Daily Markets: Investors Parse Jobs Data Amid Rising Delta Case Counts and Fresh Curbs
Today’s Big Picture
Equity indices in Asia put in a mixed day of trading today, with Japan’s Nikkei up 0.5% and India’s Sensex 0.2%, while the Hong Kong Hang Seng slumped 0.8% and China’s Shanghai Composite 0.3%. Weighing on equities in the region, China imposed new travel restrictions amid rising Delta case counts while a Japanese minister confirmed that an expansion of the country's state of emergency is being considered.
By mid-day trading, equity indices in Europe were mostly higher and U.S. futures point to positive market open later this morning. With investors focusing on the speed of job creation ahead of Friday’s July Employment report following yesterday’s disappointing July job figures from ADP, we suspect this morning’s weekly jobless claims data will be under the microscope as will the latest Challenger Jobs Cuts report. With U.S. equities at or near record highs, we suspect investors will continue to assess the fallout on the economic recovery as the Delta variant continues to spread and curbs are increasingly put in place. We would not be surprised to see a further rotation into pandemic favorites as well as safer-haven stocks.
The pandemic continues to disrupt the convention world. The New York International Auto Show has been canceled for the second straight year after New York City Mayor de Blasio announced that proof of vaccination will be required for entrance to indoor public places such as restaurants and entertainment venues. A popular beer festival, the Hyde Park Summer Fest in Chicago, has also been canceled.
China imposed new restrictions on travel in a bid to slow a delta-driven outbreak that’s grown to more than 500 cases scattered across half the country. Bloomberg reports Public transport and taxi services were curtailed in 144 of the worst-hit areas nationwide, while officials curbed train service and subway usage in Beijing, where three new cases were reported Wednesday. Hong Kong re-imposed quarantine on travelers from the mainland, though an exception remained for the southern Guangdong province which neighbors the financial city.
CVS Health (CVS) has stopped offering Johnson & Johnson’s (JNJ) single-dose Covid-19 vaccine in its pharmacies, but customers can still get the shots at almost 1,000 MinuteClinic locations in 25 states and Washington DC.
In its latest Economic Bulletin, the European Central Bank (ECB) revised its forward guidance on interest rates during its July meeting, saying it expects interest rates to remain at their present or lower levels until it sees inflation reaching 2%. The ECB’s Governing Council viewed “the recovery in the euro area economy as being on track but the pandemic continues to cast a shadow, especially as the Delta variant constitutes a growing source of uncertainty.” The ECB’s next Economic Bulletin will be published on September 23.
The Bank of England voted unanimously to keep its benchmark interest rate on hold at a record low of 0.1 percent during its August meeting, and by a majority of 7-1 to leave its bond-buying program unchanged as widely expected. The central bank reiterated that it does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target on a sustained basis. The BoE also warned of a more pronounced period of above-target inflation in the near term and as expected raised its inflation forecasts following two consecutive months of above-forecast readings.
The biggest news yesterday was the ADP Employment Change report for July, which saw just 330k new jobs, less than half the expected 695k, and the prior month was downwardly revised. This was the weakest pace since February.
Yesterday’s Markit Service PMI for July came in slightly higher than the expected 59.8 at 59.9, down from June’s 64.6, marking the slowest pace since February, but still at a historically strong level. The ISM Non-Manufacturing PMI rose to 64.1 from 60.1, well above expectations for a decline to 60.5, and marking the steepest pace of expansion on record going back to 1997. Prices paid by services industries jumped to a 16-year high.
Yesterday, vehicle sale data through the end of July was released from Ward’s Automotive group, which found that auto sales slowed for the third consecutive month, dropping to a 14.75 million annualized rate, the lowest reading since last July. Through the end of Q2, General Motors (GM) and Ford (F) lost market share while Toyota (TM), Honda (HMC), Hyundai (HYMTF), and Kia (KIARF) gained.
The Wall Street Journal reports the U.S. Senate has moved through a series of amendments to the roughly $1 trillion infrastructure package and lawmakers anticipate a vote on final passage of the bill this weekend or early next week.
Later today we will get the Trade Balance for June and the usual weekly jobless claims.
Following a surprising and sizable miss for the July ADP Employment Change Report and comments from Federal Reserve Vice Chairman Richard Clarida indicated rate hikes could start as soon as 2022 if unemployment and inflation shape up the way he expects, the S&P 500 fell 0.5% yesterday. The Dow Jones Industrial Average dropped 0.9% and the Russell 2000 lost 1.2% on the day while the Nasdaq Composite Index eked out a positive day. All of those paled in comparison to yesterday’s more than 50% pop in Robinhood (HOOD) shares.
The 10-year Treasury yield rose slightly to 1.183% while crude oil dropped 3.45 to $68.15 a barrel, falling nearly 8% so far this week. Bitcoin rose to nearly $40,000.
