Today’s Big Picture
U.S. equity futures point to a positive move at the open after shares in Asia all closed in positive territory and the major European indices were all up over 1% by midday trading. Today’s move in equity futures looks to be driven by a Bloomberg News report that China intends to accelerate its purchases of U.S. agricultural products per the terms of the deal reached last January. We remain in a market in which nearly all news is viewed through a positive lens. There is also optimism concerning more stimulus in the Eurozone as negotiations start today over at €750 billion stimulus proposal.
Markets look to be wholly unimpressed by accelerating coronavirus cases in the U.S. and while the S&P 500 is today right around where it was in October 2019, the significant downward revisions in operating EPS expectations means investors are paying 15%-30% more for earnings at a time when a record number of companies have chosen to not provide forward guidance. The world is experiencing an unprecedented health crisis which has in turn led to a record-breaking economic crisis and yet global stock prices are in the top 12% over the past decade. Also, keep in mind that today’s close could see some interesting action as today the markets face a rather profound options expiration at a level that has not been seen since December 2018. We may also see some significant moves at the end of the month due to pension re-balancing.
There are now more than 8.6 million confirmed cases of the coronavirus worldwide and more than 450,000 lives have been lost to Covid-19. Globally daily new cases continue to rise, having made a new all-time high this week of over 146,000 cases in one 24-hour period and the 7-day average has been consistently making new highs almost daily. On a more positive note, while the number of active cases continues steadily rise, the number of serious and critical cases has been relatively constant between 53,000 and 55,000 since May 23. On a less positive note, the 7-day average of daily deaths has been rising since May 30.
New York’s Governor Cuomo announced yesterday that he is considering imposing a quarantine on travelers coming into the state from areas such as Florida that are experiencing spikes in coronavirus cases. Back in March, Texas Governor Abbott issued a similar order mandating a 14-day quarantine for travelers coming into his state from the New York tri-state area. Texas saw nearly 2,800 hospitalizations Wednesday, either new consecutive high for the state in less than two weeks.
In the U.S. the number of new daily cases hit the highest level since May 21 with the 7-day average of daily cases rising continually since June 9 and the number of active cases has hit a new high of 1.21 million and has been rising steadily since June 4. In comparison, neither Italy (once the European epicenter), Spain, Germany, or France, experienced anywhere near the kind of resurgence in new cases the U.S. has experienced when those nations loosened up restrictions.
The UK’s bio-security experts have recommended downgrading the official coronavirus alert level after the nation has experienced a steady decrease in new cases. The threat level, on a scale from 1 to 5, has been downgraded from Level 4, (A Covid-19 epidemic is in general circulation. Transmission is high and rising exponentially) to a Level 3, (A Covid-19 epidemic is in general circulation).
South Korean health authorities warned today of a new wave of infections with 49 new cases over the past 24 hours, including 32 local infections, raising the nation’s caseload to 12,306. Of the domestic infections, 26 were in Seoul and its surrounding areas where about half the nation’s 50 million people live.
China’s capital city Beijing reported 25 new cases yesterday with a total of 183 cases though to be linked to a wholesale food market.
The Financial Times put together a list of the top 100 companies that have managed to, in many cases, thrive during the ongoing coronavirus-induced health and economic crisis. The company at the top of its list is unsurprisingly the one that more and more of us turned to as we struggled through living through forced home quarantines, Amazon (AMZN). Number two is Microsoft (MSFT), which thanks to Satya Nadella’s pivot to the cloud, has become a major support as companies were forced to switch to a work-from-home model. Rounding out the top three is Apple (AAPL), which despite having to close all of its 500 stores around the world, enjoyed resilient sales online sales and even managed to release a new iPhone, iMac, and MacBook Air during the lockdowns.
Japan’s deflationary problems continue. The headline inflation rate remained steady at 0.1% YoY as did core, remaining at -0.2% YoY. Ex-food and energy rose to 0.4% YoY from 0.2% YoY in April.
Germany’s Producer Price Index (PPI) fell to -2.2% YoY in May from the prior -1.9% and below expectations for-2.1%.
Retail sales in the UK rose 12% MoM in May, stronger than the expected 5.7% increase and well above the 18% contraction in April. Retail sales remain down -13.1% YoY, also an improvement from the prior 22.7% YoY contraction and better than expectations for -17.7%. Ex-fuel retail sales were also better-than-the-expected 4.5% MoM increase, rising 10.2% from the prior 15% decrease. YoY ex-fuel sales are down 9.8%, versus -14.4% expected. On a sobering note, the UK’s public debt has now exceeded GDP for the first time since WWII – that ship sailed years ago in the US.
Representatives from the 27-member European Union are negotiating today for the first time over an $841 billion proposal to tackle the fallout from the pandemic. The region is estimated to experience a contraction of around 7.4% of GDP this year. The debate covers how much to borrow from the capital markets, two where it ought to be distributed, and in what form. The discussions are made all the more complex in that they are not occurring face-to-face. There is talk that such in-person talks could be announced later today.
Yesterday’s weekly jobless claims were significantly higher than the expected 1.2 million at 1.5 million, just below the prior week’s 1.57 million and the thirteenth week of claims over 1 million. For context, before the pandemic, the prior record high was all of 695,000 in 1982. Over the past 13 weeks, we have seen 45.7 million initial jobless claims which represent 27.8% of the civilian labor force in February and is 5.3 times the total number of jobs lost in the Great Financial Crisis.
