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Daily Markets: New Quarter Kicks off With Jobless Claims Report, Manufacturing Data

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Today’s Big Picture

Equity indices in Asia kicked off the first day of trading for the September quarter on a down note following June manufacturing PMI data for the region that came in softer than expected. On the day, Japan’s Nikkei finished 0.3% lower, while the Hong Kong Hang Seng slumped 0.6%, South Korea’s Kospi fell 0.4% and China’s Shanghai Composite closed 0.1% lower. By comparison, favorable June manufacturing data spurred European equity indices higher as of mid-day trading, and U.S. futures point to a flat start to the new quarter after closing the June one near record levels.

Before U.S. equities begin trading, we’ll receive the latest weekly jobless claims data, and investors will be bracing to see if initial claims continue to outpace expectations. Soon after the start of the trading day, both the June readings for the ISM Manufacturing Index and the IHS Markit Manufacturing PMI reports for the U.S. will be published. While some will focus on the headline figures, others will be digging into the reports to further assess job growth prospects ahead of tomorrow’s June Employment Report. Meanwhile, new order data for June will give us a first look at manufacturing activity in the September quarter. Ahead of those reports, we’d note the latest New York Federal Reserve Nowcasting forecast calls for GDP of 3.39% for the quarter. 

Data Download

International Economy

Today brought a slew of manufacturing data:

  • From Australia, the Ai Group Manufacturing Index for June rose to 63.2 from 61.8, the fifth consecutive monthly increase that put the index at a record high. The IHS Markit Manufacturing PMI for the nation declined to 58.6 in June from May’s record high of 60.4. with factory orders and output slowing while employment growth eased. Both input costs and output prices increased at a slower pace than in May
  • Japan’s Tankan Large Manufacturers Index for Q2 rose to 14 from 5, slightly below the expected increase to 15
  • Japan’s Tankan Small Manufacturers Index for Q2 rose to -7 from -13, remaining below the expected improvement to -5
  • Japan’s Jibun Bank Manufacturing PMI fell to 52.4 in June from 53.0
  • China focused Caixin Manufacturing PMI fell to 51.3 in June from 52.0 in May, missing the expected decline to 51.8
  • India’s Markit Manufacturing PMI  fell to 48.1 in June 2021 from 50.8 a month earlier
  • Spain’s Markit Manufacturing PMI in June rose to 60.4 from 59.4 in the prior month, beating market expectations of 59.3
  • Italy’s IHS Markit Manufacturing PMI in June came in at 62.2, matching the consensus forecast, and was little changed from its May reading of 62.3
  • France’s Markit Manufacturing slipped to 59.0 in June from its 20-year high level of 59.4 in May but surpassed the expected reading of 58.6
  • Germany’s Markit Manufacturing PMI for June came in at 65.1, up from 64.4 the prior month and ahead of the expected increase to 64.9
  • The Eurozone Markit Manufacturing PMI hit a new record high of 63.4 in June vs. 63.1 in May, marking the twelfth consecutive month of expansion in the region

Japan’s Tankan Non-Manufacturing Outlook for Q2 rose to 3 from -1, well below the expected increase to 8.

Australia’s Exports rose 6% MoM in May, accelerating from a 3.3% increase in April. Imports rose 3.0% in May from a -2.7% pace in April. 

Germany’s Retail Sales slumped 2.4% YoY in May from the 5.1% increase posted in April.

Domestic Economy

Data from Real Capital Analytics revealed apartment prices raced up 10.1% YoY in May, pushing past industrial property price growth of 9.5%.

Pending home sales unexpectedly rose 8% in May, to the highest levels since February.

AAA reported 47.7 million Americans will travel for the Independence Day weekend, up 40% YoY with an estimated 91% of that travel done by car, 

Today brings Challenge Job Cuts for June, the usual weekly jobless claims, Markit Manufacturing PMI (final), Construction Spending and ISM Manufacturing PMI.

