MARKET WRAPS
Watch For:
U.S. Weekly Jobless Claims, U.S. EIA Weekly Petroleum Status Report
Opening Call:
Stock futures fell Thursday and yields on government bonds extended their decline as investors continued to pull back from bets on a spell of high growth and inflation.
Stocks have powered to a series of record highs this year, but some investors have grown concerned about the outlook for the economy on signs that labor shortages and supply-chain bottlenecks may crimp the pace of recovery. The spread of the highly contagious delta variant of coronavirus globally is adding to worries. Investors also are gearing up for a spell of potentially volatile summer trading, when trading desks tend to be lightly staffed.
"There is a bit of a recognition that things aren't looking as economically positive as they were in mid-June when everything seemed to be hitting that Goldilocks middle ground," said Edward Park, chief investment officer at Brooks Macdonald. "Delta, or the next delta, will be a recurring risk in markets," Mr. Park said, adding that surveys of U.S. activity had fallen short of expectations in recent days.
Up ahead, investors will parse weekly data on unemployment filings. Economists expect the report, due at 8:30 a.m. ET, to show claims for unemployment insurance fell to 350,000, adding to evidence of a recovery in the labor market.
The European Central Bank will present the conclusions of a review into its strategy at 7 a.m. ET. Policy makers are expected to have reached a decision on raising the inflation target, and their report is also likely to touch on topics including the central bank's choice of monetary tools and how climate change fits within its mandate.
In overseas markets, the Stoxx Europe 600 lost 1.3%, led lower by shares of economically-sensitive banks and basic-resource companies.
Stocks to Watch:
Camping World said it made a strategic investment in Happier Camper, the developer of the innovative and patented modular van conversion system - Adaptiv for vans. The company also said the deal will see the Adaptiv system delivered to Camping World SuperCenters across the country which will serve as van and camper design, install and renovation centers by next year.
Mannatech shares surged 50% during the regular session on Wednesday and held most of those gains after hours. The company didn't appear to issue any press releases or securities filings. It said in May that first-quarter net sales rose 4.7% to $38.3 million.
Northrop Grumman keeps its grip on the land-based U.S. nuclear deterrent, beating out Boeing for a deal worth up to $3.6 billion to maintain Minuteman III missiles. Boeing withdrew from the contest to replace them with the new GBSD program, leaving Northrop as the sole winner.
Tessco Technologies' shares rose 18% after hours after the company projected sales bookings to increase by 37% in the fiscal first quarter as it sees strong demand for its carrier and VAR and Integrator markets. Sales bookings in the second half will be higher than the first half of the year due to the lessening effects of pandemic restrictions, the company said. Overall, the wireless communications product and services provider expects first-quarter revenue around $105 million. For the full year, Tessco expects revenue between $408 million and $442 million, and net loss to be in a range of $6.5 million to $4.1 million.
The Federal Aviation Administration issued an emergency directive requiring main rotor inspections on certain Bell helicopters, Reuters reported Wednesday. According to the report, the directive and one issued in Canada on Monday affect about 400 helicopters worldwide. The directives follow a June 28 crash in Alberta. Bell is a subsidiary of Textron.
Forex:
The dollar held its gains against other major currencies following the Fed's minutes.
"U.S. policymakers are growing more comfortable with the idea of reducing asset purchases and an announcement could be made as quickly as the fourth quarter of 2021," said BK Asset Management forex strategist Kathy Lien, adding that the rebound in the U.S. economy is accelerating with Americans ramping up spending on travel and other leisure activities.
It means upcoming economic data should improve, building the case for tapering asset purchases and renewed dollar gains.
Cryptocurrencies fell across the board, alongside the broader market selloff. Bitcoin fell 6% to $32,461.91 from its 5 p.m. ET Wednesday level. Ether, the second-largest cryptocurrency by market value, and joke crypto dogecoin each sank more than 7%.
Bonds:
Government bonds continued to rally, pushing the yield on 10-year Treasury notes down to 1.291% from 1.321% Wednesday. The benchmark yield, which helps to set borrowing costs throughout the economy, was last below 1.3% in February.
Driving yields lower is a combination of waning confidence in the strength of the economy post-pandemic and technical factors including the flushing out of wagers that they would keep heading higher, analysts said.
