Daily Markets: U.S. Services Economy Data to be Next Market Touchpoint

Today’s Big Picture

Asia-Pacific equity indexes ended today’s session down across the board except for India’s Sensex which closed up 1.16%. Australia’s ASX All Ordinaries declined 0.50%, Japan’s Nikkei lost 1.20%, Hong Kong’s Hang Seng fell 1.22% and China’s Shanghai Composite and South Korea’s KOSPI were 1.43% and 2.13% lower, respectively. Taiwan’s TAIEX led the way, down 2.53% on the day. By mid-day trading, European equity indices are up across the board and U.S. futures point to a flat open later this morning.

Following yesterday’s rebound in growth stocks that came amid continued recession worries that led to oil falling below the $100 level for the first time in months, the stock market is waiting to see how the U.S. Services economy fared in June, and what insights can be gleaned from the Fed’s June monetary policy meeting minutes. Both the S&P Global and the ISM take on the U.S. Service economy will be released shortly after the open, and should the headline data or new order data disappoint, it has the potential to re-kindle recession concerns. Inside the Fed’s latest meeting minutes, investors will be looking for potential decision levers that could lead to the Fed to decide to use smaller sized interest rate hikes. 

Meanwhile, the gas crisis in Europe continues and the latest covid spike in China has led to the return of certain restrictions. Reports indicate China has instilled a vaccine mandate in Beijing and people will still need to get tested at least every three days to enter all public venues. The concern for investors and companies alike that count on China’s manufacturing is a return to lockdowns that would hinder supply chains. 

Data Download

International Economy

Factory orders in Germany edged up 0.1% MoM in May, the first albeit small rise in four months, and better than the consensus forecast that called for a 0.6% drop.

May Retail Sales in the Euro Area rose 0.2% MoM, rebounding from April sequential 1.4% drop, but below the expected 0.4% increase for the month. On a YoY basis, May Retail Sales rose 0.2%, marking the smallest annual gain since February of 2021.

Australia's central bank raised its benchmark interest rate Tuesday for a third time in as many months, boosting the cash rate to 1.35% from 0.85%.

Reports indicate Norway's government stepped in yesterday to end a strike by some of the country's oil and gas workers that had caused sharp production cuts.

Domestic Economy

10:00 AM ET will see the release of final Services PMI for June, which is expected to tick down to 54.3 from the previously reported 55.9. At the same time, the JOLTS Jobs Opening Report for May will be released with expectations for 11.043 million, down from the previous 11.4 million figure. While a lower number, job openings have been uncharacteristically high since the beginning of 2021. Prior to covid, this figure trended around 7 million from early 2018 and have ranged from 3 to 6 million from 2012 through the end of 2017.

Data providers ISM and Markit will be releasing June Services PMI after the open today with expectations for ISM Services PMI at 54.3 and Markit Services PMI at 51.6. A reminder that differences between the two measures include that ISM captures more global activity while Markit touts that it provides data on a wider size range of businesses. 

2:00 PM ET will see the release of the latest FOMC Meeting Minutes which will have academics and practitioners alike scouring the notes for any further insight into the Fed’s thinking. For those readers who are interested, here is a link to a document outlining the history of what started in 1936 as a “Record of Policy Actions.”

Markets

Stocks reversed early losses yesterday finishing the day mixed. The S&P 500 eked out a small gain while the Dow closed down 0.42% while the Nasdaq Composite closed 1.75% higher. Eight of 11 S&P sectors ended the day lower led by Energy and Utilities while Communication Services and Consumer Discretionary both rose more than 2%. Infotech was also strong yesterday, closing 1.2% higher. Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: -14.78%
• S&P 500: -19.61%
• Nasdaq Composite: -27.63% 
• Russell 2000: -23.38%
• Bitcoin (BTC-USD): -57.32%
• Ether (ETH-USD): -69.47%

Stocks to Watch

Before trading kicks off for U.S.-listed equities, no companies are expected to report their latest quarterly results but given we are in the quiet period for companies, readers should be on watch for earnings pre-announcements.

Shares of Kornit Digital (KRNT) were under pressure in after market trading last night after the company reported preliminary 2Q 2022 revenue of $56.4-$59.4 million vs its prior guidance of $85-$95 million and the $88.5 million consensus. Included among the factors named for the shortfall were “macro headwinds which meaningfully accelerated in the last few weeks of the quarter.”

Amazon (AMZN) announced that Prime members in the U.S. can enjoy a free, one-year Grubhub+ membership with no food-delivery fees on eligible orders, effective today. Also today, the UK’s UK CMA is investigating Amazon over concerns that practices affecting sellers on its UK Marketplace may be anti-competitive and could result in a worse deal for customers.

United Microelectronics (UMC) reported its June net sales grew 43.2% YoY to NT$24.83 billion, up slightly compared to NT$24.43 billion in May.

Rade Electronics (RADA) issued downside revenue guidance of ~$22.5 million for its June quarter vs. the $36.1 million consensus. Given its pending merger with Leonardo DRS, which is expected to be completed during the upcoming fourth quarter, RADA opted to withdraw its full year 2022 guidance.

IPOs

As of now, no IPOs are slated to be priced this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

No companies are expected to report its quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar. 

On the Horizon

Thursday, July 7

• Japan: Leading Indicators - May
• Germany: Industrial Production - May
• US: Challenger Job Cuts - June 
• US: Weekly Initial & Continuing Jobless Claims 
• US: Import/Export - May
• US: Weekly EIA Natural Gas Inventories
• US: Weekly EIA Crude Oil Inventories

Friday, July 8

• Japan: Household Spending - May
• Japan: Economy Watcher Current Index - June
• China: Inflation Rate and Producer Price Index - June
• US: Employment Report - June
• US: Consumer Credit - May

Thought for the Day

 “In the book of life, the answers aren’t in the back.” – Charlie Brown

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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Economy Coronavirus Stocks Central Banks Smart Investing