Daily Markets: Spreading Delta Variant Pressures Global Equities

Today’s Big Picture

Equity indices in Asia ended the day’s trading mostly lower, led by the 1.8% fall in Hong Kong’s Hang Seng and the 1.3% drop in Japan’s Nikkei, which registered its fourth consecutive loss after positive COVID-19 tests were revealed among athletes in Olympic Village. In Europe, equity indices were down across the board, and U.S. futures point to equities opening lower as investors grapple with the spreading Delta variant, potential new lockdown restrictions that could hinder the economic rebound. Stocks poised to benefit from the global recovery, such as United Airlines (UAL), American Airlines (AAL), and Royal Caribbean (RCL) are under pressure this morning in pre-market trading. And the big June quarter earnings season kicks into gear this week.

Data Download

Coronavirus

The Delta coronavirus variant is rapidly becoming dominant across much of the world, particularly in areas with low vaccination levels. For example, in Indonesia where only 6% of the population is fully vaccinated, 95% of sequenced coronavirus cases are the Delta variant. The same percentage is found in South Africa where less than 3% are fully vaccinated. Africa has seen 1 million new cases over the past month, which is the fastest infection rate yet. Russia reported yesterday a record high of Covid-19 deaths for the fourth consecutive 7-day period where the Delta variant has accounted for around 85% of the sequenced viruses over the past four weeks.

The Greek island of Mykonos has imposed a curfew from 1 am to 6 am that will last until at least July 26. Music is to be banned from 6 pm until 6 am.

Over the past week, the UK averaged nearly 45,000 cases in the coronavirus per day, an increase of 83% from the average just two weeks prior. Deaths from the virus are up over 140%.

Just to add to the fun, there have been nearly 30 coronavirus infections related to the Olympic Games so far.

The U.S. surgeon general warned more cities will probably have to follow the lead of Los Angeles and reimpose mask mandates in the coming months.

Domestic Economy

Retail Sales for June came in stronger than expected for June, rising 0.6% MoM from a downwardly revised -1.7%contraction in May, and a full percentage point better than the expected -0.4% decline. Demand was driven by electronics, clothing stores, and restaurants. Ex-Autos retail sales were also stronger than expected, rising 1.3% MoM after a downwardly revised -0.9% contraction in May, and well above the expected 0.4% increase.

Business Inventories rose 0.5% MoM, as expected in May, up from the 0.1% pace in April.

Michigan Consumer Sentiment fell to 80.8 in July, a 5-month low, from 85.5 in June, well below the expected increase to 86.5. Inflation expectations rose to 4.8% from 4.2% in June.

Later today we will get the NAHB Housing Market Index which is expected to increase to 82 from 81 in June.

Markets

Equity markets ended last week with the Nasdaq Composite and the S&P 500 falling 0.8%, the Dow dropping 0.9%. For the week, the Nasdaq Composite lost 1.9%, the S&P 500 1.0%, the Dow lost 0.5%. The outperformance of the S&P 500 over the S&P 500 equal weight as well as the outperformance of the Nasdaq 100 over the Nasdaq Composite show that the market is still being led by the usual big market cap leaders.

Stocks to Watch

Before markets begin trading, investors will have several quarterly earnings reports to chew through including those from AutoNation (AN), Cal-Maine Foods (CALM), and Tractor Supply (TSCO).

Effective today, Interactive Brokers Group (IBKR) introduced a new fee structure of a flat 3 EUR or 3 GBP per trade(trades up to 6,000 EUR/GBP in value) for stock trading in Europe.

Tesla (TSLA) introduced an option for some customers to subscribe to its advanced driver assistance software, dubbed "Full Self-Driving capability," for $199 per month, instead of paying $10,000 upfront.

L Brands (LB) hosts a virtual investor meeting covering growth plans and strategies for Bath & Body Works and Victoria's Secret & Co.

Zoom Video Communications (ZM) agreed to acquire cloud contact center provider Five9 (FIVN) in an all-stock deal that values the company at ~$14.7 billion. Zoom says the acquisition will help enhance its presence with enterprise customers and allow it to accelerate its long-term growth opportunity by adding the $24 billion contact center market.

Primo Water (PRMW) acquired substantially all of the assets of The Sweetwater Company dba Earth2O, which manufactures and distributes spring water to residential and retail accounts in Oregon and the Pacific Northwest.

Kite Realty Group Trust (KRG) and Retail Properties of America (RPAI) have entered into a merger agreement under which RPAI would combine with a subsidiary of KRG, with KRG continuing as the surviving public company. Under the terms of the agreement, each RPAI common share will be converted into 0.6230 newly issued KRG common shares in a 100% stock-for-stock transaction.

According to an 8-K filing, Salesforce's (CRM) planned $28 billion purchase of Slack Technologies (WORK) has been approved by the DOJ.

After today’s market close, IBM (IBM), JB Hunt (JBHT), and PPG Industries (PPB) are among the companies reporting their quarterly results. 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

• 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 Non-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

“The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence.” ~ Charles Bukowski

Disclosures

• IBM (IBM) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Cal-Maine Foods (CALM) is a constituent of the Foxberry Tematica Research Sustainable Future of Food Index
• Primo Water (PRMW), Tesla (TSLA) are constituents of the Tematica BITA Cleaner Living Index
• Primo Water (PRMW), Tesla (TSLA) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
• IBM (IBM) 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.

Other Topics

Stocks Economy Coronavirus Earnings