MARKET WRAPS

Watch For:

Housing Price Index for May.

Opening Call:

Stock futures wobbled Friday, leaving the Dow on track for its worst weekly performance since the end of January.

Futures tied to the Dow Jones Industrial Average wavered between gains and losses. The index of blue-chip stocks had dropped 1.9% this week through Thursday, leaving it poised for its worst showing since it fell almost 3.3% in the last week of January.

Investors have gained some confidence that the Federal Reserve will act to curb rising inflation after policy makers signaled Wednesday that they expect to raise interest rates by late 2023. That has started to take the steam out of a recent rally in stocks linked to a broad economic recovery, leading to a retreat in banking and energy shares this week.

It is also reviving appetite for technology stocks and other assets that could benefit from lower inflation and higher rates.

"If the Fed tapers bond purchases and it raises rates, then all of a sudden the inflation dragon gets tamed," said Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham. "If inflation gets tamed, you want to buy the long-duration assets," or investments that are sensitive to interest rates, he added.

In the near term, Mr. Perdon expects inflation to creep higher, due to supply-chain bottlenecks, chip shortages, strong demand for goods and services and easing pandemic restrictions. Stocks are still likely to advance, he said.

"The Fed hasn't done anything yet. All they've done is signal, and they're a long way off from doing anything," Mr. Perdon said. "Markets are supported by the trifecta of monetary and fiscal policy and the vaccine rollout. Markets may face a reckoning, but that won't happen in 2021."

Some investors are also booking profits after a strong monthslong rally that has left the S&P 500 off just 0.78% from its record close on June 14.

"Given that a lot of investors are sitting on huge gains, the temptation is to reduce risk," said Luca Paolini, chief strategist at Pictet Asset Management. "When you have the combination of expensive valuations and changes in Fed policies, it's better to lock in gains."

Overseas, the pan-continental Stoxx Europe 600 edged lower, while major indexes in Asia closed on a mixed note.

Stocks to Watch:

Pilgrim's Pride Corp. agreed to acquire the Meats and Meals business of Kerry Group PLC's Consumer Foods segment, as the company expands its prepared foods and branded products business.

The chicken and pork processor said the Meats and Meals businesses have an enterprise value around 680 million British pounds ($947.1 million).

Pilgrim's will add brands such as Denny, Richmond and Fridge Raiders to its portfolio with the deal.

Forex:

The dollar extended its rise, hitting a two-month high against a basket of currencies, after the Fed this week.

Positioning data indicate that the market had been running substantial short dollar positions, which are now being unwound, MUFG said.

However, given that longer-term U.S. bond yields have dropped back, perhaps reflecting the Fed's much tamer message on prospects of tapering asset purchases, a "sustained move stronger for the dollar might not materialize," MUFG's Derek Halpenny said.

The Swiss franc and the Japanese yen's correlation with risk appetite has fallen since the pandemic took hold and the dollar is now the favored safe haven but this isn't sustainable, RBC Capital Markets said.

"The U.S. has some of the properties one would expect to see in a haven (a large, relatively closed economy and light exposure to commodities) but lacks others (it is a net debtor)," RBC's Adam Cole said.

Markets have probably taken yield as a proxy for riskiness recently, lifting the dollar, he said. But as yields normalize, the dollar will turn more risk-neutral and the yen and the franc will re-assume their roles as key havens, he said.

The pound fell, hitting a six-week low of 1.3855 against the dollar after U.K. data showed retail sales fell, raising concerns about a slowing economic recovery.

The currency is also vulnerable to trade tensions between the U.K. and the EU, with the former threatening to unilaterally extend a grace period for processed meat exports to Northern Ireland, ING said.

The next few weeks "could be a vulnerable period" for GBP/USD, which risks falling to 1.3800, ING said,

Bonds:

In bond markets, the yield on the 10-year Treasury note ticked down to 1.489%, from 1.509% Thursday.

Treasuries continue to look attractive to foreign investors on a currency adjusted basis, despite the recent decline in yields, as extraordinary policy actions by global central banks have kept global bond yields low, said U.S. rates strategists Subadra Rajappa and Shakeeb Hulikatti of Societe Generale.

They say foreigners' demand was evident in recnet three- and 10-year UST auctions despite the recent rally which brought the 10-year UST yield below 1.50%.

"Strong demand from Japanese and European investors is also likely to persist in a low interest rate regime," they said.

