Daily Markets: Equities Hit Fresh Records as Q2 Gets Ready to Close

Today’s Big Picture

Equity indices in Asia closed mostly lower led by the 08% to 0.9% declines in the Hong Kong Hang Seng, China’s Shanghai Composite and Japan’s Nikkei. By mid-day trading, equity indices in Europe were trading higher. And U.S. futures point to a mixed equity market open later this morning, following yesterday’s new record high for both the S&P 500 and the Nasdaq Composite Index.  

As expected, following the Fed’s latest round of stress tests, bank stocks are boosting dividends to shareholders, but that enthusiasm is being muted by new lockdowns to contain the delta Covid-19 variant in Asia. Meanwhile, Spain announced that it was taking the U.K. off its list for restriction-free travel. This morning, investors will likely tune into comments from Richmond Fed President Thomas Barkin and European Central Bank President Christine Lagarde.

Data Download

International Economy

Japan’s unemployment rate in May rose to 3.0% from 2.8%, higher than the expected increase to 2.9%. Retail sales slowed to 8.2% YoY growth in May, down from April’s 11.9%, but better than the expected 7.9% increase. On a MoM basis, retail sales fell -0.4% following a -4.6% decline in April.

Spain’s inflation rate rose 2.6% YoY in June, a tick lower than May’s 2.7% and the expected 2.7% reading for the month. Retail sales in the nation rose 19.6% YoY in May after rising 40.5% in April. 

Germany’s preliminary May inflation rate increased to 2.5% YoY up from 2.3% the prior month and touch hotter than the expected reading of 2.3%.

Today brought a slew of sentiment reports out of the Eurozone for June:

• Economic sentiment rose to 117.9 in June, up from May’s 114.2, beating the expected 116.5
• Consumer confidence rebounded to -3.3 in June, up from -5.1 the prior month to match the consensus forecast

Domestic Economy

As has been the case with most of the economic data points recently, the Dallas Fed general business activity index for manufacturing in Texas came in lower for June, dropping 3.8 points to 31.1, well below April’s nearly 3-year high of 37.3.  If we look at the five Fed Manufacturing reports in aggregate along with the ISM manufacturing activity index, we see that both new orders and shipments have declined over the past three months with shipments falling at an accelerated pace. Order backlogs look to have peaked as have Prices Received and New Orders.

Later today, we will get the S&P/Case-Shiller Home Price Index, Conference Board Consumer Confidence, and the usual weekly API Crude Oil Stocks report and weekly Redbook retail sales.

Markets

Yesterday was another growth over value day, as the S&P 500 inched ahead to set its 32nd record of 2021 and the Nasdaq Composite Index closed higher on the day, setting its 18th all-time high this year. By comparison, both the more value-oriented Dow Jones Industrial Average and the small-cap Russell 2000 closed the day lower. The Russell 2000 once again failed to push out of its 6-month long sideways consolidation range. With two trading sessions left in the current quarter:

• Russell 2000 +17.6% YTD
• S&P 500 +14.2% YTD
• Nasdaq Composite +12.5% YTD
• Dow Jones Industrial Average +12.0% YTD

The 10-year Treasury yield fell to 1.48%, while the long bond dropped to 2.1% and gold held at $1,780 an ounce. Complacency remains with the VIX closing below 16 for the third consecutive trading day. The iShares iBoxx High Yield Corporate Bond ETF (HYG) closed Friday at a record low spread to government bonds. That spread expanded slightly Monday, but remains extremely small. Back to that complacency, it may be here today, but future equities pricing is a different story with the VIX curve in extremely deep contagion with incentives for selling volatility in approximately the 90th percentile over the past 10 years. What that means is that while vol may be low today, investors are willing to pay heavily for crash protection in the future.

Stocks to Watch

Sprout Social (SPT) announced new integrations with two social commerce leaders, Shopify (SHOP) and Facebook(FB) Shops. 

After a district court dismissed antitrust cases against Facebook (FB) levied by the Federal Trade Commission and several states, its shares jumped 4% to a $1 trillion valuation yesterday.

Following the conclusion of the Federal Reserve’s latest bank stress tests, Bank of America (BAC), Morgan Stanley(MS), JPMorgan Chase (JPM), Truist Financial (TFC), State Street (STT), Goldman Sachs (GS), BNY Mellon (BK), US Bancorp (USB), Wells Fargo (WFC) and PNC (PNC) have announced fresh dividend hikes.

United Airlines (UAL) announced that it will add 270 Boeing (BA) and Airbus (EADSY) aircrafts to its fleet, the largest order in the airline's history and biggest by a single carrier in a decade

VF Corp (VFC) completed the sale of the occupational portion of its Work segment, which includes the Red Kap, VF Solutions, Bulwark, Workrite, Walls, Terra, Kodiak, Work Authority, and Horace Small brands, to a Redwood Capital Investments subsidiary.

Accenture (ACN) has acquired Sentor, a Sweden-based independent provider of cyber defense and managed security services. Financial terms were not disclosed.

JP Morgan (JPM) announced that it agreed to acquire OpenInvest, a leading financial technology company that helps financial professionals customize and report on value-based investments. 

After today’s market close, AeroVironment (AVAV) will report its quarterly results. Those looking to get a jump on that report and others to be had in the coming days should visit Nasdaq’s earnings calendar page. 

On the Horizon

• 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
• July 13: Inflation, Monthly Federal Budget statement, API Crude Oil stocks
• July 14: Producer Price Index, EIA Crude Oil stocks
• July 15: Weekly jobless claims, NY Empire State Manufacturing Index, Philly Fed Manufacturing Index, Industrial Production, Import & Export Prices
• July 16: Retail Sales, Michigan Consumer Sentiment, Business Inventories, Net Capital Flows, Foreign Bond Investment
• July 19: NAHB Housing Market Index
• July 20: Building Permits, Housing Starts, API Crude Oil stocks
• July 21: EIA Energy stocks
• July 22: Weekly jobless claims, Chicago Fed National Activity Index, Existing Home Sales
• July 23: Markit Manufacturing PMI (flash), Markit Services PMI (flash)

Thought for the Day

“Knowledge speaks but wisdom listens.” ~ Jimi Hendrix

Disclosures

Accenture (ACN) is a constituent of the Foxberry Tematica Research Cybersecurity & Data Privacy 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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