MARKET WRAPS
Watch For:
U.S. New Home Sales for June, Tesla 2Q earnings,
Opening Call:
Stock futures dropped Monday, suggesting that the major stock
indexes will retreat from last week's all-time highs after markets
in China and Hong Kong plummeted.
Futures linked to the Dow Jones Industrial Average retreated.
the blue chip index on Friday crossed the 35000 closing milestone
for the first time in its history after climbing over 1% last
week.
Rising concerns over the Delta variant of Covid-19 and concerns
over economic growth are also likely to challenge the pace at which
the U.S. stock market will rise in the coming weeks, investors
said. Money managers are also awaiting guidance from the Federal
Reserve this week, including policy makers' outlook on inflation
and any clues on when the central bank may start scaling back its
bond purchase program.
"This will be a choppy environment for the rest of the year as
markets deal with growth that isn't as strong, and markets turn to
the potential withdrawal of policy support," said Hugh Gimber, a
strategist at J.P. Morgan Asset Management. "You would expect that
the spread of the Delta variant would put restrictions in place
longer and some supply bottlenecks may not last just a few
months."
Investors are also awaiting earnings from a bevy of American
companies including giant technology companies this week that will
indicate how large businesses are weathering the pandemic and a
recent uptick in inflation. Lockheed Martin is slated to post
earnings before the market opens, and electric-car maker Tesla is
due to report after the closing bell.
"This week is really where we enter crunchtime for earnings,"
Mr. Gimber said. "With tech names reporting, the bar is high."
Chinese shares tumbled after Beijing once again took aim at some
of the country's fast-growing listed companies, fueling investors'
concerns about regulatory risks.
Over the weekend, Chinese state media confirmed the after-school
tutoring sector faced a clampdown, while the national antitrust
authority levied a symbolic fine on internet giant Tencent Holdings
and ordered it to give up some exclusive music-licensing
rights.
Forex:
The dollar could rise if the Federal Reserve signals that its
bond buying program won't continue for much longer in a policy
decision Wednesday, Commerzbank said.
The Fed could imply this by changing its statement to say that
it would continue buying bonds "until further progress has been
made" from the current "until substantial progress has been made,"
Commerzbank currency analyst Ulrich Leuchtmann said.
While the bond-buying program is "pretty irrelevant" for the
foreign exchange market, a change in wording would suggest the Fed,
unlike the European Central Bank, is "willing to take restrictive
steps again," he said.
Cryptocurrencies jumped Monday, with bitcoin rising more than
18% from its 5 p.m. ET level Friday.
Investors pointed to short positions being liquidated and
speculation that Amazon.com may be venturing into digital
currencies. The price of bitcoin rose to as much as $39,544.29, its
highest level since mid June, according to CoinDesk.
EUR/USD, last steady at 1.1773, is likely to "stay sluggish" but
stuck within a tight range as both the euro and the dollar are held
back, said UniCredit.
Lower U.S. Treasury yields have been "a drag" on the dollar in
recent weeks, but lower German bond yields following last week's
hints of prolonged stimulus from the European Central Bank aren't
helping the euro either, the bank said.
Softer U.S. new homes sales, due later Monday, would likely have
a "negligible impact" on the dollar, UniCredit said.
The ongoing clash between the U.K. and EU over post-Brexit
trading arrangements for Northern Ireland is likely to limit any
sterling gains this week in the absence of market-moving economic
data, ING said.
"It appears very little downside risks related to this topic are
priced into GBP, and a combination with a USD-positive Fed meeting
could make cable [GBP/USD] re-test the 1.3600 support this
week."
Bonds:
Morgan Stanley keeps short U.S. Treasuries, seeing the fair
value of 10-year U.S. Treasury yields at around 1.60% in the
current environment, said strategist Guneet Dhingra.
In assessing the fair value, Morgan Stanley makes assumptions
about where it thinks the market can price in the timing of the
first rate hike by the Federal Reserve and the subsequent pace.
Taking a conservative approach, Morgan Stanley thinks the market
can price the first hike in the first or second quarter of 2023,
Dhingra said.
German Bunds are expected to outperform U.S. Treasuries due to
the diverging monetary policies of the European Central Bank and
the Fed, said Morgan Stanley.
"We think that the increasingly divergent reaction functions
between the Fed and the ECB will likely favour Bund outperformance
versus USTs over the near term," said strategists Alina Zaytseva
and Lorenzo Testa.
