Weekly Market Update: Stock markets show no let-up despite rising US virus cases
Fri, 10 Jul 04:06 PM EST/09:06 PM GMT
US stock markets continued to push higher this week, once again largely led by technology stocks and the NASDAQ. Though valuations are hard, if not impossible to justify for some of the mega-cap darlings, money continued to pour into that select group of names, driving the overall indices higher. The week opened with animal spirits percolating after a couple of significant M&A announcements. The economic data generally surpassed expectations, led by a 4-month high in the June ISM services data. A significant jump in JOLTS jobs openings offset another stubbornly high print (1.3M) in weekly initial jobless claims. Treasury yields moved to the lowest levels since the pandemic lockdown measures were eased, amid robust foreign demand seen in the weekly coupon sales. Covid-19 infections continued to jump in the US, led by the hotspots in the Sunbelt, which may have also buoyed demand for the relative safety of government securities. For the week, the S&P rose 1.8%, the Dow gained 1%, and the NASDAQ jumped another 4%.
In corporate news, some major M&A stories led off the week. Berkshire Hathaway’s Energy Company acquired Dominion Energy’s natural gas pipeline and storage assets for $9.7 billion. Uber confirmed plans to buy Postmates for $2.7B in an all-stock transaction as the ride-sharing giant moves further into the food delivery space. Alcoa released preliminary Q2 numbers, reporting a stronger than expected top and bottom line amid rising productivity and cost cuts, despite coronavirus headwinds. Walgreens shares fell after posting an earnings miss in Q2 as COVID-19 costs and a sales shift to low-margin items weighed on profits. Bed, Bath and Beyond plummeted after announcing a plan to close 200 stores over the next 2 years amid wider-than-expected losses and a sharp drop in Q1 revenue. In the social media world, reports circulated that Twitter is working on a subscription service, code named ‘Gryphon,’ but Twitter sources said any effort on that front remains in its early stages. TikTok was said to be considering changing its corporate structure in order to distance the app from China amid reports that the White House was considering banning the video sharing app.
SUN 7/5
D Berkshire Hathaway Inc.’s Energy Company to acquire Gas Transmission and Storage Business for $9.7B (includes the assumption of $5.7B of existing debt); agreement does not include acquisition of the Atlantic Coast Pipeline; Cuts FY20 Op EPS guidance to $3.37-3.63 v $4.33e, cites transaction (guided $4.25-4.60 prior); to use proceeds of transaction to buy back stock
MON 7/6
UBER Confirms to acquire Postmates for $2.65B in all-stock deal
(US) Boston Fed: Main Street Lending Facility is now fully operational; can now purchase participations in eligible loans from registered lenders
*(US) JUN FINAL MARKIT SERVICES PMI: 47.9 V 47.0E
*(US) JUN ISM NON-MANUFACTURING INDEX: 57.1 V 50.0E (four-month high)
005935.KR Reports Prelim Q2 (KRW) Op 8.10T v 6.21Te (6.6T y/y); Rev 52.0T v 50.7Te (56.1T y/y)
TUES 7/7
*(US) MAY JOLTS JOB OPENINGS: 5.397M V 4.500ME
(BR) Brazil Pres Bolsonaro: confirms personal coronavirus test has come back positive; I'm taking chloroquine and feeling perfectly well
WMT Reportedly plans to launch $98/yr competitor to Amazon Prime this month - Recode
WEDS 7/8
*(US) DOE CRUDE: +5.7M V -3ME; GASOLINE: -4.8M V -0.5ME; DISTILLATE: +3.1M V 0ME
*(US) MAY CONSUMER CREDIT: -$18.3B V -$15.0BE
COST Reports June SSS (ex gasoline) +14.4%
THURS 7/9
(CN) Reportedly China state lenders revamping contingency plans in anticipation of US legislation which may penalize banks for serving officials who implement new HK security laws - press
*SUPREME COURT BLOCKS HOUSE ACCESS TO TRUMP RECORDS, RULES LOWER COURTS MUST RECONSIDER HOUSE EFFORT TO SUBPOENA TRUMP TAX RECORDS
*(US) TREASURY $19B 30-YEAR BOND REOPENING DRAWS 1.330%; BID TO COVER 2.50 V 2.30 PRIOR AND 2.33 OF THE LAST 8 REOPENINGS
*(CN) China PBOC Macroprudential Policy Bureau Vice Head Zhou: YUAN TO BE TRADED DIRECTLY WITH MORE CURRENCIES (Currencies not disclosed immediately after PBoC comments)
FRI 7/10
(EU) EU Council President Michel on compromise proposal on recovery plan Proposes 2021-27 budget at €1.074T; maintains recovery fund proposal of €750B
Various govt bond yield hitting record lows in session on safe-haven flows
GILD Presents additional data on investigational antiviral remdesivir for the treatment of COVID-19; remdesivir was associated with an improvement in clinical recovery and a 62% reduction in the risk of mortality
*(US) JUN PPI FINAL DEMAND M/M: -0.2% V +0.4%E; Y/Y: -0.8% V -0.2%E
