Weekly Market Update: markets vacillate between fears of COVID spread and hopes for a vaccine
Equity markets started the week off on continued solid footing, helped by rising hopes for a coronavirus vaccine before year end. A push and pull between concerning headlines surrounding Covid-19 hotspots and incremental developments from vaccine trials was evident in modest intraday markets swings. Earnings season kicked off led by the banks as usual. Generally encouraging reports for several of the large US financial institutions did little to alter the share price trajectory of most. Economic data continued to show improvement from the April pandemic shutdown lows while stock markets forged higher. But the impending expiry of current US government pandemic measures has created a looming fiscal cliff that has many investors concerned that trend can hold. To that end, by Friday much of the focus pivoted to Washington as well as Brussels as leaders there tried to find common ground on what the next round coronavirus fiscal stimulus should look like. Rates stayed very subdued, illustrated by a new record low in 30-year mortgage rates. The US dollar remained on softer footing as evident against the Euro which touched it highest level since March. For the week, the S&P gained 1.2% and the DJIA added 2.3%, while profit taking in the tech megacaps took the Nasdaq down 1.1%.
As earnings season kicked off this week, Netflix reported a historic Q2 subscriber gain, but posted an earnings miss and its guidance disappointed the street. Kansas City Southern missed expectations, noting weakness in its auto and intermodal sectors. Major banks began releasing quarterly results, as well: JPMorgan beat on its top and bottom line, while Wells Fargo disappointed investors and slashed its dividend. Bank of America shares were hit after notching a nearly 50% drop in earnings year on year. Goldman’s Q2 earnings came in higher than anticipated on strong FICC results, and Morgan Stanley posted a profit beat, as well, amid strong trading results. On the M&A front, Analog Devices bought rival Maxim Integrated Products to create a $68B chipmaker. Dell shares lifted after it confirmed it is exploring a spinoff of its 81% stake in VMWare.
MON 7/13 MXIM Confirms to be acquired by Analog Devices in all stock transaction; Combined EV >$68B (US) Jun Monthly Budget Statement: -$864.1B v -$398.9B prior (US) California Gov Newsom: closes indoor activities in bars and restaurants
TUES 7/14 *(UK) MAY MONTHLY GDP M/M: 1.8% V 5.5%E *(DE) GERMANY JULY ZEW CURRENT SITUATION SURVEY: -80.9 V -65.0BE; EXPECTATIONS SURVEY: 59.3 V 60.0E JPM Reports Q2 $1.38 v $1.34e, Managed Rev $33.8B v $30.7Be FAST Reports Q2 $0.42 v $0.35e, Rev $1.51B v $1.44Be JPM CFO Piepszak: expects economic "damage" visibility in "coming months"; Investment banking rev declining q/q and y/y in Q3 - media call comments *(US) JUN CPI M/M: 0.6% V 0.5%E; CPI (EX-FOOD/ENERGY) M/M: 0.2% V 0.1%E; CPI NSA: 257.797 V 257.706E MRNA NEJM reports trial data shows mRNA-1273 COVID-19 vaccine has produced antibodies in all patients tested during initial Phase 1 study - press (US) Pres Trump: China sanctions legislation will hold China accountable for its actions in Hong Kong; also signs executive order ending preferential treatment for Hong Kong - comments at 'Hong Kong Autonomy Act' signing ceremony *(JP) BANK OF JAPAN (BOJ) LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%, AS EXPECTED
WEDS 7/15 *(UK) JUN CPI M/M: 0.1% V 0.0%E; Y/Y: 0.6% V 0.4% *(US) JULY EMPIRE MANUFACTURING: 17.2 V 10.0E (first positive reading since Feb 2020) *(US) JUN INDUSTRIAL PRODUCTION M/M: 5.4% V 4.3%E; CAPACITY UTILIZATION: 68.6% V 67.8%E *(US) DOE CRUDE: -7.5M V -1.5ME; GASOLINE: -3.1M V -1ME; DISTILLATE: -0.5M V +1.5ME AA Reports Q2 -$0.02 v -$0.01 y/y, Rev $2.15B v $2.71B y/y TWTR Several high profile Twitter accounts, including those of Barack Obama, Elon Musk, and Bill Gates, have been hacked AZN.UK UK's Telegraph: Oxford scientists may have a 'breakthrough' on COVID-19 vaccine; drug triggers response that may offer 'double defense' against the virus VMW Dell confirms explores VMware spin-off; intends to negotiate terms consistent with an investment grade rating for both companies *(CN) CHINA Q2 GDP Q/Q: 11.5% V 9.6%E; Y/Y: 3.2% V 2.4%E
THURS 7/16 TSM Reports Q2 (NT$) Net 120.8B v 66.8B y/y, Op 131.1B v 73.3B y/y; US Chip plant production to begin in 2024 BAC Reports Q2 $0.37 v $0.28e, Rev $22.3B v $21.8Be *(EU) ECB LEAVES MAIN 7-DAY REFINANCING RATE UNCHANGED AT 0.00%; AS EXPECTED; maintains forward guidance and path of bond-buying program *(US) JUN ADVANCE RETAIL SALES M/M: 7.5% V 5.0%E; RETAIL SALES (EX-AUTO) M/M: 7.3% V 5.0%E *(US) INITIAL JOBLESS CLAIMS: 1.30M V 1.25ME; CONTINUING CLAIMS: 17.3M V 17.5ME *(US) JULY PHILADELPHIA FED BUSINESS OUTLOOK: 24.1 V 20.0E JBLU JetBlue and American Airlines announce strategic 7-yr partnership to create more competitive options and choice for customers in the Northeast (EU) ECB chief Lagarde: Outlook remains highly uncertain, reiterates stance that will do everything within its mandate - Prepared Remarks (EU) ECB chief Lagarde: Have made full use of Pandemic bond fund flexibility - Q&A DAI.DE Reports prelim Q2 adj EBIT -€708M v -€1.72Be, industrial FCF €685M v -€2.11Be; better than expected market recovery and a strong June performance (US) Pres Trump tells associates he will not sign next COVID relief bill without a payroll tax cut - Politico MSFT Reportedly cut <1K jobs this week; the cuts were said to target areas including MSN.com and Azure cloud unit - Financial Press
FRI 7/17 *(EU) EURO ZONE JUN FINAL CPI Y/Y: 0.3% V 0.3%E; CPI CORE Y/Y: 0.8% V 0.8%E KSU Daily volumes are recovering across key strategic growth areas - earnings slides STT Reports Q2 $1.86 v $1.63e, Rev $2.94B v $2.87Be (US) JULY PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 73.2 V 79.0E