Weekly Market Update: Delta Variant and Growth Signals Spur Some Uneasiness
Stock markets were roiled for much of this week by concerns that the sustained uptick in Covid-19 infections globally and a slowdown in China's growth could impede the economic recovery. Questions surrounding the lasting efficacy of current Covid vaccines against the newest variants, alongside new lockdowns in Asia, led to more hand-wringing that the pandemic will put further pressure on global supply chains and potentially sustain the rise seen in prices. Those inflation worries and the Federal Reserve's signaling that it will scale back some of its easy money policies remained an impediment to investor sentiment overall. Also, the US’s clumsy troop withdrawal from Afghanistan, underscored by the easy toppling of Kabul by the Taliban, sparked concerns that the growing criticism of the Biden Administration could reduce the amount of fiscal measures the Democrats will ultimately be successful in pushing through Congress.
Growth worries were clearly fanned by deceleration in economic data. Monday investors pondered key Chinese economic readings that came in well below market expectations over the weekend. US Aug Empire Manufacturing was significantly below expectations, which was followed up by very disappointing July retail sales figures. Philly Fed and housing data also showed slowdowns. Many economists lowered Q3 GDP forecasts in unison. Federal Reserve speak suggested officials largely continue to believe that the “substantial” progress needed to commence tapering is nearing, while also emphasizing they are paying close attention to the Delta variant. US indices rebounded sharply on Friday into options expiration. WTI crude traded down for its seventh consecutive session (the longest streak since February 2020), hitting its lowest level since May. The Dollar index traded to a 9-month high above 93.50 while cryptocurrencies saw a significant rally intensify, pushing Bitcoin back towards $50K. For the week, the S&P dropped 0.6%, Dow fell 1.1%, and the NASDAQ lost 0.7%.
In corporate news this week, Home Depot profit beat estimates, though same store sales numbers disappointed and customer transactions were down year on year. Retailers Walmart and Target saw Q2 sales and earnings rise, driven by strong grocery sales and a confident start to back-to-school season. Japan’s largest automaker Toyota Motor said it would have to cut its production by 40% in September due to the ongoing semiconductor shortage. US regulators reportedly opened a formal probe of Tesla’s Autopilot feature, citing a swath of collisions with parked emergency vehicles. T-Mobile confirmed that data from over 10M customer accounts had been stolen, along with 40M records of former or prospective customers who had previously applied for credit. Online trading platform Robinhood reported its first results as a publicly traded company, sending shares lower after warning that it sees a deceleration in trading activity in coming quarters. The FTC filed an amended complaint against Facebook, accusing the social media giant of acquiring competitors and thwarting access to their platform. Endo International shares dropped sharply on reports it hired a financial restructuring adviser to evaluate its options amid a deluge of lawsuits alleging it contributed to the opioid crisis.
SUN 8/15 (US) UN Security Council to meet on Monday, Aug 16th at 10:00EST (14:00GMT) on Afghanistan; Kabul falls to Taliban as president flees - press BHP.AU Confirms considering options for petroleum business, including deal with Woodside (as speculated in press); no deal yet
MON 8/16 (US) Fed officials reportedly weigh ending asset purchases by mid-2022 - US financial press TSLA US said to open formal investigation of Tesla Autopilot citing collisions with parked emergency vehicles - press *(US) AUG EMPIRE MANUFACTURING: 18.3 V 28.5E H To acquire resort operator Apple Leisure Group from KKR and KSL Capital Partners for $2.7B in cash OPEC+ sources: OPEC+ sees no need to release more oil into the market right now beyond what has already been planned amidst calls from the US to raise output - press (US) Reportedly the US will advise coronavirus vaccine boosters to be taken 8 months after vaccination, could offer boosters to non immune compromised individuals in mid Sept - NYT
