Daily Markets: Biden to Outline Measures to Address Supply Chain Issues

Today’s Big Picture

Equities in Asia finished the day mostly lower with Japan’s Nikkei down 0.2%, China’s Shanghai Composite down 0.5%, and the Hong Kong Hang Seng down a hair, and South Korea’s Kospi falling 0.1%. By mid-day trading, equities in Europe were mostly higher while U.S. futures point to a mixed open later this morning.

Following the widespread website outages observed this morning, investors will want to hit the refresh button several times until service is restored. Websites experiencing outages this morning include The New York Times (NYT), Amazon (AMZN) Web Services, and Reddit, among others, according to Downdetector. The BBC reports the UK government website was also offline this morning. Reports indicate cloud computing company Fastly (FSLY) experienced technical issues and the company has since shared it found and has implemented "a fix."

As we wait for tomorrow’s May CPI report, eyes will once again turn to Washington today as the Biden administration is expected to outline new measures to address widespread supply-chain issues. Also in DC, Joseph Blount, the CEO of Colonial Pipeline, is expected to testify today before the Senate Homeland Security Committee regarding the company’s cybersecurity practices and its decision to pay the hackers.

Data Download

International Economy

Japan’s final estimate for Q1 GDP came in at a 1% QoQ decline following a 2.8% increase in Q4 2020. On an annualized basis, Q1 GDP fell 3.9%. The nation’s bank lending expanded 2.9% YoY in May.

Industrial Production in Germany fell 1% MoM in April after rising a downwardly revised 2.2% in March, missing the expected increase of 0.5% for the month.

Retail Sales in Italy jumped 30.4% YoY in April after a whopping 22.9% YoY gain in April.

The third estimate for GDP in Eurozone in Q1 came in at a 0.3% drop after falling a revised 0.6% in Q4 2020 vs. the expected -0.6%. On a YoY basis, the Eurozone’s Q1 GDP contracted 1.3% following the 4.7% drop in Q4 2020.

Domestic Economy

Consumer Credit in the U.S. rose by $18.6 billion in April after a downwardly revised $18.6 billion gain in March, well below expectations for a $22 billion increase. Revolving credit fell by $2.0 billion while non-revolving rose by $20.7 million.

Yesterday Black Knight’s monthly mortgage monitor found the mortgage delinquency rate fell below 5% to 4.7% and is now 1.27 percentage points higher than its pre-pandemic level. Foreclosures continue to be at record lows due to ongoing moratoriums, which is affecting seriously delinquent loans. A full two-thirds of non-current loans are overdue by at least 90 days.

The Department of Justice reported yesterday it recovered $2.3 million worth of the ransom payment paid by the Colonial Pipeline hack, stating it was able to break in to the virtual wallet used by suspected Russia-based ransomware group DarkSide that held the ransom. This may have some rather interesting ramifications for the crypto world as evidenced by the selloff in bitcoin this morning.

The NFIB Small Business Optimism Index rose to 99.8 in April, an increase of 1.6 points from March

Later today we will get the Balance of Trade from April, which is expected to improve from a $74.4 billion deficit to a $69 billion deficit. We will also get the usual weekly Redbook retail sales report, the JOLTs report from the BLS, which is expected to see 8.3 million new job postings after last month’s record high of 8.1 million.

Markets

Equities started the first full week of June on a quiet note with the S&P 500 slipping 0.1% and the Dow Jones Industrial Average falling 0.4% while the Nasdaq Composite Index and the Russell 2000 rose 0.5% and 1.4%, respectively. Most of the S&P sectors finished lower with defensive sectors and Communication Services the only ones to gain on the day.

Despite all the talk about inflation, 10-year breakeven yields are at six-month lows. Nominal 10-year yields have barely moved in the past few months.

The U.S. Securities and Exchange Commission to say it was looking into signs of market manipulation given the "volatility in certain stocks" - that’s right, they're talking about AMC Entertainment (AMC), GameStop (GME) and your other meme stocks.

The Federal Reserve Board announced on Monday that results from its bank stress tests will be released on Thursday, June 24, at 4:30 PM EDT.

Stocks to Watch

Navistar (NAV) reported mixed April quarter results with better than expected EPS despite revenue for the quarter that fell short of consensus expectations. Chargeouts in the company's Core (Class 6-8 trucks and buses in the United States and Canada) market were 13,900 units in the second quarter of 2021.

