Stocks

Daily Markets: S&P 500 Looks to Its Record Gain Amid Slow Start to End of June

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Today’s Big Picture

Equity indices in Asia closed the day’s trading modestly lower across the board led by the 0.06% dip in Japan’s Nikkei. By mid-day trading, equity indices in Europe were also modestly in the red, and U.S. futures point to a mixed open when those markets begin trading later this morning.  

As we get ready to shut the books on June and Q2 2020 midweek, investors will parse through the limited amount of earnings reports this week to prepare for the onslaught of such reports soon after the Independence Day holiday. Meanwhile, June economic data this week will likely lead to the retouching of Q2 2021 GDP forecasts. For some context, as of last Friday, the New York Federal Reserve’s Nowcasting Report pegged Q2 2021 GDP at 3.39%, down considerably from its view of 5.28% on April 30.

New order data contained in several of the reports to have this week will indicate how Q3 2021 is likely to start while employment data will indicate to what degree supply chain issues could improve in the coming months. Investors will also keep tabs on negotiations in Washington for the $579 billion bipartisan infrastructure plan.

Data Download

International Economy 

For many in the U.S., the pandemic feels like it is behind us. But that isn’t the case around the world.

  • Pakistan is expecting a fourth wave since only 13 million jabs have been administered so far in the nation of 216 million
  • Indonesia recorded its biggest one-day increase in new infections over the weekend
  • Two nude sunbathers in Australia were fined for breaching pandemic-related public health rules
  • Thailand has suspended dining-in at restaurants in Bangkok and other provinces for at least 30 days following another wave of infections
  • Malaysia has extended its nationwide lockdown that was set to expire today as caseloads remain too high
  • In Russia, officials in Moscow canceled plans to allow restaurants, bars and clubs to remain open after 11 p.m. due to surging cases
  • Officials in South Africa fear the third wave it is currently experiencing may prove to be worse than the first two
  • Daily cases of the virus in Fiji have increased more than seven times since the start of June, with a high prevalence of the Delta variant
  • In contrast, the number of people in New York state hospitals being treated for Covid-19 has reached the lowest level since the pandemic began

Industrial companies in China experienced slowing profit growth in May due to rising raw material costs and supply chain challenges that worked to squeeze margins. Industrial firm profits were up 36.4% YoY in May, down from 57% YoY pace in April.

Domestic Economy

Last Friday, Personal Income came in better-than-expected, although still contracting, falling -2.0% MoM in May following the -13.1% decline in April, but better than the expected -2.5%. Personal Spending came in flat versus expectations for 0.4% MoM. The PCE Price Index (Personal Consumption Expenditure) rose 3.9% YoY in May, accelerating from the 3.6% pace in April and well up from the 1.8% pace pre-pandemic. Core PCE rose 3.4% YoY, as expected, up from 3.1% in April. This was the highest rate since 1992 and well above the Fed’s 2.0% target. 

Later today, we will get the Dallas Fed Manufacturing Index. We will be looking at it in light of what we learned last week, which is the slowing in Durable Goods, the weakening PMIs from Markit, and the deceleration in the Kansas City Fed.

Markets

Markets ended Friday in the green. The S&P 500 gained 0.3% and closed at a new high, its 31st new high of 2021. The Dow rose 0.7% but the Nasdaq closed just below breakeven. Financials were the strongest performers with technology the weakest.

Stocks to Watch

Tesla (TSLA) plans to recall more than 285k mostly China-made Model 3 and Model Y cars due to an issue with the cruise control feature of the vehicles.

United Airlines (UAL) expects to generate positive adjusted pre-tax income in July 2021, the first month with positive adjusted pre-tax income since January 2020. 

McAfee Corp. (MCFE) announced an extension of its longstanding partnership with Samsung to protect consumers' personal data against online threats. 

IBM (IBM) announced new hybrid cloud AI-powered automation software for communications service providers to help deliver on the promise of 5G.

Honda Motor (HMC) announced its first new volume battery-electric vehicle will be named "Prologue," signaling a new electrified era that will lead to the company's vision for 100% zero-emission vehicle sales in North America by 2040.

NVIDIA (NVDA) announced that it is partnering with Google (GOOG) Cloud to establish the industry's first AI-on-5G Innovation Lab. Also, reports indicate Broadcom (AVGO)Marvell Technology (MRVL) and MediaTek (MDTKF) are in favor of Nvidia's $40 billion acquisition of ARM from SoftBank (SFTBY).

Brookfield Business Partners LP (BBU) together with institutional partners announced an agreement to acquire Modulaire Group, a leading provider of modular leasing services in Europe and Asia-Pacific, for approximately $5 billion.

The Board of Directors at SolarWinds (SWI) announced July 12 as the record date and July 19 as the anticipated distribution date for the previously announced potential spin-off of its MSP business into a standalone, separately-traded public company named N-able, Inc.

German carmaker Daimler (DDAIF) is on track to spin off Daimler Truck, the world's largest truck and bus maker, by the end of the year. 

The U.S. Federal Aviation Administration reportedly informed Boeing (BA) that its planned 777X is not yet ready for a significant certification step, and warned that it "realistically" will not certify the airplane until mid-to-late 2023.

California-based cybersecurity software company, SentinelOne (S) has boosted its IPO price range, and now plans to offer 32 million shares at an expected price between $31 to $32 per share vs. the prior targeted range of $26 to $29.

After today’s market close, Herman Miller (MLHR) will report its quarterly results. Investors looking to get a jump on those reports to be had in the coming days should visit Nasdaq’s earnings calendar page

On the Horizon

  • 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

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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