Durable Goods for July; EIA Weekly Petroleum Status Report; Royal Bank of Canada 3Q earnings
Stock futures wobbled Wednesday, suggesting muted trading for the indexes a day after the S&P 500 notched its 50th record close of 2021.
Investors say they are holding off on any big new bets going into the end of the week because they are awaiting fresh insights from Federal Reserve Chairman Jerome Powell at the central bank’s Jackson Hole symposium Friday. Money managers are torn over whether the Fed will proceed with scaling back its bond purchases in coming months, given the uptick in Covid-19 cases and some signs that the economic recovery is slowing.
“It is wait-and-see because we’re getting to the point where we think we’ll get some definitive information on tapering,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “On one hand, we’ve had the signaling on tapering, but on the flip side, you see people looking at a deceleration in activity.”
Markets are also weighing a mix of other factors. Regulatory approval of Pfizer and BioNTech’s Covid-19 vaccine has spurred some businesses to impose vaccination mandates, potentially boosting the pace of the U.S. rollout. Meanwhile, concerns over the duration of vaccines’ efficacy has caused some investors to expect that the global economic recovery could falter.
Dicks Sporting Goods and retail-trader favorite Express are set to report quarterly earnings ahead of the opening bell. Ulta Beauty and Salesforce.com are slated to post results after markets close.
Express shares, a longtime favorite of Reddit traders, jumped 8% premarket. Other meme stocks also rose, with AMC Entertainment Holdings gaining 3% after rallying 20% Tuesday. Koss shares gained 4% premarket.
Figures due at 8:30 a.m. ET will signal how demand for cars, appliances and other durable goods fared in July. Economists surveyed by The Wall Street Journal expect that new orders for products meant to last at least three years decreased 0.5%, seasonally adjusted, from the previous month.
Overseas, the Stoxx Europe 600 index edged up 0.2%, while in Asia, major indexes closed on a mixed note.
Stocks to Watch:
Cleveland-Cliffs said its Covid-19 vaccine incentive program has achieved a vaccination rate of 75% among employees. The company said the program, which was launched in July, saw workers who received a Covid-19 vaccine given $1,500. In addition, vaccinated workers at facilities that achieved a 75% vaccination rate received an additional $1,500, the company said.
Cleveland-Cliffs said almost 19,000 of its approximately 25,000 employees received a vaccination, adding 27 of its 43 locations had a vaccination rate of at least 75%. When the program was launched in July, the company said, its vaccination rate was 35%.
First American Financial said its board approved an 11% increase to the company’s quarterly dividend. The new dividend of 51 cents a share will be payable on Sept. 15 to shareholders of record as of Sept. 8.
Also on Tuesday, the company said its board increased the size of the company’s share repurchase plan from $300 million to $600 million. With the increase, the company now has a repurchase authorization of $472 million.
Dennis J. Gilmore, the company’s chief executive, said, “Our decision to increase the dividend and our repurchase authorization reflects our confidence in the outlook for our business over both the short-term and the long-term.”
FSD Pharma shares fell 14% after hours as the company said it will terminate the Phase 2 clinical trial of ultra-micronized palmitoylethanolamide, or FSD-201, for use in treating Covid-19.
The company had retained Bloom Burton Securities to review its Phase 2 clinical program and the general commercial viability of FSD-201, and Bloom Burton recently reported its findings.
FSD Pharma said “while we are disappointed that the Phase 2 study commenced under the company’s prior management was not productive, we are pleased that the independent review did support the belief that there are other viable commercial opportunities for FSD-201.”
The dollar gained in Europe with the USD Index hovering around the 93.00 level.
Overall sentiment appears positive but is vulnerable to shifts in the run-up to the Jackson Hole symposium, said ING. However, market participants may still be no wiser in terms of the Fed’s intentions by Monday, and this may be sufficient for optimists to keep sentiment positive, added ING.
Deutsche Bank said positioning is getting mostly longer the dollar across G10 and particularly in emerging markets. The bank continues to expect a Fed tapering announcement in November.
U.S. Treasury yields continued to grind higher in Europe.
Jerome Powell’s speech is likely to address “a slowing economic recovery now that the burst from reopening is increasingly in the rear-view mirror,” said TS Lombard, while sounding a bullish note: “A recovery is still underway. While the economy works through this process of building activity in a post-Covid world, the supply/demand balance in Treasury notes and bonds continues regardless of taper.”
Asset manager Louis Navellier said the Fed will likely announce tapering this year, but the actual reduction of bond purchases will be gradual and won’t start until next year. “I am betting that any tapering will commence in 2022 and even then the Fed will merely downshift from $120 billion to $80 billion per month in easing rather than ending QE altogether,” he said.
Columbia Threadneedle said clarity is what markets will look for in Powell’s remarks on Friday. “Fed communication has been confusing lately, ” said Columbia Threadneedle’s Anwiti Bahuguna, as FOMC members seem to diverge about how soon to tackle rising inflation. “An earlier taper signal would be a surprise for the markets,” she said.
Bahuguna argues that FOMC member analysis indicates current inflation “is just a supply bottleneck/reopening-driven rise in prices,” so she is surprised some of them have made hawkish public remarks recently. “It seems like they aren’t singing from the same hymn sheet.”
Julius Baer said investors expecting a clear signal from Powell will most likely be disappointed. Yves Bonzon, group chief investment officer said his takeaway from the Fed’s last minutes is that “members have no more insight into the nature of inflation or the state of the labor market than we do.”
He expects Powell to be advised to keep all options open and avoid making a clear statement on Friday, therefore Julius Baer doesn’t anticipate a massive move in the Treasury market, where the scarcity of safe assets is still the driving force.
Tradeweb said the yield on the 1-month U.S. bill has trended lower, in a possible sign that Fed moves to put a floor under yields “may be showing less effectiveness.”
Tradeweb said that after closing at 0.00% in May, the short-term bill rose to as high as 0.053% in early July, then traded within less than a basis point for multiple weeks, until last week, when it closed as low as 0.028% and is now at 0.033%.
Crude oil futures were lower in Europe as the recent rebound pauses. Although prices are up 8-9% so far this week, having reversed last week’s sharp drop, they are still firmly lower for the month so far.
“The most serious concerns about demand, which is what had triggered [last week’s] price slide, have faded away,” said Commerzbank’s Carsten Fritsch. This is in part thanks to “a considerable rise in crude oil imports and a further increase in crude oil processing in July” in India, he said, adding that “much the same [should] happen in other countries once the measures put in place to contain the Delta variant are eased.”
Gold extended its losses in Europe as the dollar ticked higher, with bullion’s sideways trading of recent months likely to end in September, as trading volumes return to normal levels and the Fed offers more clues about its tapering plans.
“The market is on hold at the moment, there are no real catalysts,” said David Govett, a veteran trader of precious metals formerly at brokerage Marex. “Gold hasn’t performed well enough in the past three to four months to attract any new money. The stock market, on the other hand, has and that is where the money has been going,” he said.
Copper prices edged higher as concerns about Chinese demand eased, but TD Securities said the red metal could find dwindling support from economic growth in the longer term.
“Tailwinds are morphing into headwinds, while global growth eases and central banks begin to turn more restrictive, ultimately keeping the path of least resistance to the downside.”
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August 25, 2021 05:53 ET (09:53 GMT)
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