Company / Analytics

Week 27 in Brief

North America

In the US, major benchmarks recovered to Friday and booked a third straight week of gains, following a previous session that was marked by doubts about global economic growth amidst the rising Delta variant of the Covid-19.

How did the major indices perform?

• In the US, the Dow Jones Industrial Average rose 448.23 points, or 1.3%, to a record 34,870.16.
• The S&P 500 climbed 48.73 points, or 1.1%, to a record 4,369.55, powered by a 2.8% gain in financials and a 2% rise in materials.
• The Nasdaq Composite added 142.13 points, or 1%, to a record 14,701.92.
• The small-capitalization Russell 2000 index gained 2.2%.
• On Thursday, stocks retreated but ended the day off session lows. The Dow closed 259.86 points lower, off 0.7%, at 34,421.93, after dropping more than 500 points at its session low. The S&P 500 ended 0.9% lower, while the Nasdaq Composite gave up 0.7% a day after both indexes closed at their latest in a string of records.
• For the week, the Dow and S&P 500 booked weekly gains of about 0.2% and 0.4%, respectively. The Nasdaq, which started Friday trade on track for a weekly decline of 0.3%, also finished the week with a 0.4% gain. All three benchmarks rose for a third straight week. By contrast, the Russell 2000 fell around 1.1% for a second straight week of losses.

What drove the market?

• Concerns over global growth outlook: The market made an impressive comeback after slumping on Thursday on concerns about the global growth outlook as some leading global economies, including Japan and Indian, struggled with the coronavirus pandemic. The concerns about the pandemic were blamed — along with myriad other factors — for a U.S. Treasury debt rally that sent long-term yields down to their lowest levels since February this week.
• But Yields edged back up Friday though, with the 10-year U.S. Treasury yield rising 6.7 basis points to settle at 1.354%. The yield had hit a five-month low below 1.25% on Thursday.
• Earnings Season: The earnings season begins next week and companies in the S&P 500 index are expected to see a 63.6% increase in earnings in the second quarter from a year before, which would mark the biggest 12-month climb since the fourth quarter of 2009, according to FactSet analysts.
• Analysts note there is a battle between the rising delta variant and the earnings season which begins next week. This has left investors weighing corporate guidance on growth against concerns the spread of the delta variant of Covid-19 could hold back, or reverse, economic reopening globally. Some investors and strategists caution that the upswing for stocks belies concerns that are running beneath the surface. Indeed, the market appears conflicted between accepting bad economic news which means more easy money, but also potentially more inflation; or if it wants good economic news which means Fed tapering sooner rather than later, but also potentially flatter markets, tighter credit, and weaker earnings. This conflict is expected to continue until the earnings season picks up and provides a distraction.
• New Coronavirus restrictions: Coronavirus-related restrictions were tightened in Asia and Europe. Seoul’s pandemic alert was lifted to its highest level, the Netherlands announced new steps, and social-distancing rules were tightened in Sydney, a day after Japan declared a state of emergency that will effectively rule out spectators at the 2020 Olympics.
• While concerns about the spread of the delta variant of the coronavirus that causes COVID-19 were cited as part of the reason behind the worries over the global economic outlook, some analysts questioned whether the struggle with the pandemic in some Asian and emerging market countries, in particular, would be enough to derail the global equity market rally.
• Biden’s anti-competitive Executive Order: The Biden administration on Friday announced a new executive order to crack down on anti-competitive practices in the technology sector in particular. The order includes 72 actions and recommendations across a dozen federal agencies.
• Economic Data: U.S. wholesale inventories climbed 1.3% in May, compared with 1.1% that had been expected by economists on average, suggesting that inventories remain tight amid supply-chain bottlenecks and amplified demand in the rebound from the pandemic.

Which stocks were in focus Friday?

• Shares of Philip Morris shares closed 1.1% higher Friday after the company announced plans to buy Vectura Group PLC, a U.K. pharmaceuticals business specializing in inhaled medicines, for $1.24 billion in cash, part of its push to expand beyond tobacco and nicotine.
• Shares of Levi Strauss & Co. rose 1.4% after the jeans company late Thursday announced results that topped Wall Street estimates and raised its forecast for the year. Levi Strauss stock closed at $ 28.38.
• Stripe has hired Cleary Gottlieb Steen & Hamilton LLP to advise it on planning for an initial public offering, according to a report from Reuters Friday.
• Shares of United Airlines Holdings Inc. were in focus on Friday after the air carrier is taking advantage of the “resurgence” in travel as the recovery from the COVID-19 pandemic continues, by saying it was adding nearly 150 flights to warm-weather cities in the U.S., and boosting service to Mexico, the Caribbean, and Central America. United Airlines’ stock climbed 2.9%, closing at $51.10.
• Altria Group Inc. said Friday it has agreed to sell its Ste. Michelle Wine Estates business to private-equity firm Sycamore Partners Management LP for about $1.2 billion in cash. Shares rose 2.1% to close at $47.40.
• The US Food and Drug Administration and the Center for Disease Control on Thursday said there isn’t scientific evidence that COVID-19 booster shots are required, hours after drugmaker Pfizer said it would seek authorization for a Covid booster shot to help contain the Delta variant. Pfizer shares rose 0.9%
• Stamps.com Inc. announced Friday an agreement to be acquired by software investment firm Thoma Bravo in a cash deal that values the web-based mailing and shipping services company at $6.6 billion. Shares of Stamps.com soared 64%, closing at $324.23.
• Shares of Biogen Inc. tumbled after the acting commissioner of the Food and Drug Administration called for a government investigation into her own agency’s approval of Biogen’s new Alzheimer’s disease drug.