Commodities:

Oil was lower in Europe, with the firmer dollar continuing to weigh on prices.

DNB Markets' Helge Andre Martinsen points to the dollar's move as being responsible for oil's slip in the past day or so.

Separately, Iran's presidential election takes place today. While that vote might see a hard-liner oust moderate Hassan Rouhani, the backing of Iran's supreme leader means "a change in president is not expected to derail [nuclear] talks," Martinsen added.

Gold futures rose, recovering some of their losses from Thursday, when they suffered their largest drop in over 10 months.

The price of the precious metal tends to decline when investors anticipate rates rising and yield-bearing investments becoming more attractive.

Copper prices also rebounded somewhat but the gains did little to erase the sharp losses the red-metal has seen this week.

Three-month copper on the LME was up 0.6% at $9,246.50 a metric ton, but is set to close the week 7.5% lower.

That would be its worst weekly loss since the pandemic first roiled markets in March 2020. The red-metal has been hit by a combination of Chinese plans to offload stockpiles and a hawkish turn by the Fed.

"Less liquidity from the U.S. and a firmer dollar, plus prospects of a slowdown in China as the top consumer tries to rein in overheated markets weighed on sentiment," said Anna Stablum at brokerage Marex.

TODAY'S TOP HEADLINES

CVS and Walgreens Were Reeling. Now They're Riding a Covid-19 Wave.

As the Covid-19 pandemic bore down last spring, America's drugstore giants warned investors that the health crisis threatened their already tenuous turnarounds.

CVS Health Corp. and Walgreens Boots Alliance Inc. lost revenue as shoppers stayed home and skipped routine medical care. The companies spent hundreds of millions of dollars to roll out testing and vaccination programs.

Read More ->

Funding for Bezos Space Company Fails to Launch in House

HOUSE THROWS UP ROADBLOCKS to funding for Jeff Bezos's Blue Origin space exploration company that was approved as part of the Senate's bipartisan China competition legislation last week. Members from both parties made clear the $10 billion authorization, pushed by Washington Democratic Sen. Maria Cantwell, for a second moon lander contract (Elon Musk's SpaceX won the first contract earlier this year, while Blue Origin was one of two runners-up) was a nonstarter for the House's version of science and innovation legislation.

Blue Origin filed a complaint with the Government Accountability Office after SpaceX won the contract, urging the government to reassess and award a second contract. Senate progressives like Bernie Sanders and Elizabeth Warren have urged their House colleagues to remove the measure.

Read More ->

Canada Vaccine Panel Recommends Against AstraZeneca for Second Dose

A Canadian vaccine panel said Thursday that people who received a first dose of AstraZeneca PLC's vaccine against Covid-19 should get a different vaccine for their second dose.

Canada's national advisory panel on immunization said earlier this month that authorized Covid-19 vaccines could be mixed, and noted some people might prefer to get a messenger RNA vaccine for their second shot. The panel has previously said mRNA vaccines, such as the ones produced by Pfizer Inc. in partnership with BioNTech SE, as well as Moderna Inc., are preferable to viral vector vaccines, such as those developed by AstraZeneca and Johnson & Johnson.

Read More ->

U.S. FCC Proposes Fresh Ban on Equipment From Chinese Firms Including Huawei, ZTE

The U.S. Federal Communications Commission has proposed new rules that would prevent U.S. communications networks from using equipment made by a handful of Chinese companies deemed as national security threats, including telecom giants Huawei Technologies Co. and ZTE Corp.

The proposed regulation also seeks to revoke prior authorizations issued to five Chinese companies that allowed U.S. networks to use their equipment, the telecom regulator said in a statement Thursday.

Read More ->

Supreme Court Rules Cargill, Nestle Can't Be Sued in Child-Labor Case

WASHINGTON-The Supreme Court ruled Thursday that Nestlé USA and Cargill Inc. can't be sued in U.S. courts for abuses allegedly committed in Ivory Coast, where plaintiffs accused the food-processing giants of obtaining cocoa from plantations that relied on the forced labor of children.

The court, in a decision by Justice Clarence Thomas, said the plaintiffs' case didn't have enough of a connection to the U.S. to proceed.

Read More ->

BOJ Introduces Lending Facility for Climate Change

TOKYO-The Bank of Japan on Friday said it would introduce a lending facility to help banks finance projects connected to climate change.

