Markets

Daily Markets: Infrastructure, Powell Top of Mind for Investors

Cords of steel detail
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Today’s Big Picture

Equity indices in Asia finished the day mostly higher, led by the more than 3% move in Japan’s Nikkei, which was followed by more meager gains for China’s Shanghai Composite and South Korea’s Kospi. Hong Kong’s Hang Seng closed down 0.6%. By mid-day trading, European equity indices were mixed but little changed, and following yesterday’s sharp move higher, U.S. futures point to a flat market open.

Much like yesterday, amid sparse economic data and earnings reports, eyes will once again be focused on Washington today. Ahead of his testimony before the Select Subcommittee on the Coronavirus Crisis, the Federal Reserve released Fed Chairman Powell’s opening statement. The key line in those remarks is found toward the end: “We at the Fed will do everything we can to support the economy for as long as it takes to complete the recovery.”

As lawmakers question Powell, we suspect he'll stick close to that statement even as investors will once again parse his words for clues as to what could come next from the Fed.

Meanwhile, Bloomberg reports the bipartisan group of senators trying to come up with an infrastructure compromise are moving closer to an agreement on a proposal but are struggling with how to pay for their plan, given the White House’s opposition to indexing the gasoline tax to inflation.

Data Download

International Economy

South Korea’s Producer Price Index for May accelerated to 6.4% YoY after rising an upwardly revised 6.0% in April.

Industrial Sales in Italy rose 105.1% YoY in April after rising 37.9% in March, but we’d remind readers of the very easy comparisons to year-ago levels given the pandemic.

Domestic Economy

The only material economic data yesterday was the Chicago Fed’s National Activity Index for May, which was generally pretty strong, rising to 0.29 after a relatively weak April at -0.09. There were some areas of weakness, such as Consumption & Housing, which came in at the second-worst level since the pandemic hit last March and April. Overall this index has a strong, positive correlation with the growth of GDP, and the average for April and May indicates GDP growth of around 10% for Q2.

Later today, we will get Existing Home Sales, which are expected to drop to a seasonally adjusted annual rate of 5.7 million homes, the third consecutive decline thanks to low inventory levels. We will also get the Richmond Fed Manufacturing Index for June and the usual weekly API Crude Oil Stock report.

Markets

The S&P 500 rose 1.4% on Monday, with 95% of its component stocks closing in the green, in a rebound rally following comments from New York Fed President John Williams that he sees 7% economic growth this year, inflation cooling next year, and the data hasn't supported a shift in monetary policy as yet. Williams went on to say, "It goes without saying that there is a great deal of uncertainty about the inflation outlook, and I will be watching the data closely."

The Dow Jones Industrial Average and the Russell 2000 closed 1.8% and 2.2% higher, respectively, while the Nasdaq Composite finished the day up 0.8%. Monday also snapped a 10-day record streak of declines between the open to the close for the Dow.

Monday’s action started to reverse an extreme relative positioning from Friday’s close wherein the Dow was more than two standard deviations below its 50-day moving average while the Nasdaq was more than one standard deviation above its 50-day. The last time we saw such a spread was in March 2000 and before that May 1996 and September 1999.

The bond market saw a major reversal as well Monday, with the Treasury curve steepening after last week’s flattening. The 10-year yield rose to 1.49% and the 30-year rose more than 30 basis points. The VIX dropped back below 18.

Stocks to Watch

Netflix (NFLX) signed a deal with Steven Spielberg’s production company, Amblin Partners, to make several movies in the coming years. The financial details of the agreement were not disclosed.

Shoe Carnival (SCVL) issued upside guidance for its fiscal 2022 that now calls for EPS of above $6.00 vs. the $5.64 consensus. The company also announced a two-for-one stock split to shareholders of record at the close of business on July 6.

Reports indicate Exxon Mobil (XOM) is preparing to reduce headcount at its U.S. offices by between 5% and 10% annually for the next three to five years by using its performance-evaluation system to suss out low performers.