They see the risks for the July FOMC meeting as skewed toward an
upbeat and hawkish message, while the ECB's position is dovish. The
10-year UST-Bund spread is 168 basis points, according to
Tradeweb.
Morgan Stanley thinks a reversal to above 200 basis points may
not be attainable in the short run, though.
Commodities:
Oil prices fell, continuing the volatility the market has
experienced in recent weeks.
Investors are increasingly worried about rising coronavirus case
numbers in several major Asian economies and "any significant
reversal of easing in restrictions in parts of Europe and the U.S.
would send a fairly bearish signal to the market, particularly when
you consider the higher vaccination rates in those regions," said
ING's Warren Patterson.
In addition, traders reduced their net bets on rising Brent and
WTI prices last week to their lowest since May and November
respectively
Base metal prices slipped as China's crackdown on the equity
market prompts inventors to flee from risk assets. Three-month
copper on the LME was down 0.6% at $9,571.50 a metric ton, while
aluminum fell 1% to $2,483.50 a ton and nickel edged down 0.2% to
$19,440 a ton.
China on Monday continued efforts to tighten regulations on some
companies by placing strict restrictions on the country's booming
after-school tutoring industry.
That prompted sharp falls for the country's stocks as investors
shunned risk assets.
TODAY'S TOP HEADLINES
Tesla Poised for Record Earnings as It Navigates Global Chip
Shortage
Tesla Inc. is expected to report a record quarterly profit,
largely evading the effects of a global chip shortage that has
constricted the global auto industry.
The Silicon Valley electric-car maker produced more than 206,000
vehicles in the second quarter, more than doubling its year-earlier
output. Global auto sales have cooled somewhat amid a shortfall of
semiconductors. Many auto makers, including Ford Motor Co. and
General Motors Co., have been forced to idle assembly plants over
supply constraints, squeezing vehicle inventories and pushing up
prices.
Read More ->
Credit Suisse Settles Spying Case With Ex-Executive Iqbal
Khan
Credit Suisse Group AG said it reached a settlement with a
former executive and private investigators over a spying scandal
that rocked the bank.
In fall 2019, the Swiss bank hired investigators to spy on Iqbal
Khan, a top wealth-management executive who was leaving to join
rival UBS Group AG. Mr. Khan spotted one of the investigators and
went to the police, setting off international headlines and leading
to the ouster of the bank's chief executive over the reputational
fallout.
Read More ->
Covid-19 Pill Race Heats Up as Japanese Firm Vies With Pfizer,
Merck
A Japanese company has started human trials of the first
once-a-day pill for Covid-19 patients, joining Pfizer Inc. and
Merck & Co. in the race to find treatments for the disease.
Osaka-based Shionogi & Co., which helped develop the
blockbuster cholesterol drug Crestor, said it designed its pill to
attack the Covid-19 virus. It said the once-a-day dosing would be
more convenient. The company said it is testing the drug and any
side effects in trials that began this month and are likely to
continue until next year.
Read More ->
A Space Company's Wall Street Launch Misfires
WASHINGTON-A space-transportation company trying to go public
didn't tell potential investors that its satellite-hauling
technology failed, that it lost contact with a satellite in space
and that its Russian founder had been deemed a national-security
risk by the U.S. government, the Securities and Exchange Commission
said.
Had the company, Momentus Inc., filed for a traditional initial
public offering, the bankers working on the deal could be liable
for any misleading statements to investors. But it didn't. It is
attempting to go public by merging with a special-purpose
acquisition company-a route that doesn't require bankers to do full
due diligence on the business breaking into public markets.
Read More ->
China's Tutoring Crackdown Slams Stocks
SINGAPORE-China confirmed it would take drastic steps to
restrain the country's booming after-school tutoring industry,
prompting further selloffs in stocks like New Oriental Education
& Technology Group Inc. on Monday.
The restrictions, published over the weekend by state media, are
the most recent regulatory assault on a fast-growing part of the
Chinese economy. They follow a monthslong crackdown on various
parts of China's technology industry that has rattled companies
like Alibaba Group Holding Ltd., its unlisted sister company Ant
Group Co., and ride-hailing giant Didi Global Inc.
Read More ->
A Key Gauge of Future Inflation Is Easing
One of the most important signals of future inflation has begun
to ease in the past month, a development that should reassure the
Federal Reserve in its prediction that the recent inflation surge
will prove largely temporary.
Read More ->
Hot Used-Car Market Boosts Auto Lenders and Borrowers
Red-hot demand for used cars is turning the auto-lending world
upside down.
