* U.S. stocks positive
* Technology leads S&P sector gainers; financials biggest
decliner
* U.S. dollar, gold, crude up; U.S. 10-yr Treasury yield
1.26%
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you by Reuters stocks reporters.
STILL A MOSTLY MUTED RESPONSE TO BEATS (1420 EDT/1820 GMT)
So far this earnings season, U.S. companies beating
analysts' expectations on both revenue and earnings per share
are outperforming the broader market by 1.2%, Jonathan Golub,
chief U.S. equity strategist & head of quantitative research at
Credit Suisse Securities, wrote in a note Thursday.
While this price response to beats is better than it was
over the past four earnings seasons, "it is relatively muted
given the size of surprises," he wrote.
Nearly 90% of reports from S&P 500 companies so far are
beating analysts' expectations on earnings, which is set to be
the highest since at least 1994, as far as Refinitiv's records
go back.
With results in from just over 100 of the S&P 500 companies,
companies in aggregate are reporting earnings 16.2% above
expectations, well above the long-term average of 3.9% above
estimates, but below the average of 20.1% for the prior four
quarters, according to Refinitiv.
The S&P 500 is about flat since July 13, when the
earnings period unofficially kicked off.
(Caroline Valetkevitch)
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FED LIKELY TO TOUCH ON BOND TAPER NEXT WEEK, MAY SEND YIELDS
HIGHER (1350 EDT/1750 GMT)
The Federal Reserve is likely to say it has discussed
tapering bond purchases when it concludes its two-day meeting
next week, which could send Treasury yields higher even if the
U.S. central bank stresses that no details have yet been
decided, according to economists at Morgan Stanley.
The Fed is expected to adopt an upbeat assessment on the
economy while also noting that recent jumps in inflation are
likely temporary and that COVID-19 remains a risk, economists
including Ellen Zentner said in a report on Thursday.
Also, “we think now is the time to talk tapering. We expect
the Committee to debate the pace and flexibility, as well as the
relationship of tapering with rate hikes,” they said.
Fed Chair Jerome Powell is likely to acknowledge the
discussions at the end of the meeting, while also stressing that
no decision has been made, Morgan Stanley said. Still, that
could send yields higher, they said.
“An upbeat assessment of the economy from the Fed and
continued discussion of tapering could ring hawkish to the
market, especially given the benign pace of hikes priced in,”
the economists said.
The bank recommends taking short positions in 10-year
Treasuries. Yields on the benchmark notes fell to a
five-month low of 1.128% on Tuesday before rebounding to 1.260%
on Thursday.
(Karen Brettell)
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DETERIORATING LIQUIDITY ADDED TO THIS WEEK'S BOND RALLY -
JPMORGAN (1245 EDT/1645 GMT)
Deteriorating liquidity in U.S. Treasury futures likely
amplified recent market moves that saw Treasury yields drop to
five-month lows, according to analysts at JPMorgan.
U.S. 10-year Treasury yields plunged to 1.128%
on Tuesday, before rebounding to 1.258% on Thursday.
“The deterioration in liquidity conditions in markets
appears to have been mainly concentrated in (U.S. Treasury)
markets and has very likely exacerbated the magnitude of those
moves,” the analysts said in a report sent on Wednesday.
Reduced liquidity played a role in amplifying a selloff in
February that ended with Treasury yields reaching one-year highs
of 1.776% in March, and conditions have weakened to their lowest
levels since then, JPMorgan said.
Meanwhile the bank's metrics for the S&P 500 e-mini futures
show only a minor deterioration in liquidity, with
conditions remaining close to the upper end of its range for the
first half of the year, they said.
(Karen Brettell)
*****
WALL ST EDGES LOWER MIDDAY WITH ENERGY, FINANCIALS (1210
EDT/1610 GMT)
U.S. stocks are slightly lower in midday trading Thursday,
with the S&P 500 with energy and financials
leading declines while the technology sector
is higher.
Adding to recent investor concern, data showed the number of
Americans filing new claims for unemployment benefits
unexpectedly rose last week.
Investors are also looking to earnings reports and corporate
guidance for clues on the economy's health.
The vast majority of reports have been better than analysts
expected. Biogen Inc shares are up 1.5% after it raised
its full-year revenue expectations.
Here is the midday U.S. market snapshot:
(Caroline Valetkevitch)
*****
STOXX BACK TO PRE-MONDAY DELTA SELLOFF (1145 EDT/1545 GMT)
Although it was quite wobbly, the STOXX 600 ended up 0.6%,
its third straight session of gains.
At 456 points, the pan-European benchmark is now just a tad
higher than where it was before Monday's selloff.
Fears about the Delta variant are easing somewhat on the
equities front even if lower bond yields today show concerns are
still clouding the horizon on other asset classes.
The ECB meeting wasn't a game changer for the broad stock
market but banks did erase their gains with the prospect of
interest rates staying rock bottom for the foreseeable future.
The euro zone banking index ended down 0.2% after
rising over 1.4%.
