MARKET WRAPS

Watch For:

S&P CoreLogic Case-Shiller Home Prices Index for June; Chicago Business Barometer -- ISM-Chicago Business Survey -- Chicago PMI for August; Conference Board -- Consumer Confidence for August; Canada GDP for June

Opening Call:

Stock futures edged higher Tuesday, suggesting that the S&P 500 is on course for a third consecutive record close, ahead of data on U.S. consumer confidence levels.

Stocks have powered higher since Jerome Powell reiterated Friday that the timing of scaling back on bond purchases-which is likely to begin later this year-won't have any bearing on subsequent decisions to raise interest rates. Meanwhile, concerns about the elevated number of Covid-19 cases are providing a lift to technology stocks because investors are renewing bets on companies that would benefit from lockdowns and people working from home.

"The fact that the Fed is willing to start to taper in the face of this Delta variant coming through does suggest they have confidence that the economy is going to stand on its own two feet," said Peter Langas, chief portfolio strategist at Bessemer Trust.

Mr. Powell's signals that policy makers will only gradually cut back on asset purchases, and that they are still a long way from raising interest rates, also offers a cushion for the market against any shock factors, he added.

Data on consumer confidence, due out at 10 a.m. ET, may offer insights into whether the spread of the Delta variant of coronavirus is weighing on Americans' willingness to spend.

"You have seen people canceling vacations or not going out to restaurants" due to the Delta variant, said Mr. Langas. "There is this concern on the margin that we are seeing people pull back a bit. All of that comes into play in regards to where consumer confidence is going in the short term," he said.

Overseas, the Stoxx Europe 600 ticked up 0.1%, while Asian stocks mostly gained.

The disruption to U.S. economic activity from Hurricane Ida will result in a 0.2% drag on U.S. GDP in the current quarter, said Joe Brusuelas, chief economist at RSM U.S.

Ida's impact is expected to be near $16 billion as the storm caused higher energy prices, supply-chain disruptions and extensive property damage, but the losses are likely to be made up as rebuilding takes place in the coming quarters, Brusuelas said.

"The storm will require dedicated aid from the federal government to jump-start the rebuilding in Louisiana, Mississippi, Alabama and elsewhere in the aftermath of the storm. This aid will come on top of the demands of a region already struggling with the resurgence of Covid-19," Brusuelas said.

Stocks to Watch:

Collins Aerospace, a subsidiary of Raytheon Technologies, agreed to acquire privately held flight-tracking and data platform FlightAware on Monday, in a move that aims to expand the company's connected aviation ecosystem. The financial terms of the transaction weren't disclosed.

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Walker & Dunlop agreed to buy Alliant Capital and its affiliates for an enterprise value of $696 million including debt, giving the company a large affordable-housing portfolio. The company will give Alliant $351 million in cash and $90 million of its shares. It also plans to assume around $155 million of Alliant's debt and will give the company $100 million in participating interest for future cash flows over the next four years. The transaction will have an immediate effect on revenue, adjusted earnings and cash flow, the company said.

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Zoom said customers with 10 or fewer employees represented about 36% of second-quarter revenue, roughly in line with the year-ago period but down from the 38% high in the third quarter last year. Company officials had noted that group of customers would be more volatile and that they expect that category to continue to decline as a percentage of revenue. "Our online business will be a headwind in the coming quarters as smaller customers and consumers adjust to the evolving environment," company officials said. Zoom stock fell 11% after hours.

Forex:

The dollar dropped to a three-week low against a basket of currencies and Unicredit said it should remain under pressure in the near-term after Powell's speech.

Powell made it clear the Fed intends to start tapering asset purchases this year but only gradually and that the timing of tapering wouldn't be a signal for the timing of interest rate rises, said Unicredit.

That means the dollar is "probably set to remain sluggish" in the near-term, also because the support it may receive from positive U.S. economic data has likely declined as tapering is already priced in.

Commerzbank said the dollar faces a tough week due the prospect of lackluster U.S. economic data.

The Fed probably wants to assess data, particularly on the labor market, in coming weeks before deciding to start tapering asset purchases, said Commerzbank's Antje Praefcke. Friday's nonfarm payrolls report could show jobs growth slowed in August, disappointing market expectations, she said.

U.S. consumer confidence data due later and the ISM manufacturing purchasing managers' index on Wednesday could also disappoint, she said.

"The data is unlikely to be so good that it suggests the Fed will decide to taper sooner rather than later." If the data miss forecasts, the dollar could see an even sharper decline, Praefcke said.

Bonds:

Treasury yields continued to fall in Europe, extending Monday's retreat as traders turned their attention to a crucial jobs report due this week.

The lack of specifics from Powell is a big reason why money continued to flow into Treasurys and U.S. stocks, some analysts said. They said his remarks underline the importance of near-term economic data in determining when tapering is likely to begin, ensuring a sharp focus on Friday's August jobs report. But for now, investors interpreted his comments as a continuation of easy policy until at least the Fed's next meeting in three weeks, and possibly the next few months.

Columbia Threadneedle's Anwiti Bahuguna said the decline in yields has more to do with bets that both growth and inflation have peaked than to Powell's speech.

Friday's much-expected remarks sounded "very neutral to me," she said, noting the market reacted as if Powell was more dovish than he really was. The speech left her seeing the Fed's stance at this point as "hawkish in the nearer term, and we really don't know what it means for the long term, we just have to wait and see the data."

AmeriVet said: "We need more time and data to sort out the debate," about how fast the Fed will remove stimulus. "We don't need to see continued gains of 800,000 [jobs] per month for the Fed to meet its 'substantial progress' criteria for asset purchases."

Commodities:

Oil prices were largely flat in Europe ahead of Wednesday's OPEC meeting, with no change in output policy expects, said DNB Markets. "The market expects no change in output policy for the group, meaning that OPEC+ will continue to increase its production by 400,000 barrels a day on a monthly basis," DNB Markets' Helge Martinsen saids.

Metals prices jumped as the London Metals Exchange reopened following a U.K. holiday and prices caught up with gains made in Shanghai. Supply risks were lifting the metals, said Commerzbank, pointing to reports of looming strikes at Chilean copper mines.

Meanwhile, aluminum prices were also firmer as production of the energy-intensive metal is set to be curtailed in China's Guangxi province in order to curb emissions. "There seems to be no end to the bad news on the supply side," said Commerzbank.

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08-31-21 0607ET