Daily Markets: China Data Dampens Stocks; Fed Minutes Ahead

Today’s Big Picture

Asia-Pacific equity markets finished the day down across the board as profit-taking saw Japan’s Nikkei dip 0.25%, and a downside surprise in Chinese Services PMI coupled with the country’s decision to restrict rare earth metals used in semiconductor and EV battery production weighed on markets across the region. India’s SENSEX was little changed, down a mere 0.05%. Australia’s ASX All Ordinaries fell 0.34%, Taiwan’s TAIEX dropped 0.49%, South Korea’s KOSPI declined 0.55%, and China’s Shanghai Composite gave back 0.69%. Hong Kong’s Hang Seng closed 1.57% lower in a broad decline led by Retail Trade and Consumer Non-Durables names. European markets are down across the board in midday trading and U.S. futures point to a lower open.

As investors and traders return from the Independence Day holiday, June Services PMI data outside the U.S. pointed to slowing growth, raising renewed questions over the pace of China’s economy. That data for the U.S., along with several takes on June job creation and wage pressure are expected later this week. In anticipation, the market will face a quiet start today as folks wait for 2 PM ET when the Fed will publish the minutes of its last policy meeting. The hope is those minutes explain why the Fed paused its rate-hike cycle after 10 consecutive moves but forecasted two additional increases this year. With that potential insight in hand, the market will look to comments about the economy and Fed policy from Federal Reserve Bank of New York President John Williams, who at 4 PM ET is scheduled to participate in a moderated discussion before the 2023 Annual Meeting of the Central Bank Research Association.

Data Download

International Economy

The au Jibun Bank Flash Japan Services Business Activity Index was revised lower to 54.0 in June vs. the 54.2 flash estimate and May’s record-high of 55.9, signaling the softest upturn in activity for four months. New orders continued to grow, with new export orders rising for the tenth consecutive month and at a moderate pace overall.

The Caixin China General Services PMI fell to 53.9 in June from 57.1 in the previous month. The reading pointed to the sixth straight month of expansion in services activity but the softest pace since January amid moderated demand. New orders growth eased to a six-month low and new export business also moderated but continued to benefit from a revival in tourism and travel since the easing of pandemic restrictions. China announced beginning August 1, it will restrict exports of some gallium and germanium products, two metals widely used in semiconductors, electric vehicles, and fiber optics. Market watchers are looking to see how this plays out in the ongoing trade war with the U.S., if it may extend to other rare earth materials, and what that could mean for global supply chains.

The HCOB Eurozone Services PMI was revised downwards to 52.0 in June vs. the preliminary estimate of 52.4 and May's final reading of 55.1. Although signaling continued growth, the June figure showed the weakest expansion since January. The S&P Global/CIPS UK Services PMI was confirmed at 53.7 in June, the lowest in three months.

Domestic Economy

While we wait for the Fed to publish its June policy meeting minutes and the market digests today's comments from Fed officials, the market will pick over May Factory Orders data at 10 AM ET. Headline orders are expected to rise 0.8% MoM while the consensus view has May factory orders ex-transportations climbing 0.5% after falling 0.2% in April.

Markets

Monday was a rare abbreviated trading session with markets closing at 1:00 pm and as you can imagine, equities had a relatively dull day although we did see Consumer Discretionary post gains of 1.21% led by Tesla (TSLA) shares being bid up 6.90% (contributing to approximately 110% of the day's return) on news of the company revealing it had a strong vehicle delivery numbers for Q2. Healthcare dipped 0.82% as a number of companies were bid down on quarter-end news that there would be revised guidance on Medicare drug price negotiations. Given the Biden administration's push to lower prices, those shares trading off slightly makes sense. Despite some of the sector moves, major indexes were muted as the Dow closed essentially flat, gaining 0.03%, the S&P 500 rose 0.12%, the Nasdaq Composite added 0.21% and the Russell 2000 closed 0.43% higher.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 3.84%
• S&P 500: 16.05%
• Nasdaq Composite: 32.01%
• Russell 2000: 7.70%
• Bitcoin (BTC-USD): 87.58%
• Ether (ETH-USD): 63.06%

Stocks to Watch

Before U.S. equity markets begin trading today, no companies are expected to report their quarterly results. As we approach the June quarter earnings season, readers should be on watch for earnings pre-announcements, both positive and negative.

Citi (C) announced that it has initiated dialogue with the Federal Reserve to understand differences in Non-Interest Income (Non-Interest Revenue per Citi's Financial Reporting presentation) over the nine-quarter stress period between the Federal Reserve's CCAR results and Citi's Dodd-Frank Act Stress Test results.

Volvo Car AB (VOLAF), which is majority-owned by Chinese automaker Geely Holding (GELYF) reported sales rose 33% YoY to 66,379 cars in June, up from May sales of 60,398 units. Its June sales growth was driven by fully electric cars, which quadrupled compared to the same period last year.

Amazon (AMZN) announced the arrival of its new custom electric delivery vans from Rivian (RIVN) in Europe, with the first vans rolling out in Germany. In addition, Bloomberg reports Amazon CEO Andy Jassy is taking a hard look at how much the company’s Hollywood studio spends on original TV programming.

Renesas Electronics (RNECY) and Wolfspeed (WOLF) executed a wafer supply agreement that included a $2 billion deposit by Renesas to secure a 10-year supply commitment of silicon carbide bare and epitaxial wafers from Wolfspeed.

Reports indicate Private equity firm GTCR is in advanced discussions to purchase a majority stake in Fidelity National Information's (FIS) Worldpay business, valuing it between $15-$20 billion.

UPS (UPS) failed to reach an agreement with the International Brotherhood of Teamsters, threatening to plunge the U.S. supply chain into disruption. The current labor contract expires at the end of July, but labor leaders indicate they need a few weeks to educate their members and persuade them to ratify it. However, reports suggest union employees will not work beyond July 31 when the current contract expires, and no more bargaining sessions are scheduled.

After Today’s Market Close

No companies are slated to report their quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Thursday, July 6

• Eurozone: Retail Sales - May
• US: Challenger Job Cuts Report – June
• US: ADP Employment Change Report - June
• US: Weekly Initial & Continuing Jobless Claims
• US: S&P Global Services PMI (Final) – June
• US: ISM Non-Manufacturing Index – June
• US: Jolts Job Openings Report – May
• US: Weekly EIA Natural Gas Inventories
• US: Weekly EIA Crude Oil Inventories

Friday, July 7

• US: Employment Report – June

Thought for the Day

“Inspiration is for amateurs - the rest of us just show up and get to work” ~ Chuck Close

Disclosures

• Apple (AAPL) is a constituent of the Tematica Research 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.

Other Topics

Stocks Economy Earnings Investing Central Banks