The central bank said climate change would have an "extremely large impact" over the long term on the economy, prices and financial conditions.

Read More ->

Glynn's Take: RBA Gov. Increasingly Likely to Raise Rates Before Stepping Out the Door

A career devoted to the understanding and implementation of monetary policy has left the governor of the Reserve Bank of Australia, Philip Lowe, a tad unfulfilled.

He hasn't had to raise interest rates while in the top job, and if current policy guidance plays out, his term will expire before he gets a chance.

Read More ->

Bipartisan $1 Trillion Infrastructure Package Gains Steam

WASHINGTON-A growing bipartisan group of lawmakers and the White House haggled over how to finance a roughly $1 trillion infrastructure proposal, awaiting feedback from President Biden as Democrats began discussions on a separate economic package that could cost up to $6 trillion.

Since negotiations between Mr. Biden and a group of Senate Republicans collapsed last week, an alternative set of Republican and Democratic senators have held talks on a infrastructure plan that would spend $973 billion over five years, with $579 billion of that funding above expected baseline levels. Initially a group of five Democrats and five Republicans, the group expanded to include 11 Republicans and 10 members of the Democratic caucus on Wednesday.

Read More ->

Yellen Declines to Offer Position on State-Tax Deduction Cap

WASHINGTON-Treasury Secretary Janet Yellen repeatedly declined to offer a clear administration position on the deduction for state and local taxes during a House hearing, leaving vagueness on an issue that will be the subject of tense negotiations among Democrats considering President Biden's fiscal agenda.

Under pressure from House Democrats and Republicans on Thursday to take a position, Ms. Yellen wouldn't say whether the Biden administration favors repealing the $10,000 cap on the deduction. Eliminating that limit would cut taxes for high-income households and disproportionately benefit residents of high-tax Democratic-leaning states such as New York, New Jersey and California.

Read More ->

Lawmakers Urge Private Sector to Do More on Cybersecurity

The private sector in the U.S. must do more to defend against cyberattacks, lawmakers from both major parties stressed Thursday as several senators introduced legislation designed to target hackers.

The ransomware incident that brought operations at Colonial Pipeline Co. to a standstill for six days starting May 7, and resulted in fuel shortages across Southeastern states, shows that cybersecurity efforts must improve, said Sen. Sheldon Whitehouse (D., R.I.).

Read More ->

Supreme Court Ruling on Affordable Care Act Emboldens Democrats

Republicans said their effort to rein in the Affordable Care Act would be more difficult following the Supreme Court's rejection of the latest challenge to the 2010 healthcare law, as Democrats sought to expand it further.

The Supreme Court on Thursday rejected a challenge to the law from Texas and GOP-led states, which had argued that a decision by Congress to reduce to $0 the penalty for not having insurance meant the law was invalid. The justices found that the plaintiffs lacked standing to bring the case because they experienced no injury from the $0 penalty.

Read More ->

China Considers Lifting All Childbirth Restrictions by 2025

SINGAPORE-Chinese officials are drawing up plans to further loosen birth restrictions and transition toward policies that explicitly encourage childbirth, according to people familiar with the matter, reflecting increased urgency in Beijing as economic growth slows and China's population mix skews older.

Policy makers are discussing the possibility of fully doing away with birth restrictions by 2025, the end of the ruling Chinese Communist Party's current five-year economic plan, according to one of the people. According to that person, China will likely begin by eliminating birth restrictions in provinces where the birthrate is the lowest before enacting nationwide changes.

Read More ->

Israel Strikes Militant Targets in Gaza After More Arson Attacks

JERUSALEM-The Israeli military hit the Gaza Strip with a series of airstrikes Thursday night, rattling a shaky month-old cease-fire between the two sides that mediators are trying to keep from falling apart.

Soon after, for the first time in nearly a month, air raid sirens sounded the alarm in southern Israel when Gaza militants used heavy machine guns to fire across the border, the Israeli military said.

Read More ->

Turkey Commits to Securing Afghan Airport After Americans Leave, U.S. Says

WASHINGTON-The U.S. and Turkey have agreed to a plan for the Turks to continue providing security at the airport in Kabul, U.S. officials said, ensuring the U.S. and other nations can maintain a diplomatic presence in Afghanistan following the withdrawal of troops, expected by next month.

Jake Sullivan, President Biden's national security adviser, told reporters Thursday that both sides had made a "clear commitment" on the security of Hamid Karzai International Airport in Kabul.

