By Scott Kanowsky | Investing.com
Investing.com -- U.S. stock futures inch into the green, hinting at a recovery from declines in the preceding session, as investors looked ahead to results from big-box retailer Target . Elsewhere, private equity TPG reportedly approaches EY over purchasing a stake in the financial services group's consulting arm, while VinFast's backdoor listing sees the value of the Vietnamese electric vehicle start-up climb above U.S. car giants Ford and General Motors.
1. Futures rise after declines on Wall Street
U.S. stock futures pointed higher on Wednesday, stabilizing after shares on Wall Street slipped in the prior session, with investors digesting stronger-than-projected retail sales figures and awaiting the release of earnings from retail chain Target.
All three of the main indices closed lower on Tuesday following new data that showed the value of U.S. retail purchases rose by 0.7% month-on-month in July, up from 0.3% in June and above estimates of 0.4%. Some traders took the number as a sign that Federal Reserve policymakers could leave borrowing costs higher for longer to keep recently cooling inflation on the downward path.
A Fitch analyst also told CNBC that the agency may soon announce rating downgrades of several U.S. banks, including JPMorgan Chase (NYSE:JPM). Financial sector stocks dropped on the report, while the KBW Bank index declined by 2.8%.
2. Target to report with sales in focus
The resilient retail sales report may come at an opportune time for America's big-box retailers, many of whom have struggled to entice inflation-hit customers into their stores throughout much of 2023.
One such company, Target (NYSE:TGT), is expected to post its first quarterly revenue decline in six years when it unveils its latest results Wednesday. Like peer Walmart (NYSE:WMT) and DIY-giant Home Depot (NYSE:HD), the Minneapolis-based group has seen consumers turn away from spending on nonessential items like clothing and patio furniture in response to recently elevated prices.
Shares in Target have shed more than a sixth of their value so far this year.
Target, which relies heavily on expenditures on such discretionary items to fuel its business, has already warned that returns would be weaker during the second quarter. To make matters worse, controversy over its Target Pride collection is also seen weighing on sales.
But there may be relief on the horizon. Consumers are continuing to shell out cash for services like travel and dining out, in the latest sign that the Fed may be able to engineer a so-called "soft landing" - corraling inflation without causing a meltdown in the wider economy. When, or how, this could translate into spending on the sort of items like electronics and beauty products that can revive Target's fortunes remains uncertain.
3. TPG eyes stake in EY consulting arm - FT
Private equity firm TPG Capital is considering taking a possible stake in professional services group EY's consulting division, according to the Financial Times, in a move that could reinvigorate an attempt by the Big Four group to separate its operations.
TPG proposed a debt-and-equity deal that would sever EY's consulting business from its audit arm, the FT reported. Citing a letter sent to EY's global and U.S. heads, the paper said the consulting unit would then be listed on the stock market at a later date, although TPG did not suggest a value for the business.
Earlier this year, EY scrapped a plan to float the consulting business that would have given the new firm an enterprise value of around $100 billion. Such a move would have amounted to the biggest shake-up in the accounting industry since the failure of Enron and WorldCom accountant Arthur Andersen in 2002.
However, the FT quoted one person familiar with EY's internal discussions as saying that "the organization will not pursue this expression of interest." TPG and EY both declined to comment to the FT.
4. VinFast's electric debut
Shares in VinFast soared by 255% in their debut on the Nasdaq stock exchange after the Vietnamese electric vehicle (EV) maker said it would likely start raising funds from investors in the next 18 months.
The firm, which went public via a merger with a special-purpose acquisition company, ended a day of thin trading valued at $85 billion, giving it a greater market capitalization than U.S. car giants Ford (NYSE:F) and General Motors (NYSE:GM).
Formed as a unit out of Vietnam's biggest conglomerate Vingroup, VinFast is aiming to take a new approach to EV distribution that it hopes will give it an edge against market leader Tesla (NASDAQ:TSLA). Instead of following Tesla's direct-to-consumer strategy, VinFast is expected to partner with overseas dealers. Chief Financial Officer David Mansfield told Reuters that a number of strategic and institutional investors are already "lined up," even though the group has yet to turn a profit.
VinFast is attempting to become a new EV player at a particularly precarious time for the industry. Tesla and its rivals in China have slashed prices to try to juice demand and snap up market share, boosting revenue but threatening profit margins in the process. VinFast's VF8 car is currently more expensive than Tesla's Model Y (at least in California), while the company has yet to bring its VF9 marque to the U.S.
5. Oil prices volatile amid China fears, U.S. inventory draw
Oil prices were choppy on Wednesday, as traders weighed concerns over China’s sputtering economy against a bigger-than-expected draw in U.S. inventories.
A string of recent Chinese economic data, including retail sales and industrial output, have missed economists' estimates, pointing to ongoing sluggishness in the post-pandemic recovery of the world's biggest oil importer. China's central bank slashed interest rates on Tuesday in a bid to help reignite the broader economy, although analysts have cast doubts over the effectiveness of the move.
Meanwhile, data from the American Petroleum Institute showed that U.S. oil stockpiles saw a much larger-than-anticipated 6.2 million barrel draw last week. Official inventory data from the Energy Information Administration is due later on Wednesday for confirmation.