Last checked at 
* S&P, Nasdaq close lower; Dow posts nominal advance
* Energy weakest major S&P sector; utilities lead gainers
* Dollar, gold up; crude, bitcoin slip
* U.S. 10-Year Treasury yield ~1.30%
July 15 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
WALL STREET LOSES STEAM, BURDENED BY TECH (1615 EDT/2015
GMT)
Wall Street lost altitude on Wednesday as investors digested
a mixed bag of data and Fed Chairman Jerome Powell sang another
verse of his "inflation is transitory" song in his second
straight day of congressional testimony.
The S&P and the Nasdaq ended the session in negative
territory, weighed down by market-leading tech- and
tech-adjacent stocks such as Nvidia Corp, Amazon.com
, Microsoft Corp, Apple Inc, Facebook
Inc and Alphabet Inc.
The Dow squeaked by, closing barely green.
Utilities advanced 1.2%, leading the gainers by a
substantial margin, benefiting from falling Treasury yields and
the prospect of another brutal heatwave striking the western
United States.
A spate of data showed jobless claims hitting a 16-month low
amid an ongoing worker shortage and factory output hamstrung by
the continuing demand/supply imbalance.
Powell faced the Senate Banking Committee, where he
reiterated the central bank's vows to support the economic
revival and repeated his assurances that the current inflation
wave is temporary.
The Fed Chair's dovish refrain helped push Treasury yields
to one-week lows.
Second-quarter earnings season approaches the end of its
first week, with Morgan Stanley and UnitedHealth Group
among companies having their turn at bat on Thursday.
Morgan Stanley surprised profit expectations to the upside,
but a slowdown in trading left investors unimpressed. The stock
eked out a 0.2% gain on the day.
UnitedHealth advanced 1.3%, providing the biggest boost to
the Dow in the wake of its beat-and-raise report in which it
noted a post-pandemic upswing in non-urgent care.
Here's your closing snapshot:
(Stephen Culp)
*****
BITCOIN AT $30,000 IS SOLID SUPPORT, BUT $25,000 BET IN
OPTIONS EMERGE (1427 EDT/1627 GMT)
Pankaj Balani, chief executive officer at derivatives
trading platform Delta Exchange said $30,000 remains a strong
support for bitcoin in the options market, given that it's the
most sold strike for July and August on the downside.
That said, Balani pointed out that below $30,000, strikes at
$25,000 have emerged though with lower open interest.
"Bitcoin has been in a consolidation phase and is trying to
settle in the $30,000-$40,000 range," Balani said. "Overall, the
risk of downside below $30,000 on bitcoin is much higher now
than what it was in the month of May and June."
Implied volatility, meanwhile, is being crushed as the
market continues to trade in a tight range. Balani said if the
market continues to languish, option sellers will become
aggressive and continue selling the upside much more than the
downside. That has been happening already, he added. He noted
that implied vols are down for both the July and August
expiries.
Bitcoin was last down around 4.4% at $31,396.
(Gertrude Chavez-Dreyfuss)
*****
"NEGLECTED" LATAM EQUITIES' TIME TO SHINE? (1415 EDT/1815
GMT)
It has been a rough decade for Latin American equity
markets, as economic woes and political unrest have unsettled
investors in the region. However, the Developing Markets team at
Invesco thinks it may be time for a rebound.
Indeed, MSCI's Latin America stocks index
has declined nearly 40% in the last 10 years, compared with a
18% rise in the emerging market benchmark.
Invesco notes LatAm stocks now make up less than 8% of the
weight of the MSCI Emerging Markets Index - less than the
combined weightage of Tencent and Alibaba.
"In our view, this neglect creates conditions — though not
certainties — for opportunity," Invesco's Justin Leverenz wrote
in a July 14 note.
Rising commodity prices and a strong outlook for the mining
sector, especially given rising demand for "green metals" like
copper and cobalt, should boost Latin American stocks and
currencies, potentially aided by a weaker dollar.
With this in mind, Invesco has exposure to Brazilian miner
Vale and Mexico's largest copper producer Grupo
Mexico < GMEXICOB.MX.>
Technology is another driver of Invesco's thesis, based on
the rise of fintech, e-commerce and other tech services in
countries like Brazil. The tech industry will provide job growth
and investment opportunity in the region, according to Leverenz.
"Five of the new entrants in Latin America’s top market
capitalization giants in the past decade have come from
e-commerce and fintech, there are likely more to come as cozy
oligopolies in banking and retail get shaken up around the
region," he writes.
Finally, when assessing the political landscape, Invesco
thinks reasonably stable central banks and political divisions
should prevent a drift into "no-go zones of macroeconomic
stability," while voters are unlikely to completely reject
capitalism-friendly policies.
So far in 2021, MSCI's Latin America index is up 6%.
(Lisa Mattackal)
*****
MEANWHILE, IN WASHINGTON... (1255 EDT/1655 GMT)
Earnings season is well afoot, economic data is providing a
flood of information regarding the state of the U.S. economic
recovery, and investors are keeping a wary eye on the growing
threat of the Delta COVID-19 variant.
