A look at the day ahead in U.S. and global markets from Mike Dolan
Monday's Wall Street bounce saw some relief precede the first two earnings reports from the "Magnificent 7" megacap stocks, while U.S. Vice President Kamala Harris looked set to replace Joe Biden as Democrat candidate for November's White House race.
A volatile couple of weeks for politics and stock markets sees attention switch back to quarterly earnings on Tuesday, with Google-parent Alphabet (NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA) updating after the bell today.
Last week's sudden rotation out of Big Tech into small caps raised questions about just how high the earnings bar now is for pricey market behemoths, with stocks such as Netflix (NASDAQ:NFLX) stumbling despite beating forecasts and chipmakers sideswiped by geopolitics.
A standback look at the earnings season so far offers more solace.
Some 81% of those that have reported to date have beaten estimates, with overall annual profit growth for S&P500 firms still tracking a punchy 11% - slightly ahead of pre-season assumptions. Slower annual revenue growth at 4.5% is also slightly ahead.
And while this pace is expected to dip in Q3, standing forecasts are for a re-acceleration into 2025.
With the S&P500 rebounding more than 1% on Monday in its best day in six weeks, the Information Technology index climbed 2% - topping sectoral gainers and snapping a four-day losing streak.
The VIX volatility gauge slipped back from three-month highs.
In a twist ahead of today's updates, Israeli cybersecurity startup Wiz has ended talks with Alphabet on a reported $23 billion deal, which would have been the U.S. tech giant's largest-ever acquisition, according to a Wiz memo seen by Reuters.
But the election race remains the top talking point.
Less than 36 hours after Biden stepped aside and endorsed VP Harris, she appeared to have secured the Democratic nomination on Monday night by winning the pledged support of a majority of the party's delegates who will determine the outcome at next month's convention.
While another round of speculation about Harris' pick of running mate now ensues, markets are already tentatively re-calibrating election bets.
Although former President Donald Trump is still seen as clear favourite to return to the White House, online betting site PredictIt shows the probability of his win has slipped to 60%.
The solidifying of a clear two horse race after weeks of uncertainty about the candidates has seen Harris' ascribed probability jump 17 points from last week to some 44% on Tuesday as her campaign now begins in earnest.
The somewhat cagey election positioning to date has run into sand as a result, with many of the so-called Trump trades being pared back slightly.
With another heavy week of Treasury debt auctions kicking off with a $69 billion two-year note sale on Tuesday, Treasury yields sensitive to the fiscal implications of the election remained under wraps. The 2-to-30 year yield curve, which had briefly turned positive last week, remains inverted.
Bitcoin also slipped back.
The dollar was mixed too, falling back against Japan's yen on Tuesday as pressure built on the Bank of Japan to resume monetary tightening there.
Senior Japanese ruling party official Toshimitsu Motegi said the BOJ should more clearly indicate its resolve to normalise monetary policy, including through steady interest rate hikes. The BOJ next sets rates on July 31.
Increasingly correlated in Asia, yen strength came in tandem with a small bounce in China's yuan too, despite Monday's surprise interest rate cut from the People's Bank of China.
Trump's draconian tariff pledges may play a part there too.
But Chinese stocks recorded their biggest single-day drop in six months, demonstrating the fragility of investor sentiment despite ongoing stimulus efforts.
China's blue-chip CSI300 index closed down 2.1%, its largest one-day decline since mid-January and ending a seven-session winning run.
European stocks were mixed on Tuesday, with the euro retreating after European Central Bank Vice President Luis de Guindos said new data and macroeconomic projections will help the ECB better reassess its monetary policy stance in September - when markets now see its next rate cut.
Back on Wall Street, stock futures were off slightly ahead of the big earnings reports and with a thin economic diary.
Key developments that should provide more direction to U.S. markets later on Tuesday:
* U.S. June existing home sales, Richmond Federal Reserve's July business surveys; Euro zone July consumer confidence
* US corporate earnings: Alphabet, Tesla, Comcast (NASDAQ:CMCSA), Texas Instruments (NASDAQ:TXN), Lockheed Martin (NYSE:LMT), UPS, GE, GM, Invesco, Visa (NYSE:V), Capital One, Moody's, MSCI, Coca Cola, Kimberly-Clark (NYSE:KMB), Chubb (NYSE:CB), HCA (NYSE:HCA) Healthcare, Freeport McMoRan, AO Smith, Pentair, Philip Morris (NYSE:PM), Avery Dennison (NYSE:AVY), Danaher (NYSE:DHR), PulteGroup (NYSE:PHM), Quest, Seagate Technology (NASDAQ:STX), Sherwin-Williams (NYSE:SHW) Enphase Energy, CoStar, Genuine Parts, Packaging Corp of America
* G20 Finance Ministers and Central Bank Governors meet in Rio de Janeiro ahead of the G20 Brazil Summit
* European Central Bank Chief Economist Philip Lane speaks
* US Treasury sells $69 billion 2-year notes
(By Mike Dolan; Editing by Sharon Singleton mike.dolan@thomsonreuters.com)