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Daily Markets: Can Investor Optimism Continue Into the New Week?

Today’s Big Picture

Equities in Asia welcomed your authors back from our break last week by moving modestly higher today, led by the 1.4% move up in Japan’s Nikkei, and US equity futures point to another positive open that, if it holds, will add further to their quarter-to-date snap-back. That snap-back has been led by better-than-feared economic data and the continued, phased reopening of the global economy – see Data Download for more on that. Helping US futures tick higher, oil prices are trending up following OPEC and allied nations agreeing to extend prior production cuts of 10 million barrels of oil per day through the end of July.  

By comparison, by mid-day trading, European equities were choppy and mixed. Weighing on European equities is reported resistance for the proposed fiscal stimulus plan that will be discussed by EU leaders on Thursday. Investors will look for clues on that plan and cues on what the European Central Bank (ECB) may do next when ECB President Christine Lagarde speaks to EU lawmakers at 9:45 AM this morning. 

Moving through the coming week, we suspect investors will be closely monitoring the US-China trade battle, and new coronavirus case counts following both the continued easing of pandemic restrictions and the rash of protests during the last two weeks that saw tens of thousands of people not heeding recommended social distancing. If the number of reported daily new cases falls, investors will likely interpret it as a positive for the economy returning to normal. However, if the number of reported coronavirus cases spikes, investors are likely to reassess assumptions and expectations that have led to the sharp rebound in equities quarter to date. 

Data Download


There are now 7.1 million confirmed cases of the coronavirus and over 400,000 deaths from COVID-19 worldwide. The US has over 2 million cases, with more than 112,000 lives lost. Brazil has just under 700,000 cases and nearly 38,000 deaths. Russia, the third most-affected nation, has over 476,000 cases and nearly 6,000 deaths.

Daily new cases in the US are no longer declining, with the 7-day moving average for new daily cases vacillating between 21,000 and 22,000. On a more positive note, the number of daily deaths has been declining, with the 7-day moving average continuing to fall since its peak of 2,214 on April 21. The impact of the protests has not been seen in the data in any obvious manner. TBD if that continues. Cities and states around the country and looking to open up, but at the same time are contending with the protests, which have forced some areas to lock back up again. Governors and mayors are looking to get their economies running again, despite many regions seeing their case count rising. Looking across the nation, only 20 states are seeing cases decline (as measured by the change in the 7-day moving average of new cases), while 21 are experiencing rising cases, and 11 have seen no change – this includes territories and Washington DC.

The following 21 US states and territories are seeing cases rising:

  • California
  • Texas
  • Michigan
  • Florida
  • North Carolina
  • Arizona
  • Tennessee
  • Washington
  • Missouri
  • South Carolina
  • Utah
  • Kentucky
  • Arkansas
  • New Mexico
  • Puerto Rico
  • Oregon
  • Idaho
  • Vermont
  • Hawaii
  • Alaska
  • Montana

The following 20 states are seeing their cases declining:

  • New York
  • New Jersey
  • Illinois
  • Pennsylvania
  • Maryland
  • Connecticut
  • Ohio
  • Indiana
  • Colorado
  • Minnesota
  • Iowa
  • Rhode Island
  • Kansas
  • Delaware
  • Washington DC
  • South Dakota
  • New Hampshire
  • North Dakota
  • Maine
  • West Virginia
  • Wyoming

Some promising news came from Sorrento Therapeutics Inc (SRNE) Friday when it announced that it found a second compound that can block SARS-CoV-2 and prevent it from infecting cells in lab testing. Its compound STI-4398 completely inhibited the virus’s ability to infect African green monkey kidney epithelial cells at low concentration. The company says the results now justify progression into animal studies.  

UK pub goer’s have cause to cheer after UK ministers announced June 22 as their target date for reopening pubs and restaurants. They won’t be sharing toasts with international visitors, though, as starting today, visitors to the UK will have to self-isolate for 14 days. Airlines EasyJet (EJTTF)Ryanair (RYAAR), and British Airways (IAG) are planning to challenge this quarantine rule in court.

Olympic hopefuls got more bad news as Tokyo’s governor is questioning the viability of the postponed Olympics in 2021 without some sort of international travel and quarantine agreement.

Hong Kong has announced that it will relax its 14-day quarantine for executives of 480 of the largest companies listed in the city. Yet another difference in how the virus affects the haves versus the have-nots. 

Siemens Healthineers (SMMNY) announced that it is read to produce 50 million antibody tests this month.

International Economy

While investors in the US are counting on a strong V-shaped recovery, the international data continues to look grim. 

German Industrial Production contracted by a record 18% in April with the nation’s vast auto industry hit the hardest as its output fell 75% MoM. That drop was the biggest in the survey’s history dating back to 1991. For the first four months of 2020, Germany IP fell over 25%, far worse than the 20% cumulative decline in output during the 2008 financial crisis. Car sales in May were half of what they were in May 2019, and total car production for the first five months of 2020 fell to levels not seen since 1975. Overall, Germany’s economy is expected to contract by 6% in 2020.

Japan’s final GDP for Q1 saw a 2.2% annualized decline after a 7.2% contraction in Q4 2019 and flat in Q3. Not a great sign for global trade from this major export economy.

China’s trade data seconded the weakness in world trade with both its imports and exports declining in May by 16.7% and 3.3% respectively. This resulted in the highest trade surplus since Reuters has been tracking the data going back to 1981.

Domestic Economy

As we begin this week and following last week’s usual start of the month barrage, there are no major US-facing economic data points to be had today. Given last week’s ISM Manufacturing and Non-Manufacturing Index readings for May as well as the rather surprising May Employment Report, we look forward to seeing the Atlanta Fed’s GDPNow forecast update that is expected to be had tomorrow. 

