Weekly Market Update: Speculative ‘meme’ frenzy draws focus away from infrastructure talks, solid data, and upbeat guidance from automakers
Much of the focus this week was unavoidably on a renaissance of the meme stocks. Wild volatility in AMC shares and historic options volumes sparked a revival of the Reddit trade. It didn’t go unnoticed that the speculative pocket jumped as Bitcoin prices continued to retreat along with most other cryptos. The environment may have been ripe for a resurgence in highly speculative trade as markets appeared to be in a bit of holding pattern as earnings season ends. Most market participants saw their focus shift towards Friday’s May jobs report as well key central bank meetings later this month for more clarity.
The Biden Administration and the Republicans continued to offer proposals aimed at reaching a deal on infrastructure, but despite what appeared to be a significant concession on corporate tax rates from the President, rhetoric suggested a deal is not likely in the offing. Friday’s US Labor Department data showed the U.S. economy added fewer jobs than economists had expected, while the unemployment rate fell more than expected. Wage data did suggest employers are being forced to pay more to find workers. Regardless, the mixed data suggested the Federal Reserve can continue to be patient before paring back its extraordinary support for the economy, and that notion was underscored by the Fed’s Mester in an interview after the data release. Equity markets bounced on the jobs data while Treasury yields the US dollar gave back some of their gains seen earlier in the week. Most commodity prices moved higher led by a rebound in gold prices. WTI crude prices finished the week at levels not seen since the very early days of 2020. For the week, the S&P gained 0.6%, the DJIA added 0.7%, and the Nasdaq was up 0.5%.
In corporate news this week, GM raised its H1 outlook to be ‘significantly better’ than its prior guidance, pointing to its prioritization of semiconductor usage amid shortages, and the car maker remains ‘optimistic’ about full year prospects. Engine No. 1 was expected to win a third board seat at Exxon, after winning two seats decisively last week, as the activist investor pushes management to focus on climate change issues. Brazilian meat producer JBS Foods disclosed a cyberattack on its systems in Australia and Canada, forcing it to shut down several meat production facilities, even in the US, as officials sought to contain the fallout.
Amazon confirmed plans to hold its Prime Day event on June 21-22nd in the US and globally, moving its annual sale back to the midyear timeframe it has held since 2015. Cloudera agreed to a $16 per share go-private deal with PE firms KKR and Clayton Dubilier & Rice, an offer that is only slightly above its 2017 IPO price. Etsy said it planned to acquire global fashion resale marketplace Depop for $1.63B as the online seller tries to move into the vintage 2000s streetwear market. Facebook maintained its suspension of former President Trump’s account on all its platforms for two years, and said he would only be reinstated ‘if conditions permit.’
SUN 5/30 *(CN) CHINA MAY MANUFACTURING PMI (GOVT OFFICIAL): 51.0 V 51.1E (14th month of expansion)
MON 5/31 (US) US regulators reportedly signal bigger role in cryptocurrencies market - FT (IL) Israel Opposition parties said to have reached a deal that would remove PM Netanyahu from office - Wapo (CN) China Politburo to hold a major meeting on optimizing nationalist policies and how to deal with an aging population; will allow three children per couple - Xinhua (CN) China Education Ministry reportedly mulling to create a new division to oversee all private education platforms and online education firms - press *(DE) GERMANY MAY PRELIMINARY CPI M/M: 0.5% V 0.3%E; Y/Y: 2.5% V 2.3%E (highest annual pace since 2011) ATL.IT Atlantia investors said to have approve Autostrade sale to Italy state lender CDP - press JBSS3.BR Disclosed cyber attack on systems in Australia and Canada - press