Yesterday the Philadelphia Federal Reserve saw the largest single-month gain on record, rising 70.6 points from -43.1(bottom 1st percentile) to 27.5 (top 15th percentile). The more forward-looking New Orders component rose from -25.7(bottom 4th percentile) to 16.7 (top 35th percentile). Three sub-indices, unfilled orders, number of employees, and average employee workweek remain in negative territory but for the 6-month outlook, all sub-indices are positive.
Later today in the U.S. we will hear from quite a few Federal Reserve officials including Rosengren, Quarles, Mester, and Chair Powell. We will also get the usual weekly Baker Hugh’s oil rig count report.
Yesterday the tech-heavy Nasdaq Composite and Nasdaq 100 both rose 0.3%, its fifth consecutive close in the green and is nearly back to making new highs. The S&P 500 just barely squeezed out a win, closing up 0.1% while the Dow fell 0.2%.
Looking at market movement, while small caps have overall underperformed the broader market over the past year, since the March lows, both the Nasdaq Composite (+45.0%) and Russell 2000 (+42.4%) have outperformed the broader NYSE Composite (37.5%) and the S&P 500 (39.2%).
Stocks to Watch
AMC Entertainment (AMC) will reopen 450 US theaters on July 15, and at approximately 150 remaining locations before the opening of Disney’s (DIS) release of MULAN on July 24 and Warner Bros.’ (T) release of TENET that debuts July 31. AMC will impose seat capacity limitations, such limitations to change across four distinct phases of theatre operations. In phase 1, ticket availability will be capped initially at a maximum of 30% of the normal seating capacity.
During the 618 (June 18) holiday in China, Alibaba (BABA) and JD.com (JD) handled $136.51 billion of sales across their platforms during one of the country’s biggest shopping events. JD.com said transaction volume totaled 269.2 billion yuan ($37.99 billion) while Alibaba said its gross merchandise value reached 698.2 billion yuan ($98.52billion).
In 8-K filing and as a result of the COVID-19 pandemic, conglomerate Textron (TXT) discussed a restructuring plan that includes the elimination of 1,950 jobs, facility consolidations, and other actions.
Four Corners Property Trust (FCPT) reported it received April, May, and June rent payments of ~91%, 87%, and 87%, respectively, as of June 18.
True Car (TRUE) said vehicle demand returned in May and continued to rise in June. In an 8-K filing, the company also shared its May sales were better than expected, and “car buyers are purchasing at a faster rate.” Carmax (KMX) also reported its sales continued to improve improved since bottoming out in early April. It’s comparable store used unit sales for the two weeks ended June 14 were within 10% of year-ago levels, with many stores generating positive comparable stores sales.
PQ Group Holdings (PQD), a global provider of catalysts, specialty materials, chemicals, and services, reduced its revenue outlook for the current quarter to $350-$360 million from $360-4375 million due to continued weaker demand in Europe.
Smith & Wesson Brands (SWBI) reported better than expected April quarter results, beating top and bottom-line expectations, and shared the previously announced spin-off of its outdoor products and accessories business is on track to be completed in August.
Shares of Germany based electronic payment and risk management company Wirecard (WDI:GR) are under further pressure following the company’s disclosure auditor Ernst & Young said it didn’t have sufficient audit evidence for a quarter of the reported 1.9 billion euros reported on Wirecard’s balance sheet. This morning CEO Markus Braun resigned.
Repare Therapeutics (RPTX) upsized its IPO offering to 11 million shares, which priced at $20, well above the $16-$18 range. Shares will begin trading on Nasdaq later today.
Grocery chain Albertsons (ACI) will kick off its IPO roadshow that could see its trade as early as next week. The current price talk for the IPO suggests it could price in the $18-$20 range.
Hyliion announced it intends to merge with Tortoise Acquisition Corp (SHLL), a publicly-traded special purpose acquisition company with a strategic focus on the energy sector and decarbonizing commercial transportation in North America. Upon the closing of the transaction, the combined entity will be named Hyliion Holdings Corp. and trade under the HYLN ticker symbol.
After today’s market close there are no expected corporate earnings reports to be had. Why? Because it’s Friday. Investors that want to get a jump on the corporate earnings reports coming at us next week should visit Nasdaq’s earnings calendar page.
On the Horizon
- Dates to mark:
- June 22: Chicago Fed Activity, Existing Home Sales
- June 22: Apple’s (AAPL) WWDC Keynote
- June 23: Preliminary Markit PMIs, New Home Sales, Richmond Fed Manufacturing
- June 25: Wholesale Inventories, GDP, Durable Goods, Kansas City Fed Activity
- June 26: Personal Income, Personal Spending, PCE, Univ of Michigan Consumer Sentiment
- June 29: Pending Home Sales, Dallas Fed Manufacturing
- June 30: Case-Shiller Home Prices, MNI Chicago PMI, Consumer Confidence
- July 1: ADP Employment Report, Markit Manufacturing PMI, Construction Spending, ISM Manufacturing, Wards Vehicle Sales
- July 2: Nonfarm Payrolls, Unemployment Rate, Durable Goods, Capital Goods, Factory Orders
Thought for the Day
“Better days are coming. They are called Saturday and Sunday.” ~ Anonymous
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.