Appetite for government bonds may abate again when data show that the U.S. labor market is tightening over the summer, said Trevor Greetham, head of multiasset at Royal London Asset Management. "We've still got a lot of economic growth to come through."
Yields on European government bonds slid alongside Treasury yields. The yield on 10-year German bonds fell to minus 0.339%.
UniCredit said Wednesday's rally in sovereign bonds appears to have been driven by investors buying back borrowed securities in order to close out open short positions.
"Short-covering is most probably at work here since fundamentals and market sentiment was at least constructive," said UniCredit analysts. The release of the FOMC minutes didn't change the overall picture in markets.
Black Rock said it doesn't share the view that higher longer-term bond yields signal bad news for equities. "We don't agree with this narrative, " said Rupert Harrison, head of research for diversified strategies at BlackRock's multiasset strategies.
Rising yields shouldn't matter for equity valuations if they are due to the return of term premia--the compensation investors demand for holding riskier long-term bonds--rather than due to expectations of a higher policy rate path, he said. Higher-term premia in a backdrop of a strong economic restart don't challenge equity valuations, Harrison added.
BlackRock is strategically underweight nominal government bonds in July given their diminished ability to act as a portfolio ballast with yields near lower bounds. The asset manager said it sees more value in inflation-linked bonds and explained the strategic underweight position with the view that rising debt levels might eventually pose risks to the low-rate regime.
Given this view, BlackRock prefers inflation-linked bonds, particularly in the U.S. relative to the eurozone on valuation grounds.
Commodities:
Oil prices retreated as traders prepared for a potential rise in production from members of OPEC after the cartel failed to strike a deal on a gradual increase in output earlier this week.
Base metals prices were lower in Europe slip after the latest Fed meeting minutes. Three-month copper on the LME was down 1.3%, with aluminum 1.2% lower and nickel off 0.4%.
Inventors are jittery about when and how quickly the central bank will end its bond-buying program and while some officials said the economy was recovering faster than they anticipated others stressed caution due to recent reports of weaker-than-expected hiring.
TODAY'S TOP HEADLINES
Stellantis to Detail Electric-Vehicles Strategy
Stellantis NV, the world's third-largest auto maker by sales, plans to lay out its strategy on electric vehicles Thursday, a crucial moment for Chief Executive Carlos Tavares as he articulates his vision for the company.
Mr. Tavares has made providing a clear path forward on electrification a priority for Stellantis, which was created earlier this year through a trans-Atlantic tie-up of Fiat Chrysler Automobiles NV and France's PSA Group.
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States Target Google Play Store Practices in Antitrust Suit
Three dozen states and the District of Columbia filed an antitrust lawsuit against Alphabet Inc.'s Google on Wednesday, alleging that the company operates an illegal monopoly with its Google Play app store.
The bipartisan antitrust suit adds to the company's mounting legal challenges. Led by the state of Utah and filed in the U.S. District Court for the Northern District of California, it alleges that the company has monopolized the distribution of apps on mobile devices that run the Google-owned Android operating system, blocking competition through contracts, technical barriers and other means.
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Theranos Founder Elizabeth Holmes Renews Fight to Constrain Prosecutors
Lawyers for Theranos Inc. founder Elizabeth Holmes asked a federal judge to place new restrictions on the scope of evidence that prosecutors can present at her coming criminal-fraud trial, arguing her defense is hampered by the loss of a database with millions of blood-test results.
During a virtual hearing, Ms. Holmes's lawyers and the U.S. attorney's office in Northern California continued months of finger-pointing over who is to blame for the inability to access the blood-test database. Called the Laboratory Information System, it recorded data points on millions of Theranos blood tests but became inaccessible in 2018 under circumstances the prosecution and defense disagree about.
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EU Slaps $1 Billion Fine on Volkswagen, BMW in Antitrust Case
The European Union has imposed a fine of 875.19 million euros ($1.03 billion) on Volkswagen AG and BMW AG for restricting competition in emission cleaning for new diesel passenger cars.
The European Commission, the executive arm of the EU, said Thursday that Daimler AG, BMW and Volkswagen, which owns Audi and Porsche, colluded on the technical development in the area of nitrogen oxide cleaning, breaching EU antitrust rules.
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07-08-21 0600ET