Prices are so high that some lenders are coming out ahead on
defaulted auto debt. And far fewer borrowers are underwater on
their car loans, meaning they don't owe more than the car is worth
when they trade it in. It is a tricky time to buy a car, but a
pretty good time to owe money on one.
Read More ->
Bitcoin Jumps 20% to a Six-Week High
The price of bitcoin jumped to a six-week high on Monday, with
some investors attributing the rally to short positions being
liquidated and speculation that Amazon.com Inc. may be venturing
into digital currencies.
Bitcoin soared to $39,112.05, up more than 20% from its 5 p.m.
EDT level Friday, according to CoinDesk, reaching its highest level
since mid-June. Ether, its rival currency, jumped more than
16%.
Read More ->
German Business Sentiment Falls in July
German business sentiment worsened in July amid an increase in
coronavirus infections and supply woes, missing forecasts for an
increase.
The Ifo business-climate index came in at 100.8 points in July
compared with the 101.7 points registered in June, according to
data from the Ifo Institute released Monday. The reading missed a
forecast from economists polled by The Wall Street Journal, who
expected the index to increase to 102.5.
Read More ->
Senators Try to Finalize Deal on Infrastructure Package
WASHINGTON-Lawmakers pushed to finalize an infrastructure
agreement Sunday, but said they were still struggling to resolve a
dispute over how much to increase public-transit funding, a snag
that could delay their goal of advancing the bill in a Senate vote
early this week.
GOP senators had blocked efforts by Democrats to begin
consideration of the roughly $1 trillion infrastructure bill on
Wednesday, saying too much of the package remained unresolved.
Lawmakers in a bipartisan group crafting the legislation said late
last week that they hoped to finish in time to reverse that outcome
in a second vote in the next few days.
Read More ->
U.S. Set to Push Global Economy Over the Recovery Line
The U.S. economy likely returned to its late-2019 size during
the three months through June, helping to lift global output above
its pre-pandemic level for the first time.
Economists surveyed by The Wall Street Journal estimate that
figures to be released Thursday will show that the U.S. gross
domestic product rose at an 8.5% seasonally adjusted annual rate in
the second quarter. That likely left U.S. GDP-the value of all
goods and services produced across the economy, adjusted for
seasonality and inflation-above the $19.2 trillion level reached in
the final quarter of 2019, the last before the spread of Covid-19
pushed large parts of the global economy to shut down and contract,
they say.
Read More ->
What's Holding Back China's Recovery? The Kids Aren't
Alright
What is holding back China's economic recovery, particularly in
services and consumption?
Read More ->
Investors Are Buying American
Investors around the globe are pouring money into U.S. financial
assets, a sign of confidence that the world's largest economy
remains poised to pull through the Covid-19 pandemic better than
many others.
Read More ->
Tokyo's Olympics Were Supposed to Be in 2020. Tokyo's Covid
Protocols Are Still There.
TOKYO-Under the lights of the Nippon Budokan arena this weekend,
Naohisa Takato elevated all 130 pounds of himself to hero status as
he won Japan's first gold of the Olympics.
And when his symbolic moment came atop of the podium, he beamed
with the pride of a nation as he waited for his prize. The medal
was presented to him on a tray like an airplane lunch.
Read More ->
Covid-19 Immunity Wanes, but Third Shot Still Rarely Needed,
BioNTech CEO Says
BERLIN-Immunity against the coronavirus is waning in people who
were fully vaccinated with the shot made by BioNTech SE and Pfizer
Inc. in January because of the rapidly spreading Delta variant,
BioNTech's chief executive said, confirming data that emerged from
Israel last week.
But even as antibody levels are dropping seven months after
immunization among some vaccine recipients, most of them will
remain protected against severe disease and might not yet need a
third dose, according to Ugur Sahin, CEO of the German company that
invented the vaccine and partnered with Pfizer to develop the
product for the global market.
Read More ->
Fires Continue to Rage in Oregon, Northern California
Fire crews made progress Sunday in containing the nation's
largest forest fire, named after Bootleg Creek in southern Oregon,
as scores of blazes raged in the parched Pacific Northwest,
northern Rockies and northern California.
The Bootleg Fire was 46% contained Sunday afternoon, according
to Sarah Gracey, a spokeswoman for fire agencies fighting the
blaze, which has burned close to 410,000 acres. More than 2,400
people have been evacuated and 67 houses have been destroyed, but
there were no new evacuations announced Sunday, she said.
