Markets

Daily Markets: Another Significant Week of Earnings Awaits

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Today’s Big Picture

Equity indices in Asia ended the day’s trading in the green with Hong Kong’s Hang Seng adding 0.9%, China’s Shanghai Composite 2.0%. Japan’s Nikkei 1.8% and South Korea’s Kospi 0.7%. By mid-day trading, equity indices in Europe were all in the green, and U.S. futures point to positive moves at the open.

Following the bevy of quarterly earnings reports we had last week, this week brings another plethora of reports plus the usual start of the month economic data, including the July manufacturing and service reports from Markit Economics and ISM. When we thumb through those reports, we’ll be looking at how the internal figures stack up as well as comments surrounding input price pressures and the ability to attract workers. Those comments as well as the July ADP Employment Change report will likely sharpen expectations for the July Employment Report. With the Fed having signaled it will stay on course, and a vote on the proposed $1 trillion infrastructure plan set for Thursday, the next item of focus in Washington is the debt ceiling conversation (hint: it could get awkward).

Data Download

Coronavirus

Total cases worldwide reached over 198.3 million, with more than 4.2 million lives lost. On the positive side, over 4.13 billion doses of vaccine have been administered. The U.S. is donating more than 3 million Moderna (MRNA) shots and 415,000 AstraZeneca (AZN) doses to the Philippines this week and an additional 150,000 doses of the Johnson & Johnson (JNJ) vaccine to The Gambia. Pfizer (PFE) and Moderna have increased the prices of the vaccines in the latest contracts with the European Union.

Florida reported a record high of 21,683 new cases on Saturday as the state accounts for about 20% of all new cases in the U.S. Its prior record high was at 19,334 back on January 7. The state’s weekly number of new cases has risen 10-fold in just two months and the state currently has more people hospitalized for Covid-19 than at any point during the pandemic.

Yet another reminder that we are not out of the woods. China is seeing its broadest outbreak of the coronavirus since this all began in late 2019, including in the original epicenter Wuhan. The Delta variant has worked its way into nearly half of China’s 32 provinces in a matter of weeks. All passenger flights in and out of Yangzhou, China, have been suspended. Bus, cab, and ride-hailing services have also been stopped.

Just to keep things interesting, half of the infections in Israel are now among the fully vaccinated, with infections for people vaccinated in January at double the rate of those vaccinated in March. The U.S. CDC recently reported that about 75% of the people who were infected in a Massachusetts Covid-19 outbreak were fully vaccinated, with four of them having to be hospitalized. That said, roughly 97% of new hospitalizations and 99.5% of deaths in the U.S. are among unvaccinated individuals. According to NBC News, of the nearly 165 million Americans who have been fully vaccinated, at least 0.08% have tested positive and less than 0.001% have died from Covid-19. So, the bottom line is that while the vaccines aren’t 100%, they are still highly effective and are the best way to win this global fight against coronavirus.

International Economy

A slew of Manufacturing data for July came in over the weekend and show that while economies continue to improve, the pace slowed slightly more than expected:

  • The Ai Group Manufacturing Index for Australia for July fell to 60.8 from 63.2 while the Markit Manufacturing PMI dropped to 56.9 from 58.6, both reaching the slowest pace in four months, reflecting the slowing we’ve been seeing as Covid-19 restrictions return around the world.
  • China’s Caixin Manufacturing PMI fell more than expected to 50.3 from 51.3 in June from which it was expected to drop to 51.0. At 50.3, the measure is just barely in expansion, which is anything above 50.
  • Eurozone’s Markit Manufacturing PMI dropped less than expected to 62.8 from 63.4 in June from which it was expected to decline to 62.6.
  • UK’s Markit Manufacturing PMI fell to 60.4 (as expected) from 63.9 in June.
  • Spain’s Markit Manufacturing PMI fell more than expected to 59.0 from 60.4 in June from which it was expected to drop to 59.5.
  • Italy’s Markit Manufacturing PMI fell more than expected to 60.3 from 62.2 in June from which it was expected to drop to 61.5.
  • France’s Markit Manufacturing PMI fell more than expected to 58.0 from 59.0 in June from which it was expected to drop to 58.1.
  • Germany’s Markit Manufacturing PMI rose more than expected to 65.9 from 65.1 in June from which it was expected to increase to 65.6. Germany’s retail sales slowed to 4.2% MoM in June from 4.6% in May but came in well above expectations for a 2.0% increase.

Domestic Economy

A nationwide federal moratorium on eviction for renters expired this past weekend, putting the over 7 million Americans who are behind on their rent in a tenuous position just as the Delta variant is accelerating through the country. A few states, including California and Washington, have their own moratoriums that continue through the end of September, but most do not. Evictions could begin as early as today. Next up are homeowners with the first foreclosure proceedings against those that are in some sort of forbearance, an estimated 1.75 million homeowners or roughly 3.5% of all homes, starting in September.

Friday’s Personal Spending for June came in stronger than the expected 0.7% MoM increase at 1.0% from May’s-0.1%. Personal Income also came in stronger than expected, rising 0.1% MoM after falling -2.2%, versus expectations for a -0.3% decline. The Employment Cost Index for Q2 came in weaker than expected, which is good news on inflation, rising 0.7% QoQ, slowing from 0.9% QoQ in Q1, where it was expected to remain. The PCE Price Index held steady at 0.5% MoM in June, the same in May.

