Markets

Daily Markets: Can Stocks Rebound After Ugly Start to the Week?

A man looks at stock quotes in Beijing
Credit: Jason Lee / Reuters

Today’s Big Picture

Equity indices in Asia ended the day lower, led by falls of 1% in Japan’s Nikkei, 0.9% in Hong Kong’s Hang Seng, and 0.1% in China’s Shanghai Composite. In Europe, equity indices were mostly higher by mid-day trading and U.S. futures point to stocks clawing back some of yesterday’s sharp sell-off. As the velocity of corporate earnings reports ticks higher this week, investors will continue to mull over rising Delta variant cases and comments surrounding supply chain issues and rising costs as they fine-tune GDP and EPS expectations for the coming quarters.

And good luck today to Jeff Bezos as he blasts off into space!

Data Download

Coronavirus

Yesterday the U.S. CDC placed the UK on Level 4 ranking, its highest tier for Covid-19 levels, advising Americans to avoid visiting the UK. The Level 4 ranking is given to countries with “very high” levels of Covid-19. This came the same day that the UK removed all social contact restrictions on what Prime Minister Boris Johnson labeled “freedom day” amidst rising coronavirus cases.

On a more optimistic note, the World Health Organization (WHO) announced yesterday that the world could have control over Covid-19 by next year, “If we’re really lucky,” according to Dr. Mike Ryan, executive director of the WHO’s health emergencies program.

We aren’t quite there yet though. The American Academy of Pediatrics announced yesterday that it believes children over the age of 2 should wear masks when returning to school this year, regardless of their vaccination status. Children 12 and over are eligible for Covid-19 vaccinations, and last week the FDA announced that vaccines for children under 12 could come in early to midwinter.

A rise in COVID Delta variant cases globally has led Apple (AAPL) to push back its plan for employees to return to the office by at least a month.

International Economy

Japan’s Inflation rate rose 0.2% YoY in June, up from a -0.1% decline in May. Core Inflation rose 0.2% YoY, as expected, after a 0.1% increase in June.

China left its Prime 1-Year Loan Rate at 3.85% and its 5-Year at 4.65%, as expected.

Germany’s PPI rose 8.5% YoY in June from 7.2% in May, from which it was expected to rise to 8.4%. On a MoM basis, PPI rose 1.3% after rising 1.5% in May, from which it was expected to decelerate to 1.1%.

Domestic Economy

Yesterday’s NAHB Housing Market Index unexpectedly fell in July for the second month to 80 from 81, versus expectations for an increase to 82. Current sales conditions dropped 1 point to 86 and buyer traffic declined 6 points to 65. Later today brings the release of Building Permits, Housing Starts, and the usual weekly API Crude Oil stocks.

Markets

Worries over the COVID Delta variant sunk stocks yesterday with the Dow Jones Industrial Average falling 2.1% with all 30 components finished lower. The S&P 500 ended the day 1.6% lower, with every sector closing in the red, while the Nasdaq lost 1.1% and the Russell 2000 fell for the sixth straight session, shedding 1.8%. The S&P 500 tested its 50-day moving average for the 8th time this year and closed below its 20-day moving average for the first time since mid-June.

Travel stocks were hit hard by Delta concerns while defensive sectors weathered the day the best, with Consumer Staples and Healthcare posting the smallest declines. Bond yields fell as iShares 20+ Year Treasury Bond ETF (TLT) rose over 2%. Bitcoin (BTC) fell below $30,000 for the first time since June 22.

Stocks to Watch

Before U.S. equity markets begin trading, investors will have several quarterly earnings reports to chew through including those from GATX (GATX), Philip Morris International (PM), and Synchrony Financial (SYF).

IBM (IBM) reported June quarter results with revenue that rose 3.2% YoY modestly beating the consensus forecast while its EPS for the quarter came in better than expected. Revenue by segment saw Cloud & Cognitive Software rise 6% YoY, Global Business Service 12% YoY, Global Technology Services was little changed YoY, Systems fell 7% YoY and Global Finance fell 8.6% YoY. Based on mid-July exchange rates IBM “expects to grow revenue for the full year 2021.“

June quarter results from JB Hunt Transport Services (JBHT) topped top and bottom-line expectations with all business segments reporting “at least double-digit revenue growth” YoY. Price per a load of intermodal freight was up 9% YoY while revenue per loaded mile for truckloads was up 40% You.

PPG Industries (PPG) reported in-line revenue for the June quarter, missed consensus EPS expectations, and noted its volume growth was significantly tempered due to various supply and component disruptions as well as continual increases in raw materials and transportation costs. The company now sees various supply chain disruptions persisting through the current quarter.

Inter Parfums (IPAR) issued upside revenue guidance for Q2 and lifted its 2021 guidance as well. The company now sees June quarter revenue of $207.6 million vs. the $151.3 million consensus with European sales up 28% vs. 2018 and U.S. sales up 14% vs. 2019. Inter Parfums now sees 2021 revenue of ~$750 million vs. with prior guidance of $700 million with EPS of $1.95 vs. its prior guidance of $1.65.

Volkswagen (VWAGY) announced it will end U.S. sales and production of the Passat sedan next year, as it focuses on selling larger sport utility vehicles and the start of U.S. production of its new ID.4 electric model.

Peloton (PTON) is getting ready to debut an in-app video game called Lanebreak that would involve riders changing up their cadence and resistance levels to meet various goals and score rewards. Lanebreak is expected to open up to a members-only beta test later this year and officially launch in early 2022. Shares of the pandemic darling gained more than 7% yesterday.

General Motors (GM) confirmed it will make another all-electric pickup truck with the new model expected to be a full-sized pickup under the GMC nameplate aimed at the mainstream crowd. The company also make an electric version of the Chevy Silverado.

Rapid7 (RPD) announced it has acquired IntSights Cyber Intelligence for ~$335 million and shared it sees its 2Q revenue and non-GAAP income from operations exceeding the high-end of its May 6th guidance.

Snap (SNAP), the parent company of Snapchat, has acquired 3D & augmented reality commerce solutions provider Vertebrae.

After today’s market close, Chipotle Mexican Grill (CMG), Interactive Brokers (IBKR), Interactive Surgical (ISRG), Netflix (NFLX), and United Airlines (UAL) are among the companies reporting their 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

  • July 21: EIA Energy stocks
  • July 22: Weekly jobless claims, Chicago Fed National Activity Index, Existing Home Sales
  • July 23: Markit Manufacturing PMI (flash), Markit Services PMI (flash)
  • July 26: New Home Sales and Dallas Fed Manufacturing Index
  • July 27: Durable Goods, S&P/Case-Shiller Home Price, Conference Board Consumer Confidence, weekly API Crude Oil Stocks
  • July 28: Wholesale Inventories, Goods Trade balance, EIA Energy stocks, Fed Interest Rate Decision, and Press Conference
  • July 29: US GDP Q2, Pending Home Sales, Weekly Jobless Claims
  • July 30: Personal Income & Spending, PCE Price Index, Employment Cost Index, Chicago PMI, University of Michigan Consumer Sentiment
  • August 2: Markit Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, Total Vehicle Sales
  • 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

Thought for the Day

“We cannot reason ourselves out of our basic irrationality. All we can do is learn the art of being irrational in a reasonable way.” ~Aldous Huxley.

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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