* U.S. stock indexes higher, on track for weekly gains
* S&P, Nasdaq on course for all-time closing highs
* Communication services leads sector gains; energy only
loser
* Dollar, crude up slightly; gold down; bitcoin dips
* U.S. 10-yr Treasury yield ~1.29%
Welcome to the home for real-time coverage of markets brought to
you by Reuters stocks reporters.
RECOVERY IN SIGHT FROM THE SHORTEST-EVER RECESSION
(1345 EDT/1745 GMT)
The COVID outbreak of early 2020 brought about the briefest
U.S. recession in on record, according to the National Bureau of
Economic Research, which recently determined the economic
contraction which began in February of last year ended a mere
two months later.
And while it's been a long, rocky road back to 'normal,' the
U.S. economy is approaching pre-crisis equanimity nearly 17
months after mandated shutdowns to contain the fast-spreading
disease shuttered businesses and brought activity to a halt.
Global financial information firm Oxford Economics' (OE)
most recent Recovery Tracker "added to its nearly five-month
streak of weekly gains," advancing 0.6 percentage points (ppts)
to 97.6% of where it was in January 2020.
OE follows 23 discrete metrics and groups them into six
baskets: financial, mobility, production, employment, demand,
and health.
In the week ended July 9 - the most recent data point
available - three of those six components posted gains.
"Consumers continued to spend on restaurant outings, hotel
accommodations, and flights, while businesses responded to
robust demand by ramping up production," writes Gregory Daco,
chief U.S. economist at OE.
On the other hand, "while small business hiring was solid,
employment softened on reduced temp jobs and more searches for
UI benefits. Financial conditions tightened as peak growth and
inflation fears and a rise in Covid cases spurred market
uncertainty."
This go-around, the production component was the big gainer,
rising 4.2 ppts to 96.2% due to increased business applications
volume and higher refinery production.
"Stronger mortgage applications and higher hotel occupancy,"
as well as strong restaurant bookings helped boost the demand
tracker by 2.2 ppts to 105.4%.
Health conditions inched up 0.2 ppts to 82% as on continued
vaccine deployment and stable hospitalizations despite spiking
infections.
"The glass half-empty view is that vaccination rates have
slowed to 550k/day and the number of new Covid-19 cases is
surging," Daco adds. "With herd immunity ranges likely requiring
vaccinations for over 90% of the population, the threshold looks
higher than previously thought."
For Reuters' interactive graphic on the worldwide vaccine
rollout, click here https://graphics.reuters.com/world-coronavirus-tracker-and-maps/vaccination-rollout-and-access.
On the downside, the employment element fell by 0.4 ppts to
98.1% due to increased online searches regarding unemployment
benefits and a drop in temporary hiring, volatility and wider
spreads pushed the financial tracker down 0.7 ppts to 108.8%.
The big loser was the mobility tracker, which dropped 1.9
ppts to 95% due to softening gasoline demand, according to the
note.
The chart below, courtesy of OE, shows a history of the
recovery tracker broken down by its six major components:
(Stephen Culp)
*****
AUGUST IS NOT WHAT IT USED TO BE (1306 EDT/1706 GMT)
The market is rising again, so you're looking forward to
lazy, hazy, blissful sunny days in August?
First look at recent and not-so-recent history from the
Stock Traders Almanac newsletter.
Money flows from harvesting made August the best month from
1901-1951, with 37.5% of the U.S. population involved in farming
in 1900, according to Almanac editor Jeffrey A. Hirsch. But now,
with less than 2% of people farming, August is "amongst the
worst months of the year," he warned.
Over the last 33 years, it was the weakest month for the
Dow Jones industrial average, S&P 500, Russell
1000 and Russell 2000, with average declines from 0.4%
for the Russell 2000 to 0.8% for Dow. It is the second-weakest
month for Nasdaq, with an average 0.2% gain.
Of course some declines relate to specific events like
turmoil in Russia, the Asian currency crisis and the Long-Term
Capital Management hedge fund debacle in August 1998. when the
Dow fell 15%. Then, there was a 10% slide in August 1990,
triggered by the Gulf War.
The years following U.S. presidential elections do little to
help, with average August declines of 0.8% for the Russell 2000
and 1.7% for the Dow.
Hirsch cites the best August Dow gains in 1982, up 11.5%,
and 1984, up 9.8%, as bear markets ended. However, losses
exceeding 4% in 2010, 2011, 2013 and 2015 have widened the
average decline.
The other trend for August, besides cold drinks and
sprinklers, is a rough first 9 days, a stronger mid-month and
weak finish for the last five days when traders go on vacation.
In the last 25 years, the last five days averaged losses of 0.7%
for the Dow; 0.5% for the S&P and 0.4% for Nasdaq. Still, since
2014, the last five days have brightened, with only one loss for
the Dow, S&P and Nasdaq. So pass the sunscreen.
Post-election year average moves for August:
(Sinéad Carew)
*****
S&P 500, NASDAQ HIT RECORDS AS TWITTER, SNAP JUMP (1230
EDT/1630 GMT)
The S&P 500 and Nasdaq are at record intraday
highs on Friday, with results from social media companies
including Twitter lifting investor sentiment.
