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Day Ahead: 3 Things to Watch for August 4

Published 08/03/2020, 03:57 PM
Updated 08/03/2020, 04:12 PM
© Reuters.
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By Liz Moyer

Investing.com -- Big tech pushed Nasdaq to yet another record and lifted the Dow on Monday as investors looked past concerns about the economic fallout from Washington's stalemate over new stimulus.

Apple Inc (NASDAQ:AAPL), Netflix Inc (NASDAQ:NFLX), Facebook Inc (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT) are all sharply higher for the year and rose again on Monday. Microsoft said it was pursuing a deal to buy the U.S. operations of the TikTok social media app popular with Gen Z. NASDAQ Composite closed at 10,902, just a breath away from 11,000, as it continues its relentless rise. The Dow Jones Industrial Average rose nearly 1%, to 26,675.

Stocks also got a boost from strong earnings reports in recent days and data showing manufacturing is rebounding better than expected.

Anticipation is building over Friday's monthly jobs report for July as lawmakers on Capitol Hill continue to argue over whether to reinstate a $600 weekly federal pandemic assistance payment to those who are unemployed.

Here are some things that could affect the markets tomorrow:

1. Banks are tightening the credit spigot

Banks are tightening their lending standards and terms for everything from commercial loans to household loans like mortgages and credit cards, according to the Federal Reserve's loan officer survey. That could mean higher borrowing costs or less credit available for already Covid-challenged businesses and consumers.

Regulators have already told banks to hold off on stock buybacks so they can preserve capital out of fear that a looming credit crisis could leave them holding big losses. But at the same time, the Fed and other agencies have been encouraging banks to make more credit available to aid in the economic recovery process.

Still, financials are the second-worst performing sector of the S&P 500 so far this year, down more than 20%. Only energy was worse, down 40%. Shares of Bank of America Corp (NYSE:BAC) are down 29% since the beginning of the year, while JPMorgan Chase & Co (NYSE:JPM) is down 30% through July. Citigroup Inc (NYSE:C) is down 36%. Wells Fargo & Company (NYSE:WFC) is down 54%.

2. Investors eye Nikola's earnings report on Tuesday

Nikola Corp (NASDAQ:NKLA) shares jumped 21% on Monday as the company prepared to release second quarter earnings on Tuesday. The shares gave back some of that gain in after-hours trading, falling 4.3%.

Deutsche Bank (DE:DBKGn) said in a note on Monday that the electric truck maker could provide business updates that would drive the shares higher in the short term. Among the things investors are hoping to learn more about are the customer pipeline for Nikola's electric semi, its plans to build a hydrogen refueling network, and a manufacturing partner for its Badger pickup truck, according to Deutsche Bank analyst Emmanuel Rosner, according to The Motley Fool.

Analysts have recently been raising their estimates for the quarter, which is typically a bullish sign.

3. TikTok makes news, and not because of a viral video

U.S. presidents typically don't weigh in publicly on corporate M&A activity, but that's not stopping Donald Trump from commenting on Microsoft Corporation (NASDAQ:MSFT)'s potential deal for the popular video-making app TikTok.

The president talked with Microsoft CEO Satya Nadella over the weekend and then the Seattle company confirmed that it was looking to buy TikTok's operations in the U.S., Australia, Canada, and New Zealand. Trump has criticized TikTok and even threatened to ban it in the U.S. because of security concerns over its Chinese parent.

On Monday he told reporters at the White House that TikTok would be shut down on Sept. 15 unless Microsoft or another company buys it. TikTok has about 100 million users in the U.S., many of them teenagers and young adults.

Shares of another popular social media app, Snapchat by Snap Inc (NYSE:SNAP), fell 5.6% on Monday after the news of the Microsoft talks with TikTok. Facebook, which owns Instagram, fell less than 1%.

 

 

 

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