Weekly Market Update: Market headwinds build entering traditionally choppy time of year
The month long rally in U.S. stocks encountered stiffening headwinds this week. China's burgeoning regulatory crackdown on US listed corporations resulted in continued trepidation and fallout for investors in those stocks. Heavy US IPO issuance persisted, but signals like Robinhood’s less than stellar reception, suggested investors might be starting to balk at the onslaught of equity supply. Also economic data emerged that indicated the pace of economic growth may be downshifting. Quarterly earnings reports and conference calls continued to highlight the effects ongoing snarls in the global supply chain are having on corporate balance sheets, and are likely to persist for some time.
The Fed and Chairman Powell remained steadfast in their belief that emergency measures will stay in place for several more months at the very least. Wednesday’s FOMC statement emphasized more progress has been made towards the goals required to begin tapering, but a dovish tilt to answers in his press conference confirmed a view by many that the growing spread of the Covid Delta variant is weighing heavily on the Chairman’s mind. Friday saw things finish on a dour note following a disappointing Amazon earnings report, in particular. US Treasury yields finished lower on the week along with the Dollar. Bitcoin finally rallied up from 30K level to finish out consolidating closer the 40K. For the week, the S&P lost 0.4%, the DJIA fell 0.4%, and the Nasdaq ended 1.1% lower.
In corporate news this week, most headlines derived from the torrent of quarterly earnings, with Big Tech names front and center. Alphabet shares jumped after the search giant reported blowout numbers, noting YouTube's revenue nearly doubled amid a rebound in digital ad spending. Microsoft notched earnings and revenue beats, stating it expects growth to continue into next year. Facebook warned its sales growth rate is about to decelerate as Apple iOS restrictions and pandemic reopenings weigh on its outlook. A surprise revenue miss and disappointing outlook dealt Amazon shares their biggest daily drop since last September.
AMD posted beats on its top and bottom line and noted it is growing significantly faster than the market with strong demand across all parts of its businesses. UPS dropped despite a big earnings beat, as its operating margin outlook weighed on investor sentiment. Tesla reported its most profitable quarter in its history despite the global semiconductor shortage that has impaired the entire auto industry. Ford reported a surprise Q2 profit and said chip supply was improving though the situation ‘remains fluid.’ Boeing notched its first profit in almost two years as it saw 737 Max deliveries rise. Robinhood marked the weakest debut ever for an IPO of its size by a U.S. company, reportedly leaving underwriters nonplussed and speculating that the hybrid nature of the auction process may have confused investors.
SUN 7/25 (CN) China Industry Ministry (MIIT): To begin a crackdown on illegal internet activities
MON 7/26 *(DE) GERMANY JULY IFO BUSINESS CLIMATE: 100.8 V 102.5E (1st decline since Jan 2021) AMZN Reportedly mulls to accept Bitcoin payments by end-2021, also investigating its own token for 2022 - press RPM Reports Q4 $1.28 v $1.26e, Rev $1.74B v $1.69Be; Warns next 6mo of significant inflation, supply chain impacts (US) Goldman Sachs cuts Q3 US GDP outlook 11% from 9.5% to 8.5% LII Reports Q2 $4.57 v $4.32e, Rev $1.24B v $1.16Be; Affirms guidance & raises FY21 stock repurcase to $600M (prior $400M) (US) Reportedly US will not lift any existing travel restrictions at this point citing Delta variant and potential increase in COVID-19 cases in coming weeks - financial press WLTW Aon mutually agrees with Willis Towers Watson to terminate combination; Aon to pay $1B termination fee to WLTW *(US) JUN NEW HOME SALES: 676K V 800KE *(US) JULY DALLAS FED MANUFACTURING ACTIVITY INDEX: 27.3 V 32.3E AMZN Denies they will accept Bitcoin this year, also denies it plans to launch a crypto coin in 2022 - press TSLA Reports Q2 $1.45 adj v $0.90e, Rev $12.0B v $11.4Be; While we saw ongoing semiconductor supply challenges in Q2, we were able to further grow our production INTC Reveals two breakthrough process technologies to accelerate process and packaging innovations; Set 2025 roadmap