Read More ->
U.S. Intensifies Airstrikes in Afghanistan as Taliban Offensive
Nears Kandahar
The U.S. has stepped up airstrikes in southern Afghanistan amid
growing apprehension over a Taliban offensive threatening Kandahar,
the country's second-largest city and spiritual capital of the
Taliban movement.
The fall of Kandahar would deal a heavy blow to the U.S.-backed
government in Kabul, which is trying to impart calm to its citizens
as the Taliban has seized swaths of the countryside, but so far
failed to take a major city.
Read More ->
Write to sarka.halas@wsj.com
TODAY IN CANADA
Earnings:
Celestica Inc. (CLS.T) 2Q
Copper Mountain Mining (CMMC.T) 2Q
TFI Intl Inc. (TFII.T) 2Q
Economic Indicators (ET):
Nothing major scheduled
Stocks to Watch:
No items published
Other News:
No items published
Market Talk:
No items published
Expected Major Events for Monday
00:30/JPN: Jul Japan Flash Manufacturing PMI
08:00/GER: Jul Ifo Business Climate Index
10:00/FRA: 1Q OECD Quarterly Employment Situation
14:00/US: Jun New Residential Sales
14:30/US: Jul Texas Manufacturing Outlook Survey
23:01/UK: Jun Zoopla House Price Index
23:50/JPN: Jun Services Producer Price Index
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Monday
AMCON Distributing Co (DIT) is expected to report for 3Q.
ATI Physical Therapy Inc (ATIP) is expected to report for
2Q.
Agree Realty (ADC) is expected to report for 2Q.
Alexandria Real Estate Equities Inc (ARE) is expected to report
$0.57 for 2Q.
Alliance Resource Partners LP (ARLP) is expected to report $0.73
for 2Q.
American Campus Communities Inc (ACC) is expected to report
$-0.07 for 2Q.
Amrep Corp (AXR) is expected to report for 4Q.
Bank of Hawaii Corp (BOH) is expected to report $1.31 for
2Q.
Brandywine Realty Trust (BDN) is expected to report $0.01 for
2Q.
Cadence Design Systems (CDNS) is expected to report $0.47 for
2Q.
Calix (CALX) is expected to report $0.21 for 2Q.
Chemung Financial (CHMG) is expected to report $1.09 for 2Q.
Coastal Financial Corp (CCB) is expected to report $0.48 for
2Q.
Copper Mountain (CMMC.T,CPPMF) is expected to report $0.15 for
2Q.
Dorman Products (DORM) is expected to report $1.12 for 2Q.
Eco (Atlantic) Oil & Gas Ltd (EOG.V) is expected to report
for Full year.
Enterprise Financial Services Corp (EFSC) is expected to report
$1.07 for 2Q.
Exagen Inc (XGN) is expected to report for 2Q.
FNCB Bancorp Inc (FNCB) is expected to report for 2Q.
First Merchants Corp (FRME) is expected to report $0.92 for
2Q.
HBT Financial Inc (HBT) is expected to report for 2Q.
Hasbro Inc (HAS) is expected to report $0.43 for 2Q.
Helix Energy Solutions (HLX) is expected to report $-0.08 for
2Q.
Lake Shore Bancorp (LSBK) is expected to report for 2Q.
Lakeland Financial (LKFN) is expected to report $0.86 for
2Q.
Ledyard Financial Group (LFGP) is expected to report for 2Q.
Lennox International Inc (LII) is expected to report $4.40 for
2Q.
Lockheed Martin Corp (LMT) is expected to report $6.56 for
2Q.
Medpace Holdings Inc (MEDP) is expected to report $0.99 for
2Q.
National Bank Holdings (NBHC) is expected to report $0.70 for
2Q.
Northwest Bancshares Inc (NWBI) is expected to report $0.30 for
2Q.
Otis Worldwide Corp (OTIS) is expected to report for 2Q.
PetMed Express (PETS) is expected to report $0.36 for 1Q.
PotlatchDeltic Corp (PCH) is expected to report $2.72 for
2Q.
Prudential Bancorp Inc (PBIP) is expected to report $0.23 for
3Q.
RPM International Inc (RPM) is expected to report $1.26 for
4Q.
Sino-Global Shipping Amer (SINO) is expected to report for
3Q.
Sun Communities Inc (SUI) is expected to report for 2Q.
Tesla Inc (TSLA) is expected to report $0.55 for 2Q.
U.S. Gold Corp (USAU) is expected to report for 4Q.
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ANALYST RATINGS ACTIONS
There are no actions to report from the last 24 hours.
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
July 26, 2021 06:12 ET (10:12 GMT)
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