Daily Markets: Will the Fed Disappoint at Jackson Hole?

Today’s Big Picture

Equity indices in Asia finished the day mostly lower led by the 1.1% declines for both the Hong Kong Hang Seng and China’s Shanghai Composite. Japan’s Nikkei closed 1.1% higher on the day while South Korea’s Kospi slumped 0.6%, and India’s Sensex was left unchanged. By mid-day trading, equity indices in Europe were modestly lower across the board and U.S. futures point to a mixed start.

Investors will once again be looking to today’s weekly Jobless Claims report to get a bead on the pace of the domestic re-opening, as well as the first revision for 2Q 2021 GDP. Today also kicks off the highly anticipated 2021 Jackson Hole Economic Policy Symposium and investors will be listening for comments surrounding the Fed’s monetary policy tapering plans. The event spotlight will shine on Fed Chairman Jerome Powell on Friday but given a variety of factors, including the Citibank (C) Economic Surprise Index (CESI) back in negative territory; the growing list of companies pushing back return-to-office timetables into early 2023; the forthcoming expiration of federal impact payments; and further delays in the $1 trillion infrastructure bill, we suspect the Fed will wait for the August Employment Report before clarifying its tapering plans.

Data Download

Coronavirus

Following the move by Swiss Air and United Airlines (UAL) earlier this month, Delta Airlines (DAL) announced yesterday that it would start charging unvaccinated employees enrolled in its healthcare plan up to $200 a month.

A survey by the business lobby, Partnership for New York City, found that 23% of Manhattan’s roughly 1 million office workers have returned to the office as of mid-August, compared to 12% in May. About 44% of employers surveyed by the group said they had delayed their office return plans because of the Delta variant. About 60% said they would require returned employees to show proof of vaccination and just under half expected to require masks, regardless of vaccination status.

International Economy

Yesterday the Dutch statistical agency CPB released its latest data on global trade, which revealed that while trade volumes have been fairly stable at a roughly $18.9 trillion annual rate (in 2010 USD), rising prices have pushed the aggregate value of trade to new record highs for four consecutive months. The Emerging Market trade is nearly at a record level but ex-China, the share of the Emerging Market trade is falling after having consistently risen from 2004 to 2015.

South Korea’s central bank decided to raise its key interest rate by 25 basis points to 0.75% today, as was widely expected. This was the first rate hike in nearly three years and was the first Asian economy to tighten its monetary policy since the pandemic began.

Consumer Confidence in Germany retreated to -1.2 in September from -0.4 in August, coming in weaker than the expected decline to -0.7.

France’s Business Confidence inched higher to 110 in August from 109 in July, from which it was expected to decline only slightly to 109. The Business Climate Indicator (which summarizes the information provided by the surveys in manufacturing, services, trade -retail and wholesale - and construction) fell to 110 from July’s reading of 113.

Domestic Economy

Wednesday’s Durable Goods report for July contracted less than expected, falling -0.1% MoM after June’s 0.8% increase, but better than the expected -0.3% decline. More notably, this was the first decline in three months, driven by a -2.2% contraction in orders for transport equipment and a 5% decline in capital goods. Orders for non-defense capital goods, which is a closely followed proxy for business spending plans, were unchanged following a 1.0% increase in June.

Later today we will get the usual weekly jobless claims reports, the second estimate for Q2 GDP, Corporate Profits estimate for Q2, PCE prices for Q2, and Kansas Fed Manufacturing Index for August.

Markets

The S&P 500 and the Nasdaq Composite both rose 0.2% yesterday, their fifth consecutive day of gains, leading to yet another day of intraday highs, with the S&P 500 touching the 4,500 level for the first time, it traded off to close at 4,496.19. The Dow Jones Industrial Average increased 0.1%, and the Russell 2000 increased 0.4%.

Crude oil continued its rally yesterday, rising above $68 a barrel after the EIA data reveal a third consecutive week of inventory draws, which is typically for this time of year.

Stocks to Watch

Before U.S. equity markets open this morning, investors will be digging into several earnings reports including those from Abercrombie & Fitch (ANF), Burlington Stores (BURL), Coty (COTY), Dollar General (DF), Dollar Tree (DLTR), Hain Celestial (HAIN), Sanderson Farms (SAFM), and Tal Education (TAL).

After the close of trading yesterday, robust quarterly earnings reports were published by Williams-Sonoma (WSM), Ulta Beauty (ULTA), NetApp (NTAP), and Salesforce (CRM). All three served up rosier than expected outlooks while Splunk (SPLK) reported better than expected July quarter results but guided the current quarter in line with consensus expectations. Shares of Snowflake (SNOW) also moved lower in aftermarket trading as the company’s outlook called for slower sales growth vs. levels posted in recent quarters. Shares of Guess? (GES) also tumbled following 2022 guidance calling for revenue to be down mid-single digits YoY.

Microsoft (MSFT) said it will invest $20 billion over five years, a four-fold increase from current rates, to speed up its cyber security work. Microsoft also said it will make available $150 million in technical services to help federal, state, and local governments to help keep their security systems up to date. Google (GOOGL) announced it will invest $10 billion over the next five years to expand zero-trust programs, help secure the software supply chain, and enhance open-source security.

After today’s market close, Dell (DELL), Gap (GPS), HP (HPQ), Marvell (MRVL), Peloton (PTON), and VMWare (VMW)will be among the companies reporting their latest quarterly results. Those looking to get a jump on the earnings reports to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

• 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
• September 1: ADP Employment Change, Markit Manufacturing PMI, ISM Manufacturing PMI, Construction Spending, EIA Crude & Gasoline stocks, Total Vehicle Sales
• September 2: US Balance of Trade, Unit Labor Costs Q2, weekly Jobless Claims, Nonfarm Productivity Q2, Factory Orders
• September 3: Nonfarm Payrolls, Markit Services PMI, ISM Non-Manufacturing PMI
• September 8: US JOLTs Report IBD/TIPP Economic Optimism, API Crude Oil Stocks
• September 9: weekly Jobless Claims, EIA Energy Stocks,
• September 10: PPI, Wholesale Inventories
• September 13: Monthly Budget Statement
• September 14: Inflation, API Crude Oil Stocks
• September 15: Export & Import Prices, NY Empire State Manufacturing Index, Industrial Production, EIA Crude & Gasoline Stocks
• September 16: Retail Sales, weekly Jobless Claims, Philadelphia Fed Manufacturing Index, Business Inventories, Net Capital Flows, Foreign Bond Investment
• September 17: University of Michigan Consumer Sentiment Report

Thought for the Day

"We make a living by what we get, but we make a life by what we give." -Winston Churchill

Disclosures

• Splunk (SPLK) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Hain Celestial (HAIN), Peloton Interactive (PTON), Sanderson Farms (SAFM) are constituents of the Tematica BITA Cleaner Living Index
• Hain Celestial (HAIN), Peloton Interactive (PTON) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
• Marvell (MRVL) is a constituent of the Tematica BITA Digital Infrastructure & Connectivity Index
• Microsoft (MSFT), Williams-Sonoma (WSM) are constituents 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.

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Stocks Economy Earnings Coronavirus Central Banks Smart Investing