COVID concerns claimed victims in hospitality and airline stocks as worries about renewed pandemic restrictions weighed on the shares of Hyatt Hotels (H), Marriott International (MAR), Spirit Airlines (SAVE), Delta Air Lines (DAL), and Southwest Airlines (LUV). By comparison, shares of Zoom Video Communications (ZM) climbed almost 7% yesterday.
Stocks to Watch
Before U.S. equity markets open, investors will be digging their way through a plethora of quarterly earnings reports including those from Cars.com (CARS), Datadog (DDOG), Fiverr (FVRR), Hanesbrands (HBI), Kellogg (K), Moderna (MRNA), Papa John’s (PZZA), Vonage (VG) and YETI Holdings (YETI).
Shares of Uber (UBER) were under pressure last night despite delivering a June quarter revenue beat and a surprise bottom-line profit for the quarter as a greater than expected EBITDA loss due to driver incentives was reported. Despite rising virus cases, total bookings grew from June to July and for the current quarter Uber expects gross bookings of $22-$24 billion vs. the $22.4 billion consensus. The company is also forecasting its adjusted EBITDA loss to fall below $100 million and believes it should have earnings leverage in the back half of the year due to the pull-back in driver incentives. Uber continues to forecast it will achieve its goal of adjusted EBITDA profitability in the fourth quarter of this year.
Edge platform company Fastly (FSLY) reported a smaller than expected June quarter loss but revenue for the quarter came up shy of consensus expectations despite rising 13.9% YoY. Late in the quarter, the company experienced a global network outage that impacted its results for the quarter given the company’s usage-based business model. That outage along with the uncertainty related to the timing of returning traffic, new initiatives, and new customers ramping traffic are impacting Fastly’s guidance. For the current quarter, the company sees a greater than expected bottom-line loss and revenue of $82-$85 million vs. the $97.9 million consensus forecast.
Roku (ROKU) reported June quarter EPS that handily beat consensus expectations and guided revenue for the current quarter above consensus expectations. While revenue growth for the quarter clocked in at 81% YoY and hours streamed rose 19% YoY, the number of active accounts grew just 28% to 55.1 million missing expectations the company would have at least 55.8 million exiting the quarter.
Electronic Arts (EA) delivered a beat and raise June quarter as net bookings came in at $1.336 billion, topping the $1.28 billion consensus. More than 140 million players engaged with its sports games in the trailing 12 months, and more than 31 million have joined FIFA 21 on console and PC. Meanwhile, season 9 of Apex Legends averaged more than 13 million weekly players, with a new record for peak daily players. For the current quarter, EA forecasts net bookings of $1.725 billion vs. the $1.52 billion consensus.
Despite reporting quarterly results for its June quarter that topped consensus expectations, Etsy (ETSY) guided the current quarter below the consensus forecast. The company sees revenue for the current quarter between $500-$525 million, 13.5% YoY at the revenue midpoint vs. the $527.5 million. Etsy offered up an interesting perspective on its September quarter outlook - excluding face masks it targets mid-teens GMS growth YoY vs. single-digit growth YoY including face masks.
Following the 51% YoY increase in June quarter revenue, Adidas (ADDYY) boosted its top and bottom-line outlook for 2021. The company now expects currency-neutral sales to increase at a rate of up to 20% YoY in 2021, driven by strong double-digit improvements in all markets. This new outlook reflects sales growth of up to 7% in the second half of the year compared to the 2020 level.
Costco Wholesale (COST) reported July net sales of $15.21 billion, up 16.6% YoY. Excluding the impact of gas prices and foreign exchange, total July comp sales rose 8.0% YoY, up 8.5% in the U.S., Canada +5.5%, and Other International +7.8% while Costco’s e-commerce sales for the month rose 5.7% YoY.
United Microelectronics (UMC) reported its July sales increased 18.5% YoY to NT$18.4 billion.
Weber Inc. (WEBR) priced a significantly downsized 17.9 million share IPO at $14 per share, below the targeted range of $15-$17.
After today’s market close, we have another round of earnings palooza, including the latest quarterly results from Air Lease (AL), AMN Healthcare (AMN), Axon (AXON), Beyond Meat (BYND), Carvana (CVNA), Cloudflare (NET), Dropbox (DBX), FireEye (FEYE), Groupon (GRPN), Oatly (OTLY), Plug Power (PLUG), Shake Shack (SHAK), and Universal Display (OLED).
Those looking to get a jump on earnings reports to be had in the coming days should visit Nasdaq’s earnings calendar page.
On the Horizon
- 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 summer night is like a perfection of thought.” — Wallace Stevens
- Cloudflare (NET), FireEye (FEYE) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
- Fastly (FSLY) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
- Beyond Meat (BYND), Oatly (OTLY) are constituents of the Tematica BITA Cleaner Living Index
- Beyond Meat (BYND), Oatly (OTLY) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
- Costco Wholesale (COST) is a constituent of the Tematica Research Dividend All-Stars Index
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.