Daily Markets: May Data Bonanza as Fed Begins its Latest Policy Meeting
Today’s Big Picture
The major equity indices in Asia-Pacific were mixed today, with Japan’s Nikkei closing up 1.0% and South Korea’s Kospi gaining 0.2% while China’s Shanghai Composite fell 0.9% and Hong Kong’s Hang Seng slumped 0.7%. By midday trading, the major European equity indices were mostly higher and U.S. equity futures point to a mixed open later this morning.
The major focus for equity markets over the next two days will be the Federal Reserve’s Open Market Committee June meeting, which begins today and ends tomorrow. While the central bank is not expected to take any action, investors will be picking through today’s May Producer Price Index report to gauge to what degree the Fed will stick to its favorite word of 2021: transitory. Investors will also be digging through the latest monthly Retail Sales report, looking to determine if consumer spending is widening out as expected. In addition to that, we’ll be eyeing May Capacity Utilization data for confirmation that yes, the recent uptick in inflation data is likely to be transitory.
Today brought inflation data from Europe:
- Germanys’ rose 2.5% YoY in May after rising 2.0% in April, matching the expected figure.
- In France, May’s inflation rate inched up to 1.4% YoY following 1.2% in April, also matching the consensus forecast.
- The May inflation rate in Italy also ticked higher, hitting 1.3%, up from April’s 1.1% YoY figure, also matching expectations.
The Unemployment Rate in the UK in April inched lower to 4.7%, matching the consensus forecast, compared to March’s 4.8%.
Yesterday the New York Federal Reserve updated its monthly consumer sentiment survey which found that inflation expectations have risen to the highest levels in the survey’s history, which to be fair, only goes back to June 2013. Another interesting point is that while all age groups have seen a big increase in inflation expectations, those over 60 years of age have the highest expectations, and those aged 40-60 have higher expectations than those under 40. So much for experience, because with respect to at least this survey, younger Americans have had a better track record forecasting rates and for the under 40 crowd, the expectation is for under 3%.
Later today we get quite a few economic data releases including:
- Retail Sales are expected to decline 0.5% MoM following a flat April
- Producer Price Index (PPI) for May is expected to see both headline and core increase 0.4%, after gains of 0.6% and 0.7% respectively in April
- NY Empire State Manufacturing for June which is expected to decline to 22.6 from 24.3 in May
- Industrial Production is expected to increase 0.6% MoM after a 0.7% increase in April
- Business Inventories which are expected to decline -0.1% MoM in April after rising 0.3% in March
- NAHB Housing Market Index is expected to remain flat at 83
- Net Long-Term Tic Flows
- Foreign Bond Investment
- and the usual weekly API Crude Oil stock report
The S&P 500 rose 0.2% yesterday and we’d note a wave of buying activity late in the day helped the index close at a new record high. The Nasdaq Composite Index was the winner of the day, rising 0.7%, hitting its first new record high since April, while both the Dow Jones Industrial Average and the Russell 2000 finished the day lower. From a sector perspective, information technology and communication services were the winners of the day while the materials, financials, and industrials sectors finished weaker on the day.
Stocks to Watch
Spirit Airlines (SAVE) shared leisure demand in domestic and international markets continued to improve throughout the quarter and the company sees its load factor for the quarter at ~84%, in line with the performance achieved in 2Q19.
Shares of Biodesix (BDSX) are up in premarket trading following the news its SARS CoV-2 Neutralization Antibody Test is now commercially available.
Vimeo (VMEO) shared that exiting May, its subscriber count was up 18% YoY, its average revenue per user in May was up 18% YoY and its total revenue for the month climbed 42% YoY.
American Express (AMEX) shared its May travel bookings were 95% of May 2019 levels and restaurant spending is rebounding as well, hitting 85% of May 2019 levels.
Credit card delinquency rates at Discover Financial Services (DFS) declined to 1.50% in May 2021 from 1.69% in April and from 2.36% in May 2020. The company’s May net charge-off rate of 2.62% increased from 2.55% in April but is well below 4.07% a year ago.
Capital One (COF) also reported its May card metrics, which included a domestic net charge-off rate of 2.33% vs 2.4% last month with a delinquency rate of 1.69% vs 1.92% in April.
Citing a "much stronger" than anticipated final two weeks of the tax season, Blucora (BCOR) raised its outlook for the current quarter. The company now expects its 2Q revenue of $250-$254.5 million, up from its prior guidance of $238-$249.0 million, and well above the consensus of $226.7 million.
The UK’s Competition and Markets Authority (CMA) has launched a market study into Apple’s (AAPL) and Alphabet's (GOOGL) mobile ecosystems over concerns they are stifling competition across a range of digital markets.
The U.S. and the European Union agreed to a five-year truce in their 17-year dispute over aircraft subsidies to Airbus SE (EADSY) and Boeing (BA). According to reports, under the deal, all future passenger aircraft will be required to be developed without subsidies.
After today’s market close, Oracle (ORCL) will report its latest quarterly results. Those looking to get a jump on that report and others to be had in the coming days should visit Nasdaq’s earnings calendar page.
On the Horizon
- June 16: Building Permits, Housing Starts, Import/Export Prices, weekly energy stocks, FOMC Economic Projections, and Interest Rate decision
- June 17: Weekly Jobless Claims, Philadelphia Fed Manufacturing
- June 21: Chicago Fed National Activity Index
- June 22: Existing Home Sales, Weekly API Crude Oil Stock
- 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
Thought for the Day
“A fool is known by his speech, and a wise man by silence.” ~ Pythagoras
- American Express (AXP) is a constituent in the Tematica BITA Digital Infrastructure and Connectivity Index.
- American Express (AXP) is a constituent in Tematica Research's Thematic 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.