Markets

When we closed trading yesterday, we closed the books on June and Q2 2021 with the S&P 500 rising 0.1% on mixed breadth to put in yet another record high. Industrials were the strongest performers on the day, while Real Estate and Communication Services were the biggest decliners. The Dow Jones Industrial Average and the Russell 2000 finished 0.6% and 0.1% higher, while the Nasdaq Composite Index slumped 0.2%. For the first half of 2020, the major market indices were up

  • Russell 2000 +17.0%
  • S&P 500 +14.4%
  • Dow Jones Industrial Average +12.7%
  • Nasdaq Composite +12.5%

The biggest winners in the S&P 500 so far this year are primarily energy stocks ranging from Marathon Oil (MPC)Diamondback Energy (FANG) and Occidental Petroleum (OXY), up 104%, 94% and 81%, respectively. Other big winners were L Brands (LB)Ford Motor (F) and Gap (GPS), up 94%, 69% and 67%, respectively.

Stocks to Watch

In addition to digging into the June ISM Manufacturing and IHS Manufacturing PMI data for the U.S. this morning, investors will be parsing the latest quarterly results from Acuity Brands (AYI)McCormick & Co. (MKC)Simply Good Foods (SMPL) and Walgreens Boots Alliance (WBA). 

Micron (MUreported better than expected May quarter EPS as revenue for the quarter rose 36.5% YoY to $7.42 billion vs. the $7.3 billion consensus. The company’s NAND revenue hit a record driven by mobile MCP, consumer SSD and client SSD sales, while its embedded business exceeded $1 billion for the first time due to strength in the auto and industrial markets. Micron issued upside guidance for its current quarter, calling for EPS of $2.20 to $2.40 vs. the $2.15 consensus with revenue in the range of $8.0 to $8.4 billion vs. the $7.9 billion consensus. The company also announced it entered into a definitive agreement to sell its Lehi, Utah, fab to Texas Instruments (TXN) for $1.5 billion.

National Beverage (FIZZ) reported its results for its fiscal 2021 that modestly missed consensus expectations for both its top and bottom line. The company shared that shipments of its new trio of La Croix products, Beach Plum, Black Razzberry and Guava Sao Paulo, started late in April, and their velocity is setting records greater than any previous flavor launch.

Last night, the Nevada casinos recorded a gaming win tally of $1.23 billion in May to mark a third consecutive month over the billion-dollar mark. The total was 25.3% higher than the level seen in 2019 during May. Early this morning, the Macau Gaming Inspection and Coordination Bureau reported June gross revenue rose 812% YoY to HKD 6.5 billion vs. June 2020’s 97% drop. Stocks to watch on this news include Caesars Entertainment (CZR)MGM Resorts(MGM)Wynn Resorts (WYNN) and Las Vegas Sands (LVS).  

Reports indicate Facebook (FB) is experimenting with its Instagram service to show users full-screen videos in their feeds, a direct take on Tik Tok and Google’s (GOOG) YouTube. According to the company, Instagram is “no longer a photo-sharing app or a square photo-sharing app.” 

Intel (INTC) delayed the production of its Xeon server chip until 2022.

XPeng (XPEV) recorded its highest-ever monthly deliveries in June of 6,565 Smart EVs, up 617% YoY and a 15% MoM. Nio (NIO) delivered 8,083 vehicles in June 2021, an increase of 20.4% MoM and 116.1% YoY. 

Ford Motor (F) shared it will idle or reduce production at eight plants, including six in the U.S., for varying periods next month and into early August due to the ongoing semiconductor chip shortage. Affected products include Ford F-150, Ford Bronco Sport, Ford Mustang and Ford Explorer.

Hertz Global (HTZGQ) announced that it completed its Chapter 11 restructuring process.

Philip Morris International (PM) agreed to acquire privately-held Fertin Pharma A/S, a developer and manufacturer of pharmaceutical and well-being products based on oral and intra-oral delivery systems.

MKS Instruments (MKSI) and Atotech (ATC) entered into a definitive agreement in which MKS will acquire Atotech for $16.20 in cash and 0.0552 of a share of MKS common stock for each Atotech common share.

Krispy Kreme (DNUT) priced its IPO at $17 per share, well below the expected range of $21-$24.

After today’s market close, there are no companies expected to report their quarterly results. Those looking to get a jump on those reports and others to be had in the coming days should visit Nasdaq’s earnings calendar page

On the Horizon

  • 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

“You are your best thing.” - Toni Morrison

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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