TUES 7/27 700.HK WeChat stops new users registrations until early Aug due to security upgrade following new China govt regulations (CN) China reportedly considering adding more national laws in Hong Kong basic law annex - press UPS Reports Q2 $3.06 v $2.71e, Rev $23.4B v $23.1Be; Has no plans to buyback shares in 2021 SWK Reports Q2 $3.08 v $2.89e, Rev $4.30B v $4.20Be; Raises guidance significantly GE Reports Q2 $0.05 v $0.03e, Rev $18.3B v $18.3Be; Aviation shows early signs of recovery MMM Reports Q2 $2.59 v $2.25e, Rev $8.95B v $8.54Be; Raises guidance RTX Reports Q2 $1.03 v $0.92e, Rev $15.9B v $15.8Be; Raises guidance FISV Reports Q2 $1.37 v $1.29e, Rev $4.05B v $3.71Be; Raises guidance for second time ADM Reports Q2 $1.33 adj v $0.99e, Rev $22.9B v $18.2Be; Expects strong momentum to continue in H2 WM Reports Q2 $1.27 v $1.18e, Rev $4.48B v $4.24Be; Raises guidance again; Focuses on disciplined pricing and cost management helped to offset the inflationary cost pressures we have seen GLW Reports Q2 $0.53 v $0.51e, Rev $3.50B v $3.40Be LECO Reports Q2 $1.67 v $1.46e, Rev $826M v $786Me *(HU) HUNGARY CENTRAL BANK (MNB) RAISES BASE RATE BY 30BPS TO 1.20%; HIGHER-THAN-EXPECTED PCAR Reports Q2 $1.41 v $1.38e, Rev $5.84B v $5.44Be *IMF WORLD ECONOMIC OUTLOOK (WEO): MAINTAINS 2021 GDP GROWTH AT 6.0% (CN) China government reportedly digging a new field for 'what appears to be 110 silos for launching nuclear missiles' - NYT *(US) JULY CONSUMER CONFIDENCE: 129.1 V 124.0E (US) Atlanta Fed GDPNow: cuts Q2 GDP forecast to 7.4% from 7.6% (US) CDC confirms recommendation that vaccinated individuals should wear masks in public indoor settings in areas with high COVID-19 transmission rates; Kids wear masks when back to school - press MSFT Reports Q4 $2.17 v $1.90e, Rev $46.2B v $44.1Be GOOGL Reports Q2 $27.26 v $19.89e, Rev $51.0B v $46.1Be AMD Reports Q2 $0.63 v $0.54e, Rev $3.85B v $3.60Be; Says growing significantly faster than the market with strong demand across all of our businesses (US) Weekly API Crude Oil Inventories: -4.7M v +0.8M prior
WED 7/28 DBK.DE Reports Q2 Net+€692M v -€77M y/y, Rev €6.24B v €5.9Be; scraps costs target BAS.DE Reports Q2 Net +€1.7B v -€0.9B y/y, Adj EBITDA €3.2B v €1.1B y/y, Rev €19.8B v €19.8B prelim PFE Reports Q2 $1.07 v $0.97e, Rev $19.0B v $17.5Be; Raises guidance due to higher anticipated COVID-19 vaccine Rev TDY Reports Q2 $4.61 v $2.94e, Rev $1.12B v $1.00Be; Guides Q3 strong; raises FY21 guidance significantly ADP Reports Q4 $1.20 v $1.13e, Rev $3.74B v $3.67Be SHOP Reports Q2 $2.24 v $0.98e, Rev $1.12B v $1.04Be; Notes consumer spending remained strong GSK.UK Reports Q2 Adj EPS 28.1p v 0.20pe, Rev £8.09B v £7.69Be APH Reports Q2 $0.61 v $0.55e, Rev $2.66B v $2.47Be; The revolution in electronics is accelerating NSC Reports Q2 $3.28 v $2.94e, Rev $2.80B v $2.75Be *(US) JUN PRELIMINARY WHOLESALE INVENTORIES M/M: 0.8% V 1.1%E *(US) DOE CRUDE: -4.1M V -2ME; GASOLINE: -2.3M V -1ME; DISTILLATE: -3.1M V -0.5ME (US) Atlanta Fed GDPNow: cuts Q2 GDP forecast to 6.4% from 7.4% *(US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 0.00-0.25% (AS EXPECTED); Made progress towards goals since setting out bar for tapering (US) Fed Chair Powell: Fed will continue to support the economy until recovery is complete; Timing of tapering will depend on incoming data - post rate decision press conference QCOM Reports Q3 $1.92 v $1.67e, Rev $8.00B v $7.58Be; Says it has more demand than supply in all products F Reports Q2 +$0.13 v -$0.11e, Rev $26.8B adj v $21.5Be FB Reports Q2 $3.61 v $3.03e, Rev $29.1B v $27.9Be; Expects Rev growth rate v 2019 levels to decelerate modestly in H2 2021 005930.KR Reports final Q2 (KRW) Net 9.45T v 5.5T y/y; Op 12.6T v 12.5T prelim (8.15T y/y); Rev 63.7T v 63.0T prelim (52.97T y/y)