Read More ->

U.S. FCC Proposes Fresh Ban on Equipment From Chinese Firms Including Huawei, ZTE

The U.S. Federal Communications Commission has proposed new rules that would prevent U.S. communications networks from using equipment made by a handful of Chinese companies deemed as national security threats, including telecom giants Huawei Technologies Co. and ZTE Corp.

The proposed regulation also seeks to revoke prior authorizations issued to five Chinese companies that allowed U.S. networks to use their equipment, the telecom regulator said in a statement Thursday.

Read More ->

Write to sarka.halas@wsj.com

TODAY IN CANADA

Earnings:

Nothing major scheduled

Economic Indicators (ET):

0830 May New Housing Price Index

Stocks to Watch:

Evertz Technologies 4Q Profit Slips as Sales Rise

Evertz Technologies Ltd. said profit fell in the fiscal fourth quarter despite an increase in sales.

The software defined video network technology provider said profit was 9.8 million Canadian dollars ($7.9 million) for the quarter ended April 30, compared with C$16 million in the year-earlier period.

Per-share earnings were C$0.13, compared with C$0.21 a year ago. Revenue rose to C$93.3 million, up from C$92.2 million a year earlier.

Market Talk:

Bet on Iron-Ore Miners Now, Copper Miners Later

For investors wagering on mining, companies that rely on iron ore are still likely to be the best bet in the near term due to expectations of very large capital returns come earnings season this August, Jefferies says. There's also "the fact that China is not selling iron-ore inventories to drive prices lower," it says, which make the likes of Vale, Rio Tinto and BHP a good defensive play in the short run. Looking out six months and beyond, it will be time to bet on copper, Jefferies reckons. "Freeport, First Quantum and Glencore are best for 2022," says the bank.

Expected Major Events for Friday

06:00/GER: May PPI

06:00/UK: May UK monthly retail sales figures

08:30/UK: May Bank of England/Kantar Inflation Attitudes Survey

08:30/UK: 1Q Bank of England statistics on UK banks' external claims

08:59/JPN: Japan Monetary Policy Meeting decision

09:00/ITA: Apr Balance of Payments

12:30/CAN: May New Housing Price Index

17:59/UK: CBI Economic Forecast

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Friday

Camber Energy Inc (CEI) is expected to report for 4Q.

Camber Energy Inc (CEI) is expected to report for 1Q.

Glassbridge Enterprises Inc (GLAE) is expected to report for 4Q.

Medley Management Inc (MDLX,MDLY) is expected to report for 1Q.

Sequential Brands Group Inc (SQBG) is expected to report for 1Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

Acorda Therapeutics Raised to Buy From Neutral by HC Wainwright & Co.

Altice USA Inc Raised to Buy From Hold by TD Securities

Altice USA Raised to Buy From Hold by TD Securities

Altria Initiated at Neutral by Redburn Partners

American Express Cut to Hold From Buy by DZ Bank

Broadstone Net Lease Cut to Neutral From Buy by Goldman Sachs

Camping World Holdings Cut to Neutral From Buy by Northcoast Research

Charter Communications Inc. Raised to Buy From Hold by TD Securities

Charter Communications Raised to Buy From Hold by TD Securities

Constellation Pharma Cut to Sector Perform From Outperform by RBC Capital

CyrusOne Cut to Market Perform From Outperform by Cowen & Co.

Honest Co Cut to Neutral From Buy by Guggenheim

Host Hotels & Resorts Raised to Overweight From Equal-Weight by Capital One

Ingersoll Rand Raised to Buy From Hold by Vertical Research

Kindred Biosciences Cut to Hold From Buy by Lake Street

Kindred Biosciences Cut to Neutral From Buy by HC Wainwright & Co.

Moelis & Co. Raised to Peer Perform From Underperform by Wolfe Research

Nike Cut to Mixed From Positive by OTR Global

Omega Healthcare Cut to Sector Perform From Outperform by Scotiabank

Stanley Black & Decker Raised to Buy From Hold by Gabelli & Co.

Thor Industries Cut to Neutral From Buy by Northcoast Research

Voya Financial Cut to Neutral From Buy by Citigroup

Washington REIT Cut to Market Perform From Outperform by Raymond James

Winnebago Cut to Neutral From Buy by Northcoast Research

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

June 18, 2021 06:05 ET (10:05 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.