The main loser of the day was London's FTSE 100,
which lost 0.4% due partially to a rising pound and the poor
performance of Unilever, which lost close to 6%.
The consumer group warned surging commodity costs would
squeeze its full-year operating margin, overshadowing strong
second-quarter sales growth fuelled by the easing of
pandemic-related curbs in many of its markets.
(Julien Ponthus)
*****
NEXT TO NORMAL: JOBLESS CLAIMS, EXISTING HOME SALES (1045
EDT/1445 GMT)
Data released on Thursday suggested the labor market is
stumbling along the road to recovery while the housing market -
the erstwhile star of the pandemic recession recovery - is
returning to pre-COVID equanimity.
The number of U.S. workers filing first-time applications
for unemployment benefits spiked unexpectedly to
419,000 last week, poking above the 400,000 level for the first
time since late June, according to the Labor Department.
Analysts expected claims to notch down to 350,000.
But the data is volatile, and doesn't necessarily suggest a
weakening labor market recovery, with factors like an ongoing
worker shortage and early cancellation of emergency federal
benefits in about 20 Republican-led states adding noise to the
numbers.
"We need to filter the noise in the data points and not lose
sight of the big picture, which is that the trend line continues
to head lower," writes Anu Gaggar, senior global investment
analyst at Commonwealth Financial Network. "For future weeks,
the pace of decline in claims could slow down as more and more
slack is taken out of the labor market...but the overall picture
continues to point to a return to pre-pandemic level of economic
activity."
But while it's true that claims have fallen quite a bit from
the head-spinning 6.149 million seen in early April 2020, they
still hover well above the 200,000-250,000 range associated with
healthy jobs market churn.
For context, more people submitted initial jobless claims
last week than live in Tampa, Florida.
The data overlaps the survey period for the Labor
Department's comprehensive July employment report
Ongoing claims, reported on a one-week lag, also came in
above consensus at 3.236 million.
Sales of previously owned homes posted a
weaker-than-expected rebound in June, rising 1.4% to 5.86
million units at a seasonally adjusted annualized rate,
according to the National Association of Realtors (NAR).
The number undershot consensus by 40,000 units, and followed
May's downwardly-revised 1.2% decline.
The increase could be partly attributed to a stabilization
of supply of homes on the market, which was driven to all-time
lows by a pandemic-related exodus to suburbia in search of elbow
room and home office space.
"Supply has modestly improved in recent months due to more
housing starts and existing homeowners listing their homes, all
of which has resulted in an uptick in sales," says Lawrence Yun,
NAR's chief economist.
Wall Street was mixed in morning trading, with investors
pivoting away from value and back to growth.
The Nasdaq was green, the S&P 500 essentially flat and the
Dow was in negative territory, with economically sensitive
cyclicals and smallcaps underperforming.
(Stephen Culp)
*****
COMPANIES SHOULD CAPITALIZE ON LOW RATES WITH BUYBACKS, M&A
– WELLS FARGO (1003 EDT/1403 GMT)
Companies should capitalize on the low borrowing costs
relative to the economic outlook by undertaking debt-financed
share buyback and merger and acquisition strategies, while
investors can benefit from investing in companies that are
likely to pursue these, according to analysts at Wells Fargo.
U.S. 10-year Treasury yields plunged to
five-month lows of 1.128% this week and the yield curve has
flattened, raising fears that fixed income investors are pricing
in a very bearish outlook for the U.S. economy. The yields have
since rebounded to 1.273%.
However, "investors should not interpret these low rates as
a signal that economic growth is meaningfully impaired and that
it is time to take shelter in the work-from-home bunker. In
fact, for 2H21, we favor stocks and strategies that can
capitalize on an artificially low cost of capital,” Wells Fargo
analysts including Christopher P. Harvey said on Thursday in a
report.
Treasury yields are being pulled down by real rates, which
adjust for expected inflation, which in turn are influenced by
record Federal Reserve bond purchases. That means that “the cost
of funding in today's bond market is exceptionally low given the
economic strength,” they said.
Companies can benefit by issuing debt to repurchase shares
or buy other firms, they said. Portfolio managers could also
target companies that can tap the capital markets to buy back
shares or that may be a target of mergers and acquisitions.
(Karen Brettell)
*****
S&P 500 E-MINIS NEAR FLAT AFTER JOBLESS CLAIMS (0900
EDT/1300 GMT)
S&P 500 e-mini futures are near unchanged early on
Thursday, with U.S. stock index futures trimming gains after
data showing the number of Americans filing new claims for
unemployment benefits unexpectedly rose last week.
Investors are looking to earnings reports and corporate
guidance too for clues on the economy's health. Dow Inc
share are higher premarket after its second-quarter profit
doubled from the first.
Stocks ended higher for a second day on Wednesday after a
steep selloff on Monday tied to worries about increasing
COVID-19 cases and the impact on the economic outlook.
Here is the early U.S. market snapshot:
(Caroline Valetkevitch)
*****
FOR THURSDAY'S LIVE MARKETS REPORTS BEFORE 0900 EDT/1300
GMT, PLEASE SEE