THRS 7/29 AIR.FR Reports H1 adj Net +€2.23B v -€1.92B y/y, Adj EBIT €2.73B v -€1.55B y/y, Rev €24.64B v €18.9B y/y; board approves plans for a new freighter version of its A350 passenger jet (DE) GERMANY JULY CPI NORTH RHINE WESTPHALIA M/M: 0.8% V 0.5% PRIOR; Y/Y: 4.1% V 2.5% PRIOR CSGN.CH Reports Q2 (CHF) Net 253M v 1.16B y/y, Pretax 813M v 1.55B y/y, Rev 5.1B v 6.2B y/y NOKIA.FI Reports Q2 €0.09 v €0.05e, Op €682M v €408Me; Rev €5.31B v €5.43Be; Raises guidance NESN.CH Reports H1 (CHF) Net 5.9B v 5.8Be, Op 7.3B v 7.2Be, Rev 41.8B v 41.9Be SAN.FR Reports Q2 Business EPS €1.38 v €0.67e, Op €2.27B v €1.60B y/y, Rev €8.74B v €8.4Be VOW3.DE Reports H1 Net +€8.45B v -€1.02B y/y, Op €11.4B v €11.0B prelim, Rev €129.7B v €96.1B y/y; Trims deliveries outlook citing chip shortage income in H2 RDSA.NL Reports Q2 CCS $0.71 v $0.08 y/y, Adj CCS Net $5.53B v $5.20Be, Rev $61.8B (total rev and other income) v $32.5B y/y; Commences $2B share buyback, to raise dividend from Q2 onwards by 38% AZN.UK Reports Q2 Core EPS $0.90* v $0.96 y/y, Rev $8.22B v $6.28B y/y; Raises guidance DGE.UK Reports FY20/21 Preliminary Net £2.66B v £1.41B y/y, adj Op £3.75B v £2.14B y/y, Rev £12.7B v £12.5Be 066570.KR Reports final Q2 (KRW) Net -211.9B v +65.6B y/y; Op 1.11T v 1.1T prelim (495.4B y/y); Rev 17.1T v 17.1T prelim (12.8T y/y) NOK CEO: chip shortage situation remains tight and to continue into 2022 - post earnings comments (DE) GERMANY JULY NET UNEMPLOYMENT CHANGE: -91.0K V -29.0KE; UNEMPLOYMENT CLAIMS RATE: 5.7% V 5.8%E (CN) China Finance Ministry (MOF): To remove steel products tax rebates for 23 items, confirms to raise export tariffs for certain steel products from Aug 1st (EU) EURO ZONE JULY ECONOMIC CONFIDENCE: 119.0 V 118.2E (highest in over 20 years) (DE) GERMANY JULY PRELIMINARY CPI M/M: 0.9% V 0.6%E; Y/Y: 3.8% V 3.2%E (highest annual pace since 1993) MA Reports Q2 $1.95 adj v $1.72e, Rev $4.50B v $4.35Be (US) INITIAL JOBLESS CLAIMS: 400K V 385KE; CONTINUING CLAIMS: 3.27M V 3.18ME (US) Q2 ADVANCE GDP PRICE INDEX: 6.0% V 5.4%E; CORE PCE Q/Q: 6.1% V 6.1%E (US) Nevada reports June casino gaming Rev $1.19B, +111% y/y; Las Vegas strip Rev $610.6M, +156% y/y (US) JUN PENDING HOME SALES M/M: -1.9% V 0.1%E; Y/Y: -3.3% V -3.3%E AMZN Reports Q2 $15.12 v $12.22e, Rev $113.1B v $115.1Be - Guides Q3 Rev $106-112B +10-16% y/y v $119.2Be AMZN CFO: Sees step down in Revenue growth continuing for the next few quarters, citing lapping growth from 2020 pandemic and additional mobility among customers getting out and doing more than shopping online - media call comments X Reports Q2 $3.37 v $3.16e, Rev $5.03B v $4.70Be
FRI 7/30 *(DE) GERMANY Q2 PRELIMINARY GDP Q/Q: 1.5% V 2.0%E; Y/Y: 9.6% V 9.6%E *(EU) EURO ZONE JULY ADVANCE CPI ESTIMATE Y/Y: 2.2% V 2.0%E (back above ECB's target); CPI CORE Y/Y: 0.7% V 0.7%E *(EU) EURO ZONE Q2 ADVANCE GDP Q/Q: 2.0% V 1.5%E; Y/Y: 13.7% V 13.2%E *(EU) EURO ZONE JUN UNEMPLOYMENT RATE: 7.7% V 7.9%E CAT Reports Q2 $2.60 v $2.38e, Rev $12.9B v $12.4Be; Cites higher end-user demand for equipment and services PG Reports Q4 $1.13 v $1.08e, Rev $18.9B v $18.3Be XOM Reports Q2 $1.10 v $1.02e, Rev $67.7B v $63.7Be *(US) JUN PERSONAL INCOME: +0.1% V -0.3%E; PERSONAL SPENDING: 1.0% V 0.7%E (US) SEC Chair Gensler: Confirms SEC has asked staff to seek certain disclosures from offshore issuers associated with China-based operating companies *(US) JULY CHICAGO PURCHASE MANAGERS INDEX: 73.4 V 64.2E *(US) JULY FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 81.2 V 80.8E (US) Atlanta Fed GDPNow: forecasts initial Q3 GDP at 6.1%