Markets

Daily Markets: Why Investors Have Eyes on Washington This Week

Dome of the U.S. Capitol Building
Credit: Erin Scott - Reuters / stock.adobe.com

Today’s Big Picture

The major equity markets in Asia-Pacific closed mostly in the red today with Japan’s Nikkei falling 3.3%, Hong Kong’s Hang Seng lost 1.1%, South Korea’s Kospi shed 0.8%, and Australia’s ASX 200 dropped 1.8% while China’s Shanghai Composite inched ahead, rising 0.1%. By midday trading, the major European equity indices were mostly higher and U.S. equity futures point to positive open later this morning.

Amid a dearth of economic data and earnings reports, odds are investor will have eyes on Washington today as U.S. President Biden looks to have a busy start to the week: He is expected to meet with financial regulators today and review a bipartisan $579 billion infrastructure proposal ahead of the July 4 Congressional recess. With Fed Chairman Jerome Powell heading to Capitol Hill tomorrow to update lawmakers on the Fed’s efforts to support the economy, Washington will remain a focal point for investors.

Data Download

International Economy

This pandemic is starting to feel like that scene from The Godfather: “Just when I thought I was out, they pull me back in.” The Delta coronavirus variant that first emerged in India and has been sweeping through the UK is now becoming dominant in Portugal with clusters appearing in Germany, France, Italy, Belgium, and Spain, leading European health officials to warn that further action may be necessary to slow the spread. The variant accounts for 98% of sequenced Covid-19 infections in the UK, 96% in Portugal, over 20% in Italy, over 15% in Belgium, between 2% to 4% in France, and is now the most prevalent version in Moscow. The variant is also spreading in the U.S. in states with low vaccination rates. The World Health Organization reported on Friday that it is becoming the globally dominant variant. Over the weekend, the Centers for Disease Control and Prevention shared the Delta coronavirus variant could become a dominant strain in the U.S. this summer.

Yesterday, it was announced that the U.S. borders with Canada and Mexico are to remain closed to all but essential travel until July 21 at a minimum. The border ban has been in place since March 2020 and was set to expire today. New cases of the coronavirus in Canada are just 15% of where they were at the peak and hospital admissions are about a third of what they were. Reports indicate the U.S.-Canada border is unlikely to be completely reopened until 75% of Canadians are fully vaccinated.

Last week the European Union recommended adding the U.S. to a list of safe origin countries after having banned American visitors since early in the pandemic.

Retail sales in Australia came in weaker than the expected 0.5% pace for May, increasing just 0.1% MoM, down vs. the 1.1% pace in April.

Domestic Economy

Later today we will get the Chicago Fed National Activity Index for May.

Markets

Friday the equity markets took a beating with the Dow suffering its worst weekly loss since October, dropping 1.6% on the day and -3.7% for the week. For the week, the Nasdaq 100 was the strongest of the main indices, rising 0.3% while the Nasdaq Composite fell 0.3%, the S&P 500 lost 1.9% despite having made a new high midweek and is now testing its 50-day moving average. The S&P 500 equal weight dropped 3.7% last week, the Dow lost 3.5%, and the Russell 2000 ended 3.8% lower. Volatility rose 27.6%.

Friday’s drop was likely exacerbated by comments from St. Louis Fed President Jim Bullard on CNBC concerning a rate hike likely in 2022. On the other end of the spectrum, Minneapolis Fed President Neel Kashkari said he wants to keep the benchmark short-term interest rate near zero through the end of 2023 at a minimum, but he is currently in the minority.

Last week’s comments from the Fed pushed the U.S. Dollar Index above its 50-day moving average on Wednesday then its 200-day moving average on Thursday, ending a nearly year-long streak below its 200-day. We will be watching closely to see if the dollar can break out of the range it’s been trapped in since 2017.

Stocks to Watch

Today’s the National Retail Federation’s (NRF) Retail Converge conference kicks off. The five-day event gets underway with a fireside chat between Walmart’s (WMT) U.S. President and CEO John Furner and NRF President and CEO Matthew Shay.

Amazon’s (AMZN) 2021 Prime Day kicked off earlier today and runs through tomorrow and running side by side it are competing events from Target (TGT) and Walmart. Expectations call for Amazon to reap $12 billion from Prime Day this year up from $10.4 billion last year and $7.16 billion in 2019 according to Digital Commerce 360.

American Airlines (AAL) announced that it had canceled about 180 flights (6% of its mainline schedule) over the weekend due to staffing shortages, maintenance, and other problems as the company struggles to keep up with accelerating demand. To help ease those disruptions, the company plans to cut its schedule by about 1% through mid-July.

Deutsche Bank (DB) and Fiserv (FISV) announced a joint venture to create a comprehensive provider of payment acceptance and banking solutions.

Shares of CNH Industrial (CNHI) are down in pre-market trading following the news it would acquire Raven Industries (RAVN) for $58 per share.

Westlake Chemical (WLK) agreed to acquire Boral Ltd.'s (BOALY) North American building products business for $2.15 billion in cash.

KKR (KKR) and Vini Cosmetics inked an agreement in which Vini's Co-Founders Darshan Patel and Dipam Patel will sell a majority stake in the company to KKR for ~$625 million. Vini manufactures, markets, and distributes its branded deodorants, cosmetics, and toiletries through its flagship brand FOGG, OSSUM, GlamUp, and several others.

Cybersecurity software company, SentinelOne (S) is expected to raise up to $928 million with its 32 million share IPO that targets a $26-$29 per share price.

After today’s market close, Luminex (LMNX) will reports its quarterly results. Those looking to get a jump on that and other such reports to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

  • 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
  • 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: Flash July Markit Manufacturing & Services PMIs

Thought for the Day

“You can’t wait until life isn’t hard anymore before you decide to be happy.” Jane Marczewski aka Nightbirde on America’s Got Talent.

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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