TUES 8/17 (NZ) New Zealand PM Ardern: Country to enter into 3 day lockdown and raises alert level 4 (highest level) as off Tuesday (Aug 17th) at midnight *(EU) EURO ZONE Q2 PRELIMINARY GDP Q/Q: 2.0% V 2.0%E; Y/Y: 13.6% V 13.7%E HD Reports Q2 $4.53 v $4.41e, Rev $41.1B v $40.7Be WMT Reports Q2 $1.78 adj v $1.56e, Rev $141.1B v $136.0Be; Raises guidance *(US) JULY ADVANCE RETAIL SALES M/M: -1.1% V -0.3%E; RETAIL SALES (EX-AUTO) M/M: -0.4% V +0.2%E *(US) AUG NAHB HOUSING MARKET INDEX: 75 V 80E (NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: +0.3% v -1.0% prior (US) Atlanta Fed GDPNow: Raises Q3 GDP forecast to 6.2% from 6.0% A Reports Q3 $1.10 v $0.99e, Rev $1.59B v $1.53Be; Raises guidance - + momentum in all markets & regions 2799.HK (CN) Said to to receive ~$7.0B from China State Council for approved recapitalization from CITIC, existing shareholders to take losses on investments
WEDS 8/18 TMUS Confirms data ~8.65M Current customer accounts’ was stolen, containing personal information, including SSN#, driver’s license/ID, DOB info; More than 40M records of former or prospective customers also exposed whom previously applied for credit with TMUS *(UK) JULY CPI M/M: 0.0% V 0.2%E; Y/Y: 2.0% V 2.3%E (moves back to target) 700.HK Reports Q2 (CNY) adj Net 34.0B v 32.8Be, Rev 138.3B v 138.2Be *(EU) EURO ZONE JULY FINAL CPI Y/Y: 2.2% V 2.2%E; CPI CORE Y/Y: 0.7% V 0.7%E (Confirms that annual pace moves back above ECB's target) TGT Reports Q2 $3.64 adj v $3.48e, Rev $25.2B v $25.1Be; Approves new $15B share buyback (12% of market cap) PLCE Reports Q2 $1.71 v $0.19e, Rev $413.9M v $419Me; Says Q3 off to outstanding start ZIM Reports Q2 $7.38 v $0.23 y/y, Rev $2.38B v $795M y/y; Doubles guidance outlook TJX Reports Q2 $0.64 v $0.56e, Rev $12.1B v $11.2Be; Sales are very strong to start Q3 FY22, with overall open-only comp store sales up mid-teens over Q3 FY20; Raises FY22 share buyback by $250M to $1.50B *(US) JULY HOUSING STARTS: 1.534M V 1.600ME; BUILDING PERMITS: 1.635M V 1.610ME *(US) DOE CRUDE: -3.2M V -1.5ME; GASOLINE: +0.7M V -2ME; DISTILLATE: -2.7M V 0ME (US) US health officials: Expect to make Covid vaccine booster shots widely available to Americans starting Sept 20th (US) Atlanta Fed GDPNow: Cuts Q3 GDP forecast to 6.1% from 6.2% (US) Fed’s Bullard (non-voter, hawk): Recent data has been slightly weaker but still expects 'very robust' growth up to 7% this year and 4% in 2022 - online event comments HOOD Reports Q2 -$2.16 v +$0.09 y/y, Rev $565M v $244M y/y; Q2 is first quarter where a larger share of new customers placed their first trade in crypto rather than equities CSCO Reports Q4 $0.84 v $0.83e, Rev $13.1B v $13.0Be 2799.HK Profit warning: Guides FY20 (CNY) Net loss 102.9B v +1.42B y/y; Confirms bailout from CITIC
THURS 8/19 (US) Goldman analyst cuts US 2021 GDP growth forecast from 8.5% to 5.5% (timing uncertain) (UK) British public health study has found that protection from either of the two most commonly used COVID-19 vaccines against the now prevalent Delta variant of the coronavirus weakens within three months - financial press 7203.JP Said to be cutting global output by ~40% during Sept from prior plans due to chip shortages and coronavirus - Nikkei M Reports Q2 $1.29 adj v $0.22e, Rev $5.65B v $5.12Be; Raises outlook 2nd time; Reinstates lower quarterly dividend at $0.15/shr (before $0.377/shr); Announces $500M share repurchase program KSS Reports Q2 $2.48 v $1.30e, Rev $4.45B v $4.20Be; Raises guidance *(US) INITIAL JOBLESS CLAIMS: 348K V 364KE (post pandemic low); CONTINUING CLAIMS: 2.82M V 2.80ME *(US) AUG PHILADELPHIA FED BUSINESS OUTLOOK: 19.4 V 23.1E (lowest since Dec) INTC CEO: Sees more M&A in chip production, I'm a willing buyer - press FB FTC reportedly plans to refile monopoly lawsuit against Facebook later in federal court today - press (CN) China Legislature passes the personal Information Protection Law (PIPL), effective from Nov 1st - Press
FRI 8/20 AZN.UK AZD7442 PROVENT Phase III prophylaxis (non-vaccine) trial met primary endpoint in preventing COVID-19; Reduced the risk of developing symptomatic COVID-19 by 77% DE Reports Q3 $5.32 v $4.49e, Rev (Equipment Ops) $10.41B v $10.2Be; Raises guidance (CN) China govt said to possibly ask US IPO-bound companies to hand over data - financial press (US) US govt extends Mexico and Canada border closing for non-essential travel through Sept 21st (CN) China Securities Regulatory Commission (CSRC) said to plan to create conditions for audit cooperation with US in order to stabilize growth of Hong Kong capital markets - press (US) Fed's Kaplan (non-voter; hawkish): The big imponderable is the path of the Delta virus; If Delta is having more negative effect on GDP growth, it could cause me to adjust my views - Fox Business interview