But goings-on in the U.S. Capitol building remain on market
participants' radar.
U.S. Federal Reserve Chairman Jerome Powell is spending his
second day testifying before Congress, and the Senate Banking
Committee has the latest honor.
While Powell largely stuck to his "inflation is transitory"
script, he faced grilling from both sides of the aisle.
Pennsylvania Republican Pat Toomey called the central bank's
ongoing purchases of mortgage-backed securities "puzzling" in
view of skyrocketing home prices, while committee chair Sherrod
Brown, Democrat from Ohio, challenged Powell over weakening bank
regulations, saying "the Fed has rolled back important
safeguards making it easier for the banks to pump up the price
of their stock."
U.S. Treasury yields fell as Powell held his dovish ground.
Partisan wrangling over an infrastructure bill rolled on,
with U.S. Senate Majority leader Chuck Schumer setting up the
first floor debate on a $1.2 trillion package, while also urging
fellow Democrats to move on a larger $3.5 trillion budget
package, which includes spending on climate measures and beefs
up social spending.
For his part, Senate Minority leader Mitch McConnell said in
a Fox News interview on Thursday that every Republican senator
would vote against the larger measure.
Industrials and materials, which stand
to gain from increased infrastructure expenditures, were both
green at last glance.
(Stephen Culp)
*****
EUROPE CLOSES IN FAMILIAR TERRITORY (1145 EDT/1545 GMT)
There are quite a lot of factors which can help explain
today's 1% retreat for European stocks and the spread of the
Delta variant is a big one, coupled with the ongoing bond rally
and 'peak growth' fears.
The big bulk of the market price action took place within
the energy sector with the index losing close to 3% and briefly
hitting lows not seen since February.
Rising U.S. fuel stocks are raising concerns over the demand
in the world's largest economy as you can read here:
Then again, at about 455 points, the pan-European STOXX 600
is in very familiar territory.
"It's been another negative day for European markets, as
they continue to trade in the range they’ve broadly been in for
the past few months", commented Michael Hewson at CMC Markets
UK.
As you can see below, the STOXX 600 has spent most of the
last 30 sessions hovering between 450 and 461 points.
(Julien Ponthus)
*****
'FIT FOR 55' PACKAGE: UNFIT FOR AIRLINES, BOOST FOR GREEN
ENERGY MAJORS (1118 EDT/1518 GMT)
Just when you thought airlines stocks were recovering from
the massive declines last year, the spread of the Delta variant
across Europe is threatening to stall the recovery. It doesn't
stop there. European Union's mega climate plan unveiled on
Wednesday ain't going to sit well with investors either.
The EU Commission, in what it called the 'Fit for 55'
package, said aviation must do more to contribute to its goal to
cut economy-wide net emissions by 55% by 2030, from 1990 levels.
Fuel costs are the biggest headache. Bernstein analysts say
easyJet faces the biggest threat due to its higher level
of free allowances on jet fuel and slower fleet transition. With
lower margins, Air France KLM is also badly hit. New
fleet and lower allowance, on the other hand, sets up Wizz Air
favorably. But overall, they are not confident airlines
can pass on higher costs to consumers.
Meanwhile, a call to stop diesel and petrol cars will have a
mixed impact on auto stocks. Equita analysts point out a few
names. Faurecia's clean mobility division has no
products for electric cars, Sogefi's filter division
is likely to see OE business fade for ICE cars. Stocks exposed
to car electrification like STMicroelectronics and
Umicore will benefit.
Indeed, the companies most favored by the package will be
Green Energy majors including EDP Renovaveis, RWE
, EDP, Enel.
On July 14, Goldman Sachs said in a research note that it
expects a fourfold growth in annual RES (Renewable Energy
Sources) and a surge in power grid investments.
(Sruthi Shankar)
*****
THE ECONOMY CHUGS ALONG, BUT IT'S TAKING THE LOCAL, NOT THE
EXPRESS (1100 EDT/1500 GMT)
A maelstrom of data unleashed on Thursday appeared to back
up Federal Reserve Chairman Jerome Powell's assertion that while
the economy is on a track to recovery, it's nowhere arriving at
"back to normal."
A worker shortage and a steep demand/supply imbalance
continue to leave their paw prints on the indicators.
The number of U.S. workers filing first-time applications
for unemployment benefits last week fell by 26,000
to 360,000, hitting a 16-month low and the consensus bull's eye.
While claims have stayed below the 400,000 mark in recent
weeks, they still hover above the 200,000 to 250,000 range
associated with healthy labor market churn, suggesting that
yanking the federal emergency unemployment supplements early (as
at least 20 states led by Republican governors have done) hasn't
yet prodded workers back to the labor force en masse.
About 9.5 million Americans remain unemployed, but there are
also nearly that many job openings.
Still, early cancellation of federal benefits is having some
effect on claims.
"The early end to emergency benefits by some states is
starting to become apparent in the data," writes Nancy Vanden
Houten, lead U.S. economist at Oxford Economics (OE).