How did the European markets perform?

• European stocks jumped more than 1% on Friday, posting their best session in two months and erasing all of this week’s losses, as investors sought bargains after one of the worst sell-offs this year on global economic recovery worries.
• The pan-European STOXX 600 index gained 1.3%, with sectors that took a hit earlier this week such as automakers and miners surging 4% and 3.4%, respectively. The mining sector marked its best session in two months.
• French stocks rose by the most in four months, advancing 2.1% and leading gains among major European bourses.
• Banks were up 2.4% but were the hardest hit this week as government bond yields dropped.
• Meanwhile, a fresh surge in COVID-19 cases and underwhelming U.S. and Chinese economic data raised concerns about the strength of the recovery, boosting bonds and sending the benchmark STOXX 600 1.1% lower on the week until Friday’s gains negated those losses. But with France saying the highly contagious Delta variant of COVID-19 will probably account for most new coronavirus cases in the country from this weekend, and Spain’s tourism hotspots asking the government to bring back curfews, the path out of a pandemic-induced economic slump still looks challenging.
• UK airlines such as British Airways-owner IAG, EasyJet, and Ryanair rose between 0.5% and 1.9%, as Britain planned to scrap quarantine for fully vaccinated arrivals from other countries in the coming weeks.
• In economic data, the UK’s post-lockdown economic rebound slowed sharply in May despite an easing of COVID-related restrictions.
• In individual stocks, French planemaker Airbus gained 3.4% after it reported a 52% jump in deliveries in the first half of the year.
• British luxury goods group Burberry rose 3.8% after Goldman Sachs upgraded the stock to “buy”, while Italian rival Salvatore Ferragamo slipped 0.7% after the U.S. bank downgraded it to “sell”.
• Investors will now turn their focus to the earnings season, which kicks off next week. The bulk of the European companies are expected to report later this month, with analysts forecasting a near-109% surge in second-quarter profit for STOXX 600 companies, according to Refinitiv IBES data.

How did Asian markets perform?

• Shares in Asia-Pacific fell on renewed Covid concerns. In Japan, the Nikkei 225 led losses among the region’s major markets as it fell 1.7% in afternoon trade, while the Topix index shed 1.48%.
• Investors flocked to the safety of bonds overnight with 10-year U.S. Treasury yields reaching levels not seen since February.
• MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.9% to 667.99, a level not seen since mid-May. For the week so far, the index is down 3.2%, the biggest decline since early February.
• Investors were also concerned about political tensions in the Middle East, Russia, and China while Beijing’s crackdown on foreign-listed Chinese firms took its toll too.
• In economic data, the People’s Bank of China announced Friday it was cutting reserve requirements for its banks to help bolster its economy. The PBOC said, effective July 15, that reserve requirement ratio, or RRR, would be lowered by a half-point, to a weighted average of 8.9%.

Commodities and other assets

• Oil prices rose for a second day on Friday as the market reacted to falling U.S. inventories, and signs of strong Asian demand from both China and India added support.
• Brent crude oil futures were up $1.43, 1.93%, at $75.55. U.S. West Texas Intermediate futures were up $1.62, or 2.2%, at $74.56.
• Meanwhile, Gold was on track for its best weekly performance since end-May. It was last up 0.1% at $1,804.84 an ounce.

Currencies

• The dollar edged lower on Friday, along with the Japanese yen, as riskier currencies were favored, with the rally in U.S. Treasuries running out of steam and global stock markets steadying.
• The ICE U.S. Dollar Index, a measure of the currency against six major rivals, was down 0.4%, at 92.423.
• The euro extended gains on top of a 0.45% jump on Thursday, rising 0.27% to $1.1876.
• The safe-haven yen hovered near a one-month high at 109.81 per dollar.
• In Asia, the risk-sensitive Aussie rose 0.79% to $0.74905, after earlier touching a fresh low for the year at $0.7410, and the kiwi added 0.81% to $0.7002, having plunged more than 1% in the previous session.
• Yield differences between emerging markets and developed world debt also widened. The drop in the US dollar Friday gave respite to emerging market currencies, but most were still set for weekly losses on concerns over China’s economic recovery and the fast-spreading Delta variant of COVID-19.
• MSCI’s index of emerging market currencies traded flat after losing 0.8% since Monday’s close. The index is set to drop by 0.5% this week.

Next Week

• The earnings season starts, with JPMorgan Chase, Bank of America, and Delta Air, among others reporting.
• Investors will also digest economic data including the Consumer Price Index numbers from across the world.