Friday’s jobs report was a massive surprise. Instead of the expected 7 million decline in jobs in May after the 21 million jobs lost in April, there was an increase of 2.5 million jobs, the biggest 1-month increase in civilian employment since the end of World War II. The unemployment rate fell to 13.3% from 14.7% versus expectations for an increase to 19.0%. The numbers were stunning and difficult to reconcile with the over 40 million initial jobless claims. There is also a rather large “misclassification” of data referenced in the report that would have, had the data been properly addressed, resulted in the unemployment rate rising to 16.3%, rather than falling to 13.3%. There were also a large number of people classified as employed by absent from work. For all the bullishness this report induced Friday, which saw markets reaching for new highs, the level of employment remains below where it was 15 years ago.

The workweek rose 1.5% to 34.7 hours, the highest level on record which, when coupled with the rebound in employment, means a 4.3% bounce-back in aggregate hours worked. This implies that Q2 GDP only contracted by 46% annualized.


The rebound in the stock market continued last week as we entered the month of June, the home stretch for the second quarter. Despite the turmoil associated with the continued protests in the US that are presenting a fresh headwind to businesses, particularly retailers and restaurant companies, the better-than-feared economic data of the week paired with de-escalation in U.S.-China tensions, at least for now, led equities higher. That across-the-board, upward move led all the major US equity indices to register gains of more than 23% quarter to date as of Friday’s market close. The Nasdaq Composite Index leads the pack with its 27.5% quarter to date rebound that left it 9.4% higher year to date. 

As investor optimism has hit warp speed, American Airlines (AAL) was the best performing stock in the S&P 500 last week, up 77.1 % since the start of June as of Friday’s close. Last week the Dow rose 6.8%, the S&P 500 4.9%, and the Nasdaq Composite 3.4% while the US 10-year Treasury bond yield rose 24 basis points to 0.89%.

Stocks to Watch

Citing “demand, production, and cost trends in April and May that were more favorable than previously anticipated,” paper and tissue manufacturer Clearwater Paper (CLW) raised its June quarter guidance. US readers of Daily Markets, especially those that have trolled grocery store aisles during the pandemic in search of toilet paper, will not find this news surprising.  

Recreational vehicles (RVs) company Thor Industries (THO) reported April quarter results that were ahead of top and bottom-line expectations. Sales and backlog for May, the first month of the company’s current quarter, improved on a weekly basis as dealers began to reopen their dealerships and consumer demand increased.

Omnichannel provider of lease purchasing solutions Aaron’s (AAN) issued upside guidance for the current quarter. The company now sees EPs of $0.80-$0.85 vs. the $0.41 consensus forecast. 

Global semiconductor foundry United Microelectronics Corp. (UMC) reported its May revenue rose 20.45% to NT$14.75 billion in May, bringing its YTD 2020 revenue to up 26.65% to NT$72.07 billion. 

Integrated circuit packaging and testing company ChipMOS (IMOS) reported May revenue of $59.6 million, down 3.5% MoM but up 4.7% YoY. For the month, the company saw healthy memory demand, including DRAM and NOR flash, offset by TV and smartphone-related DDIC demand softness.

The Wall Street Journal reports NASA’s inspector general is investigating an allegation that a high-ranking NASA official earlier this year improperly guided Boeing (BAregarding an agency competition for lucrative lunar-lander contracts.

Shares of India’s online travel company Yatra Online (YTRA) are coming under pressure this morning following the company’s announcement that it has $32.5 million in total available liquidity and its “current monthly run-rate operating fixed cost was approximately US$1.2 million (excluding any litigation-related expenses).”

Business Insider indicated Amazon’s (AMZN) Prime Air drone delivery program will launch on August 31. Prime Air is designed to deliver packages under five pounds in 30 minutes or less using fully electric drones that can fly up to 15 miles.

Apple (AAPL) is reportedly preparing to allow customers to buy a number of its products, including iPads, Macs, and AirPods, over monthly, interest-free installments using its Apple Card credit card.

Mobile infrastructure company Ericsson (ERIC) announced it has increased its footprint in China through 5G contract awards from all three major operators in China. While that 5G business in China is expected to have “healthy profitability over the life of the contracts,” margins during the current quarter are expected to be negative due to high initial costs for new products.

Volkswagen (VLKAY) shared it is eyeing more cost cuts, potentially for R&D, investments, and fixed costs, to offset the economic impact of the coronavirus pandemic. 

Tesla (TSLA) sold 11,095 Model 3 vehicles in China during May, more than triple the 3,635 sold in April, according to the China Passenger Car Association. 

Facebook’s (FB) CEO Mark Zuckerberg announced the company will its policies on political posts and review potential options for handling violating or partially-violating content aside from the binary leave-it-up or take-it-down decisions.

Over the weekend, Bloomberg reported UK-based AstraZeneca Plc (AZN) made a preliminary approach to rival drugmaker Gilead Sciences (GILD) about a potential merger. Both companies declined to comment.  

According to Dealogic, year to date, companies going public in 2020 have raised $12.2 billion in listing their IPOs with Nasdaq (NDAQ) vs. $10.9 billion at the NYSE (ICE). 

After today’s close investors, Calavo Growers (CVGW)Casey’s General (CASY)Coupa Software (COUP), and Stitch Fix (SFIX) are slated to report their quarterly earnings. Investors that want to get a jump on those and other corporate earnings reports coming at us this week should visit Nasdaq’s earnings calendar page

On the Horizon

      • Dates to mark:
          • June 9: NFIB Business Optimism Index and JOLTS report
          • June 10: Federal Reserve Interest rate decisions
          • June 11:  May PPI
          • June 12: Michigan Consumer Sentiment Report 

Thought for the Day

“Believe you can, and you’re halfway there.” ~Theodore Roosevelt  


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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