By Geoffrey Smith
Investing.com -- Hurricane Laura bears down on Texas and Louisiana, but oil prices come off their highs. Germany extends its job support scheme for another year. Stocks are set to open mixed ahead of durable goods data at 8:30 AM ET and Salesforce (NYSE:CRM) has a blowout quarter thanks to the Great Acceleration. Here's what you need to know in financial markets on Wednesday, August 26th.
1. As big as Katrina
The National Hurricane Center said the storm front Laura is set to make landfall as a Category 4 hurricane and warned of life-threatening storm surges, extreme winds and flash flooding over eastern Texas and Louisiana.
The NHC’s categorization ranks Laura equal in force with Katrina, which devastated New Orleans in 2005.
"On the forecast track, Laura should approach the Upper Texas and southwest Louisiana coasts on this evening and move inland near those areas tonight or (Thursday) morning," it said.
2. Oil prices edge off highs as Gulf refineries shut down
Oil prices came off five-month highs ahead of the storm, while gasoline futures also edged lower to $1.3863 by 6:30 AM ET (1030).
According to Petroleum Argus, some 2.6 million barrels a day of U.S. refining capacity has been temporarily shut in, with Chevron’s 100,000 b/d Pasadena refinery joining a lengthening list of installations to close on Wednesday. That’s more than 13% of total U.S. refining capacity that won’t be buying any crude for at least a couple of days.
The Bureau of Safety and Environmental Enforcement estimated on Tuesday that around 84% of crude production in the Gulf of Mexico – equivalent to 1.6 million barrels a day - has been shut in.
The hurricane is overshadowing what appears to have been another bigger-than-expected draw on U.S. oil stocks last week. The American Petroleum Institute estimated it at 4.5 million barrels on Tuesday. The Energy Information Administration’s data are due at 10:30 AM ET (1430 GMT)
3. Stocks set to open mixed after Tuesday records
U.S. stocks are set to open mixed after posting yet more all-time highs Tuesday as the implications of collapsing consumer confidence sink in.
The Conference Board’s sentiment index slumped to a six-year low in August as the enhanced unemployment benefits approved in the CARES Act expired without being fully replaced.
By 6:30 AM ET, the Dow futures contract was down 52 points, or 0.2%, while the S&P 500 Futures contract was effectively unchanged. Nasdaq 100 futures were, however, up another 0.3%.
Today's light calendar for data is headed by the release of durable goods orders for July at 8:30 AM ET.
4. Germany extends wage subsidies for another year
Germany’s government agreed in principle to extend the country’s subsidy scheme for workers on shortened hours by another 12 months through the end of next year.
While that reinforces the commitment of Europe’s largest economy to sustaining demand, it also reflects expectations that the effects of the pandemic will be felt on the labor market long after one or more of the vaccines currently in development become widely available. The move contrasts with the U.K., which has said it intends to end its wage support scheme in October.
The benchmark DAX index rose 0.6% by lunchtime in Frankfurt, while the EUR/USD was down 0.2% at $1.1812.
Elsewhere, the French government edged closer to announcing what is expected to be a 100 billion-euro stimulus package next week.
5. Salesforce crushes it
Anyone wondering why Salesforce should replace Exxon Mobil (NYSE:XOM) in the Dow Jones Industrial Average had their doubts answered after the software firm with a huge beat in its quarterly earnings and a big upgrade to its earnings guidance.
The company’s results were typical of the “great acceleration” theme embraced by investors who have bet on the pandemic speeding up the process of business migrating to the Internet, and to Cloud-based technologies in particular.
For the full 2021 fiscal year Salesforce now sees $3.72 to $3.74 in adjusted earnings per share, some 25% above the consensus estimate before the earnings were released.
Intuit (NASDAQ:INTU) and Urban Outfitters (NASDAQ:URBN) also beat expectations with earnings released after the close on Tuesday, but department store Nordstrom (NYSE:JWN) (NYSE:JWN) disappointed.