Ongoing claims, reported on a one-week delay, dipped more
than expected, falling to 3.241 million.
Output by U.S. factories unexpectedly decreased
by 0.1% in June, according to the Federal Reserve, marking a
reversal from May's 0.9% growth, as tight chip supply weighed on
automobile production.
The data reflects "a 6.6% plunge in production of autos and
parts, which has bounced around wildly in recent months,
presumably in response to shortages of semiconductors," notes
Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"Growth clearly has moderated from (an) initial surge last
spring, but autos aren’t the only sector struggling with tight
supplies of key inputs."
In total, industrial production increased by 0.4%
in June, slower than the 0.6% expected, and weaker than the 0.7%
growth in May.
On the bright side, capacity utilization, a
measure of economic slack, edged up 0.2 percentage points to
75.4, a hair below expectations.
This tension between strong demand and supply bottlenecks
also contributed to a mixed picture Atlantic factory activity.
On the upside, manufacturing activity in New York State went
to the races. The New York Fed's Empire State index
zooming to a reading of 43, blowing past the 18 analysts
expected.
On the other hand, the Philadelphia Federal Reserve's
business index (aka Philly Fed) decelerated,
dipping to 21.9, well below the level of 28 projected by
economists.
"Both the Empire State and Philly Fed surveys suggest that
price pressures are peaking," adds Shepherdson, "with delivery
times, unfilled orders and the price indexes all slipping a bit
in recent months."
An Empire State/Philly Fed reading above zero signifies
expansion from the previous month.
The Labor Department also reported that the cost of imported
goods rose by 1% in June, cooling down from May's
1.4% pace, but still facing upward pressure from supply
bottlenecks.
Gasoline, industrial supplies and food prices drove the
increase.
"While the surge in some commodity prices may be leveling
off, the still-strong readings suggest elevated import price
inflation will persist through 2021," says Mahir Rasheed, U.S.
economist at OE. "Strong domestic demand will keep a tight pull
on imports, while stubborn supply disruptions will take time to
fully resolve as virus constraints linger."
Year-over-year, while import prices are up a red-hot 11.2%,
the latest data marks a slight deceleration from the previous
month.
The graphic below shows how import prices stack up against
other major indicators relative to the Federal Reserve's average
annual 2% inflation target:
Chips were not only the ghost in the U.S. factory machine,
but they are also haunting Wall Street on Thursday.
While the three major U.S. stock indexes are mixed in
morning-trade, the Philadelphia SE Semiconductor index is
sharply underperforming.
(Stephen Culp)
*****
S&P 500 CAUGHT IN A TRAP? (1001 EDT/1401 GMT)
Major U.S. indexes are modestly red in early trade. That
said, FANG stocks are gaining. The NYSE FANG+TM index
is up, and once again flirting with its 7,329.08 February
record-high close.
This follows the latest batch of quarterly corporate
earnings reports, and data showing the number of Americans
filing new claims for unemployment benefits fell last week as
expected.
Although the S&P 500 is now on pace to end a 3-week
winning streak, it is also trapped in an especially narrow range
this week. In fact, the benchmark index is on track for its
tightest weekly range as a percentage of the prior week's close
since late December 2019. Thus, traders are on guard for a
pick-up in volatility, and a breakout one way or the other. Of
note, the VIX is attempting to rise for a second-straight
week.
Meanwhile, Fed Chair Powell will be concluding his testimony
in front of Congress today. On Wednesday, he said he was
confident recent price hikes were associated with the country's
post-pandemic reopening and would fade.
Here is an early-trade snapshot:
(Terence Gabriel)
*****
RECENT CHIP STOCK LAG MAY SOON SPLINTER NASDAQ (0910
EDT/1310 GMT)
The Philadelphia SE Semiconductor index has been a
2021 leader. In fact, this index is up nearly 18% year-to-date
vs a rise of about 14% for the Nasdaq Composite.
However, after hitting its highest level in more than 15
years in early April, the SOX/IXIC ratio has
struggled:
Generally, traders want to see this key sub-sector within
tech outperforming to add confidence in the sustainability of
the Nasdaq's rise. However, with chips now lagging, it may be a
warning sign that the Composite's recent relatively smooth
advance to fresh record highs, may soon splinter.
Just looking back to early 2018, multi-week/multi-month
periods of SOX/IXIC ratio divergence preceded a number of
significant periods of instability in the Composite.
Most recently, as the IXIC was making new highs in late
April, the SOX/IXIC ratio failed to confirm the move. The
Composite then declined more than 8% into its mid-May trough.
Since bottoming in mid-May, the Nasdaq has enjoyed a
near-14% advance to new highs. However, the SOX is once again
underperforming. In fact, the index is down in July, and on
track for its biggest monthly percentage fall since March 2020.
(Terence Gabriel)
*****
FOR THURSDAY'S LIVE MARKETS' POSTS PRIOR TO 0905 EDT/1305
GMT - CLICK HERE:
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