April quarter results at Thor Industries (THO) crushed consensus expectations led by the 105.7% YoY increase in revenue to $3.46 billion vs. the $3.0 billion consensus. According to the company, “While our pace of production and shipments has accelerated, demand is so high that independent dealer inventories of THOR Industries products continue to decline while dealer sales are increasing. This increasing consumer demand has driven our order backlog to more than $14 billion at the end of the quarter and includes units that will be needed to restock depleted dealer inventories. Since a significant number of units in our backlog have already been retail sold, we currently believe the restocking cycle will extend well into calendar 2022."

British American Tobacco (BTI) boosted its FY2021 revenue guidance to above 5% at constant currency reflecting strong pricing and volumes for combustible tobacco vs. its prior outlook of 3%-5% growth.

Reuters reports Apple (AAPL) is in early-stage talks with China’s CATL (300750) and BYD (002594) about the supply of batteries for its planned electric vehicle.

Marvell (MRVL) reported April quarter earnings of $0.29 per share, $0.02 better than the consensus while revenue for the quarter rose 20% YoY to $832.3 million vs. the $817.4 million consensus. For its current June quarter, the company sees EPS of $0.28-0.34 vs. the $0.30 consensus forecast with revenue of $1.033-1.097 billion vs. the $1.03 billion consensus.

April quarter results at Coupa Software (COUP) topped top and bottom line expectations as the company’s subscription revenue jumped 40% YoY to $140.1 million, roughly 84% of revenue for the quarter. For its July quarter, the company sees EPS of $(0.07)-(0.05) vs. the ($0.10) consensus with revenue of $162-163 million vs. the $161.7 million consensus forecast, which includes subscription revenue of $142-143 million.

Qorvo (QRVO) announced the interoperability of its DW3000 family of products with the Apple U1 chip used in iPhone and Apple Watch models and the new Nearby Interaction protocol specification draft unveiled at the 2021 Worldwide Developers Conference.

Shares of Biogen (BIIB) surged after its controversial Alzheimer’s disease therapy was approved by U.S. regulators.

Challenging GoodRX (GDRX) and Amazon (AMZN), Walmart (WMT) announced Walmart+ members are now able to unlock exclusive savings on thousands of the most commonly prescribed medications through a new members-only prescription savings program the retailer is calling Walmart+ Rx for less.

Kroger (KR) is holdings its first nationwide hybrid hiring event later this week to hire 10K associates supporting retail, e-commerce, pharmacy, manufacturing, and logistics operations.

CoStar Group (CSGP) announced that its Board-approved and declared a ten-for-one split of CoStar Group’s common stock in the form of a stock dividend with a record date of June 17. The dividend shares are scheduled to be distributed after the close of trading on June 25 and begin trading on a stock split-adjusted basis on June 28.

As of June 7, American Finance Trust (AFIN) collected 100% of the original cash rent due for April and May.

After today’s market close, Best Inc. (BEST), Cavalo Growers (CVGW), and Manchester United (MANU) will be among the companies reporting their quarterly results. Those looking to get a jump on those reports and others to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

• June 9: Wholesale Inventories, Gasoline & Crude Oil Stocks
• June 10: Inflation, weekly Jobless Claims, Monthly Budget Statement
• June 11: Michigan Consumer Sentiment
• June 15: Retail Sales, PPI, NY Empire State Manufacturing, Industrial Production, Business Inventories, NAHB Housing Market Index, Tic Flows, Foreign Bond Investment, Weekly API Crude Oil stock
• June 16: Building Permits, Housing Starts, Import/Export Prices, weekly energy stocks, FOMC Economic Projections, and Interest Rate decision
• June 17: Weekly Jobless Claims, Philadelphia Fed Manufacturing
• June 21: Chicago Fed National Activity Index
• 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

Thought for the Day

“Man cannot remake himself without suffering, for he is both the marble and the sculptor.” ~Alexis Carrel

Disclosures

• Marvell (MRVL), Qorvo (QRVO) is a constituent in the Tematica BITA Digital Infrastructure and Connectivity Index.
• Cavalo Growers (CVGW), Walmart (WMT) are constituents of Tematica Research's Thematic Dividend All-Stars Index.
• Cavalo Growers (CVGW) is a constituent in Tematica Research’s Cleaner Living 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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