Daily Markets: Retail Earnings Continue Amid Washington's Infrastructure Gridlock

Today’s Big Picture

Equity indices in Asia closed trading today higher across the board, spurred on by the 2.5% climb in Hong Kong’s Hang Seng and the 1.1% climb in China’s Shanghai Composite. By mid-day trading, equity indices in Europe were mixed while U.S. futures point to a positive market open later this morning. Amid the continued rash of retail earnings, lawmakers in Washington will convene today to try and strike a deal to move forward with President Joe Biden’s economic agenda, including the Senate-passed $1 trillion infrastructure bill and the party’s $3.5 trillion spending plan.

Data Download

Coronavirus

The FDA yesterday gave full approval for people 16 years of age and older to Pfizer (PFE) and BioNTech’s (BNTX) coronavirus vaccine, the first in the U.S. to win such approval. Previously, like all the other coronavirus vaccines currently being used domestically, it was on the U.S. market under an emergency use authorization. BioNTech shares rose 9.6% yesterday and Pfizer gained 2.5%.

The U.S. donated nearly 900,000 Moderna Covid-19 vaccine doses to Kenya on Monday. This was the second round of donations, following 2.4 million doses of the Oxford/AstraZeneca (AZN) vaccine.

Yesterday the World Health Organization (WHO) called for a 2-month moratorium on administering “booster” doses of Covid-19 vaccines, the announcement coming just days after the U.S. and several other countries announced that they will be offering third doses.

Vaccination mandates are expanding. Chicago will soon require its public employees to be vaccinated against Covid-19. Earlier yesterday New York City and New Jersey announced similar requirements for school workers. New Jersey will be requiring all school staff and all state employees to be fully vaccinated by mid-October. The U.S. defense department is expected to shortly announce a Covid-19 vaccination requirement for all service members.

Cancellations and postponements are back in vogue. Garth Brooks has become the latest to cancel shows and Rice University in Houston is shifting the first two weeks of the upcoming semester online. There is growing speculation that the G-20 summit, scheduled for the end of October, will be held virtually, which would delay the first meeting between President Biden and General Secretary Xi.

International Economy

Consumer Confidence in the Eurozone (flash) for August fell more than expected, dropping to -5.3 from -4.4, versus expectations for a decline to -5.0. This marks the lowest level since April. For the EU as a whole, consumer morale dropped 0.7 points to -6.3 in August.

Consumer Confidence in South Korea dropped slightly in August to 102.5 from 103.2 in July.

Germany’s final estimate for Q2 GDP growth came in at 9.4% YoY after declining -3.1% YoY in Q1, topping the expected increase to 9.2%.

Domestic Economy

U.S. factories and service providers saw significantly lower growth in August. The IHS Markit Manufacturing PMI dropped below the expected decline to 62.5 instead fell to 61.2 in August from 63.4 in July. This was the slowest growth in factory activity in 4 months, but on an absolute level, growth remains solid. Material shortages continue to be a headwind with an unprecedented deterioration in vendor performance which caused the second-steepest increase in backlogs of work in the series 14-year history.

The IHS Markit Service PMI also fell more than the expected 59.5 to 55.2 in August and was the third consecutive monthly decline from May’s all-time high of 70.4. This reading marked the weakest pace of expansion since December 2020. New business growth slowed to the weakest in a year and the rate of job creation was the slowest since February. Input costs rose to one of the fastest paces on record.

Existing Home Sales rose 2% MoM in July to 5.99 million, well above the expected 5.83 million. The median existing home price for all housing types was $359,900, up 17.8% YoY, the 113th consecutive month of year-over-year increases.

From the start of the year through August 1st, air passenger traffic in the U.S. saw a massive rebound with the 7-day average passenger throughput more than doubling from just over a million a day to 2.08 million. Since peaking on August 1st, passenger traffic has been steadily declining with Sunday, August 22 the 21st consecutive day of declines on a week-over-week basis.

Later today we will get New Home Sales, which are expected to see a 6.6% MoM decline in July, but after yesterday’s better-than-expected Existing Home Sales, we may get a positive surprise. We will also get the Richmond Fed Manufacturing Index for August and of course the usual weekly Redbook Retail Sales report and the API Crude Oil stock changes.