The U.S. Senate released the full text of the proposed $1 trillion infrastructure plan and a vote is expected on Thursday. The Infrastructure Investment and Jobs Act includes $550 billion in new spending over five years in addition to $450 billion of previously approved funds. $110 billion would be allocated for roads and bridges, $66 billion for rail, $55 billion for water and wastewater infrastructure, and $39 billion for public transit. The plan also includes funds for ports, high-speed broadband internet, replacing lead water pipes, and building a network of electric vehicle charging stations.

Later today, we’ll get the July reading for the Markit Manufacturing PMI, and ISM Manufacturing PMI as well as June Construction Spending figures. As we start July, auto OEMs will be reporting their latest monthly sales figures and we’ll be comparing them against Total Vehicle Sales figures for the month.

Markets

Following disappointing earnings news out of Amazon (AMZN) and negative-sounding headlines surrounding the Delta variant, the S&P 500 declined 0.5% on Friday, the Nasdaq Composite lost 0.7%, the Dow Jones Industrial Average fell 0.4%, and the Russell 2000 sank 0.6%. Despite that setback, those equity indices finished the month of July up 2.3%, 1.2%, 1.3%, and down 3.6%, respectively. That July retreat for the Russell 2000 led it to from its leading year-to-date position coming into the month to fourth place behind the other major market indices. Year to date, the S&P 500 was up 17% exiting July, while the Dow was up 14.1%, the Nasdaq Composite +13.8%, and the Russell 2000 +12.7%.

Stocks to Watch

Before markets open, investors will be treated to a number of quarterly earnings reports, including those from Ferrari (RACE), Global Payments (GPN) and On Semiconductor (ON).

Payments company Square (SQ) reached a deal to acquire the Australian buy-now-pay-later company Afterpay (AFTPF) in a $29 billion all-stock transaction. Afterpay, a global 'buy now, pay later' platform, will accelerate Square's strategic priorities for its Seller and Cash App ecosystems. Square also reported stronger than expected June quarter EPS but revenue for the quarter that rose 143.3% YoY to $4.68 billion missed the $5.05 billion consensus.

Li Auto (LI) delivered 8,589 Li ONEs in July, up 11.4% MoM and 251.3% YoY. YTD, total deliveries are 38,743, bringing cumulative deliveries of Li ONE to 72,340 since its market debut. NIO (NIO) delivered 7,931 vehicles in July, up 124.5% YoY. XPeng (XPEV) recorded its highest-ever monthly deliveries of 8,040 Smart EVs in July, up 228% YoY and +22% MoM.

The Macau Gaming Inspection and Coordination Bureau reported July gross revenues rocketed +528% YoY to HKD 8.44 billion vs. +812.5% in June. Companies to watch on this news include Wynn Resorts (WYNN), Las Vegas Sands (LVS), MGM Resorts (MGM).

After today’s market close, Arista Networks (ANET), Freshpet (FRPT), NXP Semiconductor (NXPI), Simon Properties (SPG), Take-Two (TTWO), and Trex (TREX) will be among the companies reporting their latest quarterly results. Those looking to get a jump on earnings reports in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

  • August 3: Factory Orders, IBD/TIPP Economic Optimism, API Crude Oil Stocks
  • August 4: ADP Employment Change, Markit Services PMI, ISM Non-Manufacturing PMI, EIA Crude Oil Stocks
  • August 5: Trade Balance, weekly Jobless Claims
  • August 6: Non-farm payrolls, Wholesales Inventories
  • August 9: JOLTs Job Openings and Labor Turnover Survey
  • August 10: Nonfarm Productivity Q2, Unit Labor Costs, API Crude Oil Stocks
  • August 11: Consumer Price Index (CPI), EIA Energy Stocks, Monthly Budget Statement
  • August 12: Producer Price Index (PPI), weekly Jobless Claims
  • August 13: Import & Export Prices, University of Michigan Consumer Sentiment
  • August 16: NY Empire State Manufacturing, Net Long-term TIC flows, Overall Net Capital Flows, Foreign Bond Investment
  • August 17: NAHB Housing Market Index, Retail Sales, Industrial Production, Business Inventories
  • August 18: Building Permits, Housing Starts, EIA Energy Stocks, FOMC Minutes
  • August 19: Philadelphia Fed Manufacturing Index, weekly jobless claims
  • August 23: Chicago Fed National Activity Index, Markit Manufacturing, Services & Composite PMIs, Existing Home Sales
  • August 24: New Home Sales, API Crude Oil Stock report
  • August 25: Durable Goods Orders, EIA Energy Stocks
  • August 26: Jobless Claims, GDP Growth Q2, Corporate Profits
  • August 27: Personal Income & Spending, Wholesale Inventories, PCE Price Index, Goods Trade Balance, University of Michigan Consumer Sentiment Report
  • August 30: Pending Home Sales, Dallas Fed Manufacturing
  • August 31: S&P/Case-Shiller Home Price Index, Chicago PMI, Conference Board Consumer Confidence, API Crude Oil Stock report

Thought for the Day

“The limit is not the sky. The limit is the mind.” ~Wim Hof

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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