Communication services is up 2.5% and leading S&P
500 sector gains. Twitter is up 4.4% and Snap Inc,
which beat analysts' expectations on revenue in the second
quarter, is up 22%.
Among decliners, Intel Corp is down more than 6%
after it after it gave an annual sales forecast that implied a
weak end of the year.
Investors have been looking to earnings reports and
corporate guidance for clues on the economy's health.
Here is the midday U.S. market snapshot:
(Caroline Valetkevitch)
*****
WAIT FOR "GOLDEN CROSS" SIGNAL FOR FURTHER DOLLAR GAINS –
BOFA
Bank of America technical analyst Paul Ciani said he is
waiting on a "golden cross" signal, when the 50-day simple
moving average (SMA) crosses above the 200-day simple moving
average, for confirmation that the dollar is likely to extend
its gains.
The DXY dollar index against a basket of currencies
has been trading in a range from around 89 to 94 for the past
year, with a peak of 93.45 reached in April. That level "is key
to break above in order to confirm a double bottom pattern,
which is bullish, and end the range," Ciana said in a report on
Friday.
In the interim, some bearish oscillator divergences suggest
a dip in the coming 2-3 weeks, he said. While the 50-day and
200-day SMAs are converging, the likelihood of a golden cross
occurring will depend on the size of any upcoming dip, Ciana
said, adding "so we wait and see."
Historically the dollar has traded higher 40-60 days after a
golden cross signal, he said.
(Karen Brettell)
*****
PARADIGM SHIFT: SERVICES SECTOR LOSES STEAM, MANUFACTURING
GAINS MOMENTUM (1035 EDT/1435 GMT)
Pandemic-related shutdowns forced consumer demand toward
goods and away from customer-facing services. And as the
reopening progresses, most observers assumed pent-up consumers
would unleash their pent-up demand for travel, eating out and
other activities, pivoting back to the COVID-battered services
sector.
But on Friday, IHS Markit turned those assumptions on their
head.
With its advance 'flash' take on its July PMI (purchasing
managers index) the global financial information firm showed the
expansion of the services sector unexpectedly losing some steam,
and a faster-than-anticipated acceleration of manufacturing
activity.
Services PMI unexpectedly declined 4.8 points
to a reading of 59.8, while manufacturing PMI
gained a point to 63.1, a more robust level than the consensus
projection.
Combined, the two data series result in a composite reading
of 59.7, a 4-point drop from June.
A PMI number above 50 indicates an expansion of activity
over the previous month.
"Some moderation of service sector growth in particular was
always on the cards after the initial reopening of the economy,
and importantly we’re now seeing nicely-balanced strong growth
across both manufacturing and services," writes Chris
Williamson, chief business economist at Markit.
“While the second quarter may therefore represent a peaking
in the pace of economic growth according to the PMI, the third
quarter is still looking encouragingly strong," Williamson adds.
“Inflationary pressures and supply constraints – both in
terms of labour and materials shortages - nevertheless remain
major sources of uncertainty among businesses, as does the delta
variant, all of which has pushed business optimism about the
year ahead to the lowest seen so far this year," he says.
Wall Street appeared to be enjoying the fourth day of
risk-on sentiment in mid-morning trading, with the three major
U.S. stock indexes rallying their way to weekly gains.
But chips, smallcaps and energy stocks
have had better days.
(Stephen Culp)
*****
INFLATION IN FOCUS FOR NEXT WEEK’S FOMC MEETING (957
EDT/1357 GMT)
All eyes with be on whether the Federal Reserve expresses
any new concerns about high inflation when it concludes its
two-day meeting on Wednesday.
Fed officials including Chairman Jerome Powell have played
down high inflation readings as likely transitory due to
businesses reopening from COVID related shutdowns.
However, “since the last FOMC meeting, growth and labor
market data have improved further and inflation has continued to
rise sharply above the Fed’s 2% target,” economists at Credit
Suisse said in a note on Friday.
“Chair Powell is likely to sound more cautious about upside
inflation risks and suggest that the Fed is ready to respond in
case there are signs of more persistent inflation or a
concerning increase in inflation expectations,” the economists
said.
Powell may also indicate that Fed officials have discussed
when it will be appropriate to reduce bond purchases, though the
U.S. central bank is not expected to announce any plans at next
week’s meeting.
“Forward guidance on interest rates and asset purchases
should remain unchanged, but Powell is likely to reiterate that
‘substantial further progress’ toward the committee’s goals is
still a ways off,” Credit Suisse said.
(Karen Brettell)
*****
U.S. STOCK INDEX FUTURES RISE, LIFTED BY EARNINGS (0900
EDT/1300 GMT)
U.S. stock index futures are higher early on Friday, with
upbeat results from social media companies including Twitter
lifting sentiment.
Snap Inc also is higher after it beat analysts'
expectations on revenue in the second quarter.
On the flip side, chip maker Intel said it still
faces supply chain constraints.
Investors have been looking to earnings reports and
corporate guidance too for clues on the economy's health.
Here is the early U.S. market snapshot:
(Caroline Valetkevitch)
*****
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PLEASE SEE