TUES 6/1 (CN) China Vice Premier Liu He held talks with US Treasury Sec Yellen, both expressed willingness to maintain communications and that economic ties are important - Xinhua *(US) MAY DALLAS FED MANUFACTURING ACTIVITY INDEX: 34.9 V 36.3E (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -0.9% v -0.2% prior *(US) MAY ISM MANUFACTURING: 61.2 V 60.9E; PRICES PAID: 88.0 V 89.0E *(US) MAY FINAL MARKIT MANUFACTURING PMI: 62.1 V 61.5E (11th consecutive month of expansion) CLDR Confirms entered into going-private deal with PE firms KKR and CD&R for $16.00/shr in $5.3B cash deal - filing *(EU) EURO ZONE APR UNEMPLOYMENT RATE: 8.0% V 8.1%E *(EU) EURO ZONE MAY ADVANCE CPI ESTIMATE Y/Y: 2.0% V 1.9%E; CPI CORE Y/Y: 0.9% V 0.9%E (above ECB target for 1st time since Nov 2018) *(EU) EURO ZONE MAY FINAL MANUFACTURING PMI: 63.1 V 62.8E (confirms 11th month of expansion) *(DE) GERMANY MAY NET UNEMPLOYMENT CHANGE: -15.0K V -9.0KE; UNEMPLOYMENT CLAIMS RATE: 6.0% V 6.0%E (HK) Macau May Casino Rev (MOP): 10.4B v 8.4B prior; Y/Y: 492.2% v 467%e
WEDS 6/2 (US) US Trade Rep Tai: USTR suspending new retaliatory tariffs [related to digital taxes] for up to 180 days, provides time for OECD G20 talks NTAP Reports Q4 $1.17 v $1.12e, Rev $1.56B v $1.50Be; Raises dividend 4% (IL) Israel opposition leader Yair Lapid notifies the President that he has formed a coalition with Naftali Bennett for a govt; move would oust PM Netanyahu after 12 years in power - press (US) Federal Reserve Board announces plans to begin winding down the portfolio of the Secondary Market Corporate Credit Facility (UK) Chancellor of the Exchequer Sunak (Fin Min): US proposals on global tax reform appear to meet UK's objectives
THURS 6/3 (TR) Turkey May CPI M/M: 0.9% v 1.3%e; Y/Y: 16.6% v 17.3%e (1st decline in annual pace in 8 months) *(FR) FRANCE MAY FINAL PMI SERVICES: 56.6 V 56.6E (confirms 2nd straight expansion) *(DE) GERMANY MAY FINAL PMI SERVICES: 52.8 V 52.8E (confirms move back into expansion and highest reading since July 2020) *(UK) MAY FINAL PMI SERVICES: 62.9 V 61.8E (confirms 3rd month of expansion and highest reading since May 1997) DAL Raises Q2 pretax -$1.2B to -$1.0B (prior -$1.5 to -1.0B), Rev $6.0-6.2B v $6.35Be (prior -55% to -50%); Expects H2 2021 pretax profit - filing *(US) MAY ADP EMPLOYMENT CHANGE: +978K V +650KE *(US) Q1 FINAL NONFARM PRODUCTIVITY: 5.4% V 5.5%E; UNIT LABOR COSTS: +1.7% V -0.4%E GM Raises H1 results significantly better than prior guidance, citing prioritization of chip usage *(US) MAY ISM SERVICES INDEX: 64.0 V 63.0E (all time high) (US) Reportedly President Biden offering 15% tax floor instead of a corporate tax rate hike to 28% in effort get Republicans to support his infrastructure plan - Washington Post *(US) DOE CRUDE: -5.1M V -2.5ME; GASOLINE: +1.5M V -1.5ME; DISTILLATE: +3.7M V -1ME (US) Biden administration unveils strategy for global vaccine sharing; allocates first 25M doses to be shared globally (out of 80M promised by end of June) AVGO Reports Q2 $6.62 v $6.44e, Rev $6.61B v $6.51Be COST Reports May total SSS +14.7% (ex-gas) FB Reportedly plans to end special treatment for politicians after Trump ban; would reverse position that all speech from elected officials is inherently newsworthy - The Verge 2449.TW Said to be testing all workers following discovery of cluster of virus infections - Taiwan press
FRI 6/4 *(EU) EURO ZONE APR RETAIL SALES M/M: -3.1% V -1.5%E; Y/Y: 23.9% V 25.0%E *(US) MAY CHANGE IN NONFARM PAYROLLS: +559K V +674KE (US) US FBI Director Wray: Russian actors are chiefly responsible for ransomware attacks in US - financial press *(US) UNEMPLOYMENT RATE: 5.8% V 5.9%E *(US) MAY AVERAGE HOURLY EARNINGS M/M: 0.5% V 0.2%E; Y/Y: 2.0% V 1.6%E 2449.TW To suspend domestic production for two days after COVID breakout (EU) EURO ZONE APR RETAIL SALES M/M: -3.1% V -1.5%E; Y/Y: 23.9% V 25.0%E (US) US FBI Director Wray: Russian actors are chiefly responsible for ransomware attacks in US - financial press (US) MAY CHANGE IN NONFARM PAYROLLS: +559K V +674KE (US) UNEMPLOYMENT RATE: 5.8% V 5.9%E (US) MAY AVERAGE HOURLY EARNINGS M/M: 0.5% V 0.2%E; Y/Y: 2.0% V 1.6%E FBTo maintain former Pres Trump suspension for two years and he will only be reinstated 'if conditions permit'