Markets

Once again, the S&P 500 ended the day in record territory as did the Nasdaq Composite Index, marking its 28th record high of 2021. Both benefitted from the positive day posted by Big Tech that saw Apple (AAPL), Google (GOOGL), Amazon (AMZN), Facebook (FB), and Tesla (TSLA) all climb more than 1%. The Dow Jones Industrial Average finished the day up 0.7% while the Russell 2000 soared 1.9%. From a sector perspective, seven of the 11 S&P 500 sectors closed higher led by Energy and Consumer Discretionary while Utilities and Real Estate traded off. With advancing issues outpaced declining issues by a 2:1 margin at the NYSE and a 3:1 margin at the Nasdaq, at least for now, it would appear the investor strategy of buying the dip remains en vogue.

The U.S. Securities and Exchange Commission started to issue new disclosure requirements, including the use of offshore vehicles known as variable interest entities for IPOs, to Chinese companies seeking to list in New York as part of a push to boost investor awareness of the risks involved.

Stocks to Watch

Before markets open this morning, investors will be digging into several earnings reports including those from Advance Auto Parts (AAP), Best Buy (BBY), and New Oriental Education & Technology (EDU).

Palo Alto Networks (PAWN) reported better than expected revenue and EPS for its July quarter with billing for the quarter rising 34% YoY topping the company’s guidance. For the current October quarter, the company issued mixed guidance with EPS below the consensus forecast and revenue ahead of the consensus view. For its fiscal 2022, Palo Alto sees EPS of $7.15-7.25 vs. the $7.09 consensus with revenue of $5.275-5.325 billion vs. the $5.0 billion consensus.

Shares of Microsoft (MSFT) closed at a fresh record high following the company’s decision to lift the price of certain Office 365 productivity software subscriptions for businesses next year.

Ford Motor (F) shares traded higher yesterday on reports the company has doubled its F-150 Lightning production target based on strong demand ahead of its 2022 launch. The higher annual production target of 80,000+ electric trucks in 2024 is up from the prior target of over 40,000. The company plans to ramp up production of the F-150 Lightning from 15,000 pickups next year to an annual goal of close to 150,000 in late 2025.

Shares of Robinhood Markets (HOOD) finished higher yesterday following several analyst recommendations, including Buy ratings from Citigroup, Rosenblatt, and Mizuho, a Market Outperform from JMP Securities, and an Overweight rating at Keybanc Capital Markets.

Walmart (WMT) announced the creation of a new line of business -- Walmart GoLocal -- that extends its expertise in delivering goods to customers to businesses of all sizes.

Visa (V) announced a strategic partnership with Asia Pacific-based loyalty technology company Ascenda. The payments network will be the first globally to leverage Ascenda's new Nexus platform, which will enable Visa's partners to adopt a comprehensive new rewards program for their customers.

Chinese electric carmaker Xpeng (XPEV) began shipping its flagship P7 sedan to Norway today, its first international market.

Reuters reports South Korea is likely to bar Google and Apple from requiring software developers to use their payment systems, effectively stopping them from charging commissions on in-app purchases.

And while some of us are hanging onto the last few weeks of summer, Starbucks (SBUX) rolls out its autumn menu today, which sees the addition of the apple crisp macchiato alongside its pumpkin spice latte and pumpkin cold cream brew.

After today’s market close, Intuit (INTU), Nordstrom (JWN), Toll Brothers (TOL), and Urban Outfitters (URBN) 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 24: New Home Sales, API Crude Oil Stock report
• August 25: Durable Goods Orders, EIA Energy Stocks
• 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

“All the forces in the world are not so powerful as an idea whose time has come." ―Victor Hugo

Disclosures

• Palo Alto Networks (PAWN) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Tesla (TSLA), Xpeng (XPEV) are constituents of the Tematica BITA Cleaner Living Index
• Tesla (TSLA), Xpeng (XPEV) are constituents of the Tematica BITA Cleaner Living Sustainability Screened Index
• Visa (V) is a constituent of the Tematica BITA Digital Payments & Fintech Sustainability Screened Index
• Microsoft (MSFT), Starbucks (SBUX), Walmart (WMT) 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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