTR) results later this morning may show how far Snapchat’s problems are shared by the rest of the sector.
The report revived fears of a looming recession in the U.S., pushing the 10-Year benchmark Treasury yield down to a two-week low of 2.82%.
2. Europe recession fears rise after weak PMIs
Recession fears were front and center again in Europe overnight after the Eurozone composite purchasing managers index slipped back into contraction territory for the first time since March 2021.
That follows a bigger-than-expected first interest rate hike from the European Central Bank on Thursday, which was accompanied by some gloomy talk by President Christine Lagarde on the economic outlook. Eurozone bond yields fell, on perceptions that the turmoil in Italy - where President Sergio Mattarella has called for new elections in September - won’t stop the ECB’s new backstop tool for bond markets from working (roughly) as designed.
In the U.K., meanwhile, the composite PMI stayed in growth territory but fell to a 17-month low, while weak consumer confidence and underlying retail sales pushed the pound lower.
3. Stocks set to open lower, but on course for best week since June
U.S. stock markets are set to open slightly lower later but are still on course for their best week in five, and their highest close since early June.
By 06:20 AM ET (1020 GMT), Dow Jones futures were flat, while S&P 500 futures were down 0.3%, and Nasdaq 100 futures were down 0.6%.
Stocks likely to be in focus later include Tesla (NASDAQ:TSLA), after Bloomberg reported that Omead Afshar, the executive running Tesla’s Austin gigafactory, is likely to be forced out of the company due to his role in sourcing hard-to-get construction materials. Tesla has already fired some employees in relation to the probe.
Results from Verizon (NYSE:VZ), NextEra Energy (NYSE:NEE), American Express (NYSE:AXP), and Schlumberger (NYSE:SLB) will provide a broad cross-section of the economy.
4. Grain prices drop as Russia, Ukraine edge closer to export safety deal
Grain prices fell after the Turkish government said it expects Ukraine and Russia to sign a deal later Friday guaranteeing safe passage for grain out of Ukrainian ports to world markets.
According to the BBC, the deal envisages Ukrainian ships escorting vessels in and out through mined approaches to its ports and Russia’s agreement to a truce while shipments move. Turkey will also inspect ships entering the Bosporus straits to ease Russian fears of weapons smuggling.
The deal is also meant to facilitate Russian exports of grain and fertilizer via the Black Sea.
By 06:25 AM ET, London wheat futures were down 2.8%.
5. Oil hit by recession fears; CFTC, Baker Hughes rig count eyed
Crude oil prices fell again in line with broader recession fears, shrugging off news of increased violence in the capital of Libya, a key north African exporter.
By 06:30 AM ET, U.S. crude futures were down 1.7% at $94.75 a barrel, while Brent futures were down 1.4% at $102.42 a barrel.
The CFTC’s positioning data and the Baker Hughes rig count round off the week, while Schlumberger’s guidance and update on the state of the North American market will be of interest after Halliburton (NYSE:HAL) and Baker Hughes (NASDAQ:BKR) both warned of the near-impossibility in increasing U.S. drilling any more this year.