Capital Senior Living (CSU), which owns and operates senior living communities in the U.S., reported 78.2% occupancy in May 2021, higher than the 75.3% pandemic low. Approximately 53% of its 60 owned communities and all but two of its managed communities are above pre-pandemic February 2020 occupancy levels.

Ping Identity (PING) acquired SecuredTouch, a provider of fraud and bot detection and mitigation solutions that provide teams early visibility into potential malicious activity happening across digital properties.

Shares of DoorDash (DASH) moved higher yesterday following news that it has struck a strategic partnership with grocery store chain Albertson's (ACI).

Reports suggest Sanderson Farms (SAFM) is exploring the possibility of a sale after attracting the interest of potential buyers, including agricultural investment firm Continental Grain.

Welltower (WELL) announced it will acquire a portfolio of 86 seniors housing properties from Holiday Retirement for $1.58 billion or $152,000 per unit.

Accenture (ACN) made a strategic investment, through Accenture Ventures, in Imburse, a cloud-based, payments-as-a-service enterprise platform that simplifies the way businesses around the world access the global payments ecosystem.

Electric vehicle startup Lordstown Motors Corp (RIDE) is “evaluating strategic partners” as part of its search for funding needed to stay in operation

A day after American Airlines (AAL) announced it was canceling hundreds of flights due to a staffing crunch, Delta Air Lines (DAL) shared it is planning to hire more than 1,000 pilots by next summer amid rebounding travel demand.

Nouveau Monde Graphite (NMG) and Caterpillar (CAT) announced they signed an agreement in which Caterpillar will develop, test, and produce Cat "zero-emission machines" for the Matawinie graphite mine with a view to becoming the exclusive supplier of an all-electric mining fleet for deployment at Nouveau Monde's Matawinie mine by 2028.

The European Commission opened a fresh probe into Alphabet (GOOG, GOOGL) to determine whether the company abused its role in the ad technology sector and will examine its brokering of advertisements and sharing of user data with advertisers across websites and mobile apps (like YouTube).

After today’s market close, there are no companies expected to report their quarterly results. Those looking to get a jump on upcoming earnings should visit Nasdaq’s earnings calendar page.

On the Horizon

  • June 23: Current Account, Markit Manufacturing & Service PMI, New Home Sales, EIA Energy Stock
  • June 24: Durable Goods Orders, Wholesale Inventories, Weekly Jobless Claims, GDP Price Index Q1, Goods Trade Balance, Corporate Profits Q1
  • June 25: Personal Income & Spending, PCE Price Index, Michigan Consumer Sentiment
  • June 28: Dallas Fed Manufacturing Index
  • June 29: S&P/Case-Shiller Home Price Index, Conference Board Consumer Confidence, API Crude Oil Stocks
  • June 30: ADP Employment report, Chicago PMI, Pending Home Sales, EIA Energy Stocks
  • July 1: Weekly jobless claims, Markit Manufacturing PMI (final), Construction Spending, ISM Manufacturing PMI
  • July 2: Balance of Trade, Nonfarm Payrolls, Factory Orders
  • July 6: Markit Services PMI (final), ISM Non-Manufacturing PMI, IBD/TIPP Economic Optimism
  • July 7: JOLTs Job Opening Report, FOMC Minutes, API Crude Oil stocks
  • July 8: Weekly jobless claims, EIA Energy stocks
  • July 9: Wholesale Inventories
  • July 13: Inflation, Monthly Federal Budget statement, API Crude Oil stocks
  • July 14: Producer Price Index, EIA Crude Oil stocks
  • July 15: Weekly jobless claims, NY Empire State Manufacturing Index, Philly Fed Manufacturing Index, Industrial Production, Import & Export Prices
  • July 16: Retail Sales, Michigan Consumer Sentiment, Business Inventories, Net Capital Flows, Foreign Bond Investment
  • July 19: NAHB Housing Market Index
  • July 20: Building Permits, Housing Starts, API Crude Oil stocks
  • 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)

Thought for the Day

“Life has no remote, get up and change it yourself.” ~Kushandwisdom

Disclosures

Sanderson Farms (SAFM) is a constituent of the Tematica BITA Cleaner Living Sustainability Screened Index

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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